Tag: news

Cities at a Crossroads: Understanding the Findings of City Fiscal Conditions 2025

.Reading time 18 minutes.

A collaboration between Lewis McLain & AI

With Integrated Texas Analysis and Case Studies

Based on the National League of Cities Report (2025)
(Source: “City Fiscal Conditions 2025” PDF) 2025-City-Fiscal-Conditions-Rep…

Introduction

The City Fiscal Conditions 2025 report arrives at a moment when American cities are quietly but decisively transitioning into a new era of fiscal discipline. For several years after the pandemic, local governments benefited from an unusual combination of strong economic conditions and extraordinary federal aid. Revenue surged as consumers spent aggressively, home values climbed, and the job market reached historic strength. Cities responded by expanding public services, restoring depleted reserves, and tackling long-delayed projects.

But this report makes it clear that the “recovery period” is over. Growth has cooled, inflation remains persistent, and the federal support that once acted as a financial stabilizer is now winding down. The challenge for cities today is not collapse or crisis—it is how to regain balance in a world that feels more constrained, more expensive, and more uncertain than the one they just emerged from.

Texas cities illustrate these national trends with particular force. Their rapid population growth, heavy reliance on sales tax, and strict state revenue limitations make them a lens through which the pressures of this new era can be seen even more sharply.

I. From Rebound to Restraint: A New Phase of Municipal Budgeting

During FY2024, municipal general fund spending rose sharply—up 7.5 percent when adjusted for inflation. This increase was partly the result of postponed investments from the COVID years, when many cities limited expenditures and built reserves. It was also fueled by federal recovery programs such as the American Rescue Plan Act (ARPA) and the Infrastructure Investment and Jobs Act (IIJA), both of which infused substantial resources into local budgets.

By contrast, FY2025 reflects a deliberate slowing. Spending is still rising, but only by 0.7 percent, suggesting that cities are tightening operations and reassessing priorities. Revenue projections tell the same story: after a healthy 3.9 percent increase in FY2024, cities now expect a 1.9 percent decline for FY2025. This decline is driven largely by the tapering of federal relief funds and the normalization of consumer behavior after several years of unusually high spending.

Texas Context: Revenue Limits Under Rapid Growth

Texas cities feel this shift even more acutely. Most Texas municipalities rely heavily on sales tax revenues, which surged during the post-pandemic boom but have since flattened. When sales activity cools, city budgets weaken immediately because there is no corresponding income tax or other broad-based revenue source to cushion the decline. At the same time, the Texas 3.5 percent State Property Tax Revenue Cap prevents cities from increasing property tax collections to keep pace with population growth, even when new residents significantly increase service demand.

The combination of high growth and tight limits creates a unique challenge. Texas cities are being asked to do more—with policing, fire protection, streets, parks, utilities, and emergency services—while having less flexibility to raise the revenues needed to deliver these services. The national report identifies a slowdown; Texas turns that slowdown into a structural strain.

II. Public Safety: The Dominant and Growing Budget Pressure

Public safety remains the largest and most rapidly expanding area of municipal spending nationwide. In the average U.S. city, it now accounts for over 60 percent of the general fund, up from 54 percent just two years earlier. This includes police, fire, and emergency medical services, all of which have seen rising personnel costs, higher call volumes, increased equipment prices, and greater public expectations.

Other services—such as recreation, parks, culture, libraries, and general government—occupy a much smaller share of the municipal budget. Cities often want to invest in these quality-of-life functions, but the dominant weight of public safety makes this increasingly difficult.

Texas Context: A Perfect Storm of Public Safety Costs

Texas amplifies this national trend. Major Texas cities such as Dallas, Houston, Austin, Fort Worth, and San Antonio routinely spend 60 to 70 percent of their general funds on public safety. Several factors drive this. First, rapid population growth leads to higher 911 call volumes and more complex service demands. Second, Texas has faced serious police recruitment challenges since 2020, prompting cities to increase wages, offer signing bonuses, and add incentives to remain competitive with suburban agencies. Third, hospitals in many Texas metro areas struggle with capacity issues, causing local Fire/EMS departments to handle more medical emergency calls—including mental health-related incidents—which increases staffing and overtime costs.

