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• Author: Ludwig, Katie

Financial Foundations for Thriving Communities

Shayne Kavanagh and Vincent Reitano

GFOA, 2019, $30

GFOA recently released its newest book, Financial Foundations for Thriving Communities. If the title of the book sounds slightly familiar, there's a reason for that. GFOA introduced a new initiative with the same name at its 2019 conference and has been promoting it through a series of webinars and at state GFOA conferences throughout the year.

The book outlines strategies you can use to address the people side of public finance. Getting the numbers right (e.g., balancing the budget, paying the bills, tracking the receivables) is usually not the most difficult part of a finance officer's job. The hardest part is dealing with the people side of things--keeping stakeholders satisfied, knowing whom you can trust, convincing people that they can trust you. You have the technical skills; this book shows you how to apply those technical skills in a way that gets everyone moving forward together to build a thriving community.

Before delving into the particulars of the Financial Foundations Framework, the authors provide some background on common-pool resource theory, Elinor Ostrom's Nobel-prize winning research on which the Framework is based. (Fun fact: Ostrom was the first woman to win the Nobel Prize in economics, and until this year, she was the only woman to have won it!) A common-pool resource is one with the following characteristics: * All members of the group have access to the resource.

* Access to the resource cannot be limited easily.

* One person's consumption of the resource prevents another person's consumption of it.

Common-pool resources (classic examples are grazing lands or fisheries) often fall victim to the "tragedy of the commons," the unfortunate collision of individual and group interests. For example, individuals have an incentive to fish as much as possible in a given area--but if they all do so, the wellbeing of the whole group suffers, as the fishery will be depleted sooner rather than later. Ostrom's research identified six leadership strategies and eight institutional design principles that groups can use to avoid or overcome the tragedy of the commons.

Kavanagh and Reitano go on to explain that a local government's finances are another example of a common-pool resource. Everyone in a community owns or contributes to public resources, and everyone has an incentive to use those resources for their personal benefit. To...