Introduction.
An interesting phenomenon exists when a school board or city council member gets elected. There is a good chance that a large percentage of the things on their agenda being dealt with were put in motion by past councils and boards. Similarly, many of the decisions while they are in the capacity of an elected official will not come to fruition for years after they have completed their terms. Nor will the financial impact.
For example, it is possible that a bond election could occur under one city council, the issuance of bonds and groundbreaking occur under a subsequent council and the full cost have to be assumed by yet a third generation of council members. The first two periods of time often come in a celebrative atmosphere. Photo ops and brass plaques. The last period, raising funds to cover the costs, may not be such a happy time.
If I were on the third generation of council members or school board, I would have two questions for my colleagues: 1) why are we acting surprised? And 2) why should we apologize for stepping up to our responsibility to take care of what was put in motion before we came on board?
This is where the “just say no” mindset of the current generation of elected officials across the country and across the state is simply wrong-headed. And this is where the deferral option of balancing local budgets is so popular. Especially when it comes to employee compensation, pension funding and infrastructure maintenance & repair.
A Report Card.
This is why communities should prepare a report card on council and school board decisions. And that includes the sitting council today as well as the councils of years past – often for a decade or two. A budget is not truly balanced unless it is spending sufficient funds to keep up with the expenses occurring right now that might not have checks written until the future.
But let’s face it, that is not happening and is not likely to happen by the governing body itself. Often the race isn’t the election battle to get seated. With the clock ticking, how many things can a current elected body initiate knowing it will be a future council who has to figure out how to pay? Every professional manager knows that the single most effective way to balance a budget is to not start any program or project you can’t afford to fund now and in the future. Perhaps that is why so many things are approved with only a partial year’s costs shown.
A Multi-Year Financial Plan.
An honest MYFP produces some interesting revelations. A one-year budget can be and is often structurally imbalanced even through it appears to be balanced. Police cars with 100,000 miles on them can be pushed out at least one more year, perhaps. However, in a MYFP, you are faced with balancing the subsequent years, too. In the end, you can easily spot the gaps on the horizon. That is why the Tax Rate Equivalent (TRE) I wrote about is so important. You can’t raise taxes in advance – and may not even have to.
However, it is extremely valuable to know that a gap with a TRE of, say 3 to 5 cents can’t be ignored. A MYFP can give you a heads up on the challenge. The logical order of budget balancing steps are:
Improve Productivity.
Trim Expenditures.
Use Reserves.
Reduce Program Service Levels.
Eliminate Programs & Services.
Raise User Fees.
Raise Taxes.
There are a few other ways, but they are generally gimmicks and short-term fixes. Only five of those on the list really make a difference when balancing a budget. Trimming expenditures, like cutting travel expenses by 30%, really does not translate into sufficient moneys to balance a budget. Using reserves is a temporary solution.
If the last four are used, these can create huge negative reactions if discussed in the heat of the budget workshops. They require much discussion and planning steps to execute.
You will notice that the Deferral option is not shown on the balancing list even though it is the Number One annual budget choice, a bad choice. Even a deceitful choice. If you Defer to the following year, the impact starts to show up in a MYFP. You can replace 5 police cars a year, as needed, or 25-30 in a single year if you wait long enough and let your maintenance costs eat you alive.
The Look Back.
It is even possible to do this in reverse. I would not be an elected official for a million bucks, but the first thing I would do if I were is to go back at least five years to determine how the budget was balanced in those years. I would do this using my seven options above plus Deferrals and Non-Recurring Revenues like a big bump in sales taxes due to a positive audit adjustment that created a windfall.
What would I do with this historical information? I would put out a report card on the decisions of the past councils and boards that might be responsible for laying in my lap the obligation to balance the current year plus the past gaps pushed forward.
But there could be a good report card here. If I had been in office for a term or two and was leaving, I would want to do my own report card showing how my colleagues and I had taken care of business. Perhaps even established some reserves to recognize Depreciation.
The Political Report Card.
I believe in McKinney this is much more important report card than the budget since the resources have been rich for a number of years.
I’m interested in where the money went for the MEDC/MCDC $millions since inception. Who were the board members and their relationships to the recipients of those moneys? Who received money and then later became city council candidate contributors? Which council members built their political constituency by playing Santa Claus?
What were the bigger land deals and how were those decisions made? Why are there so many lawsuits involved? What are those about? Why were some council members so involved in some staff issues and terminations that their actions led to the FBI being called in?
There’s no political historian in McKinney. There needs to be one. Actually, there needs to be an independent team preparing report cards without a statute of limitations. LFM
Let's Talk About It, Lewis! 