Taken together, public safety becomes both essential and unavoidable. But it also pushes cities into a corner, leaving less room for parks, street maintenance, libraries, community programs, and long-term capital upkeep. The national report identifies public safety as the dominant expense; in Texas, it is the defining budget reality.

III. Fiscal Confidence Declines

Municipal finance officers across the country report declining confidence. In the survey, 52 percent say they feel better able to meet FY2025 needs than in the prior year—a noticeable drop from previous surveys. Looking ahead to FY2026, only 45 percent express optimism, down sharply from the 64 percent optimism reported a year earlier.
2025-City-Fiscal-Conditions-Rep…

Cities cite inflation, workforce costs, capital needs, and public safety demands as the primary drivers of this sentiment. Inflation has raised the price of everything from asphalt to ambulances. Recruiting employees—particularly equipment operators, utility technicians, IT personnel, police officers, and firefighters—requires higher wages. And a backlog of infrastructure projects, many delayed during the pandemic, continues to grow in scope and cost.

Texas Context: Growth Without Elasticity

Texas cities experience each of these pressures but with added difficulty because their revenue systems are less flexible. A city such as Frisco, McKinney, or Leander may grow by 5–10 percent annually, bringing thousands of new residents who need water, police protection, parks, and roads. Yet the property tax cap prevents revenue from rising at the same pace unless voters approve a tax increase—a difficult political hurdle. Meanwhile, sales taxes can fluctuate unpredictably depending on regional retail activity.

The result is a mismatch: demand expands rapidly, but revenue cannot. The national report describes growing financial caution; Texas cities describe a tightening vise.

Texas Case Studies: How National Trends Become Texas Realities

These case studies are woven here to illustrate the national themes and show how Texas cities embody them with exceptional clarity and scale.

Case Study 1: Dallas

Dallas faces the full spectrum of pressures described in the report. Its infrastructure backlog—including streets, drainage systems, and public facilities—has grown as construction costs rise due to inflation and tariffs. Public safety spending consumes over 60 percent of the general fund, leaving limited room for parks, libraries, and cultural services. In addition, the city’s relationship with Dallas Area Rapid Transit (DART) has placed new focus on cost allocation practices, as suburban cities question their share of contributions relative to the services they receive.

Taken together, Dallas demonstrates how the national transition from recovery to restraint becomes a difficult balancing act: maintaining essential services, planning long-term capital investments, and managing regional partnerships with limited financial headroom.

Case Study 2: Houston

Houston’s fiscal challenges reveal how structural issues magnify national trends. The city continues to manage large pension obligations for police, fire, and municipal employees—obligations that constrain budget flexibility. At the same time, Houston’s commercial tax base is unusually sensitive to office valuation cycles. Post-pandemic work changes have depressed office demand nationwide, and Houston, with one of the largest office markets in the country, is particularly vulnerable. Sales tax revenues also depend heavily on energy-sector cycles; when oil prices soften, household spending often does as well.

Houston illustrates the report’s warning that cities tied to volatile economic sectors face heightened revenue uncertainty during national fiscal cooling.

Case Study 3: Austin

Austin is one of the fastest-growing cities in the nation. Population growth brings economic strength, but it also drives up demand for water, roads, transit, and public safety faster than revenue can legally expand under Texas law. The city’s ambitious capital plans—including the long-term Project Connect transit system—are deeply affected by construction cost inflation and tariff-driven price increases. Meanwhile, Austin’s hiring environment requires competitive wages to attract talent in a city with a high cost of living.

Austin underscores one of the report’s central themes: rapid growth does not guarantee fiscal ease. In fact, growth can intensify financial pressure when infrastructure needs escalate faster than revenue authority.

Case Study 4: San Antonio

San Antonio has historically maintained one of the most stable fiscal profiles in Texas, but even its disciplined budget faces rising strain. Public safety consumes nearly two-thirds of the general fund, mirroring the national trend. Tourism-driven sales tax revenues softened as consumer habits returned to pre-pandemic patterns. As one of the most military- and federal-contract-dependent cities in the state, San Antonio must continuously monitor federal procurement and tax policy—including potential changes to the municipal bond tax exemption.

San Antonio demonstrates the report’s finding that even stable cities are preparing for leaner years ahead.

Case Study 5: Fort Worth

Fort Worth is the fastest-growing large city in America, and its infrastructure needs are enormous. New neighborhoods require water lines, fire stations, streets, schools, and parks. Inflation and tariffs have raised the cost of steel, heavy equipment, and construction services, making public works significantly more expensive. At the same time, the revenue cap restricts how quickly Fort Worth can scale up funding to match new demand. With sales taxes now flattening, a key engine of local revenue has slowed at exactly the moment the city needs it most.

Fort Worth illustrates the report’s broad conclusion: even cities with extraordinary growth cannot outpace the pressures of rising costs and declining federal support.

IV. Tariffs and Municipal Bond Policy: Watching for External Shocks

Nationally, cities report that tariffs are complicating procurement. Nearly half say tariffs have affected their ability to secure materials or equipment, and some describe major project delays. Tariffs raise the cost of steel, vehicles, water infrastructure components, public safety equipment, and construction materials. When these costs rise, cities often must delay projects, revise budgets, or seek alternative suppliers.

Cities are also closely watching federal discussions about the municipal bond tax exemption. Should the exemption be weakened, the cost of borrowing would rise sharply. Because cities rely heavily on debt to build long-lived infrastructure—roads, water systems, drainage, bridges—the financial impact would be significant.
2025-City-Fiscal-Conditions-Rep…

Texas Context: Higher Exposure

Texas cities—especially large, fast-growing metro areas—would be among the hardest hit by these changes. Their capital programs are enormous, covering everything from freeway interchanges and transit expansions to water treatment plants and flood control systems. If borrowing costs rise, Texas cities would be forced to trim projects, delay improvements, or seek new revenue sources in a system already marked by tight constraints.

V. Tax Sources and a Shifting Economic Base

The report highlights that property taxes are projected to grow modestly while sales taxes level off. Income taxes—where they exist—are expected to decline. Since property taxes lag real-time economic changes by one to three years, cities often experience fiscal conditions later than the private sector.
2025-City-Fiscal-Conditions-Rep…

Texas Context: High Volatility in a Sales-Heavy System

Texas cities, with no income tax option, are uniquely exposed to consumer spending shifts. When retail slows, so do city revenues. This exposure becomes even more pronounced when combined with declining commercial property valuations, which are emerging in major Texas metros as the office market softens. The state’s combination of cyclical industries, rapid development patterns, and legally restricted revenue capacity creates both opportunities and vulnerabilities that align closely with the national findings.

VI. The Broader Narrative: Resilience Through Adaptation

Across the nation, the report shows cities taking proactive steps to manage uncertainty. They are adjusting their budgets, building reserves, planning capital projects more cautiously, and monitoring federal policy developments. Many are exploring domestic supply alternatives, streamlining operations, and prioritizing essential services. The tone is neither pessimistic nor alarmist—it is grounded, realistic, and strategic.

Texas Context: Innovation as Necessity

Texas cities have long relied on creative financial tools to navigate their constrained revenue environment. These include Public Improvement Districts (PID), Tax Increment Reinvestment Zones (TIRZ), Municipal Management Districts (MMD), and Economic Development Corporations (EDC). These tools allow cities to capture value from growth and reinvest it into infrastructure, parks, roads, drainage, and redevelopment projects. Texas cities also maintain some of the strongest financial ratings in the nation due to disciplined reserve policies and long-term planning.

In other words, the very constraints that challenge Texas cities also push them to become some of the most innovative financial stewards in America.

VII. Conclusion: A New Era of Municipal Pragmatism

The City Fiscal Conditions 2025 report captures a decisive moment. Cities across the nation are transitioning from recovery to resilience—from a period defined by federal lifelines to one marked by local decision-making, capital discipline, and an unflinching look at long-term responsibilities. The post-pandemic boom has given way to a quieter, more demanding phase of municipal governance.

Texas cities exemplify this shift even more vividly. They face explosive growth, aging infrastructure, strict revenue constraints, and heavy public safety demands. Yet they continue to innovate and adapt, often serving as national models for fiscal management in high-growth environments.

As the report concludes, cities are not facing an imminent crisis—they are facing a long horizon of disciplined planning. The margin for error may be narrower than before, but the commitment to resilience, adaptability, and pragmatic leadership remains strong. Texas cities, with all their complexity and dynamism, reflect that spirit—and in many ways, illuminate the path forward for the rest of the country.

Key Aspects of School Funding in Texas

.Reading time 13 minutes.

A collaboration between Lewis McLain & AI

A Guide to How Schools Are Paid For, Why It Never Feels Like Enough, and the Big Debate Now at Texas’ Doorstep

Public education in Texas is both enormous and intimate. It is a system of more than 1,200 school districts serving nearly 5.5 million children. It is funded by formulas that even experienced administrators struggle to explain, yet it is felt every time a homeowner opens a property tax bill or a teacher receives a paycheck. It is rich in promise, strained by costs, and increasingly defined by political crosscurrents. Texas prides itself on flexibility, local control, and low taxes — but those values continually collide with the financial realities of running schools in a fast-growing, geographically massive state.

This essay maps the entire landscape of school funding in Texas: where the money comes from, how it is distributed, what the Legislature has changed in recent years, how vouchers and property-tax relief affect the system, and why Governor Greg Abbott has embraced the bold and controversial idea of eventually eliminating school property taxes altogether. Whether this vision becomes reality — and what shape the public-school system will take in the next decade — depends on understanding the architecture beneath it.

One truth stands out: Texas cannot fix teacher pay, student achievement, enrollment pressure, recapture, or facilities needs until it confronts the underlying structure of its finance system.

I. Constitutional Foundation: What Texas Promised

All school-funding debates begin with the Texas Constitution, Article VII, which requires the Legislature to establish and maintain an “efficient system of public free schools.” The courts have consistently interpreted “efficient” to mean:

  • equitable across districts
  • fundamentally adequate
  • not dependent on extreme disparities in local wealth

In the late 1980s and early 1990s, the Edgewood v. Kirby decisions transformed Texas school finance. The Texas Supreme Court ruled that wide disparities between wealthy and poor districts violated the Constitution. To remedy this, the Legislature created recapture, often called “Robin Hood,” a system requiring wealthy districts to send excess local revenue back to the state.

This constitutional framework — equity, adequacy, and local autonomy — continues to shape every reform today.

II. The Three Revenue Streams: Local, State, Federal

Texas school districts rely on three primary revenue sources, but they play very different roles.

1. Local Property Taxes

These are the backbone of school funding. Districts levy:

  • Maintenance & Operations (M&O) tax rates for salaries and day-to-day operations
  • Interest & Sinking (I&S) tax rates for debt on buildings

Local revenue varies dramatically depending on the strength of the tax base.

2. State Funding

State dollars are distributed through the Foundation School Program (FSP). The system uses:

  • a Basic Allotment (BA)
  • adjustments for special-population students via Weighted Average Daily Attendance (WADA)
  • transportation allotments, small district adjustments, and more

If a district cannot raise enough locally to meet its entitlement, the state fills the gap.

3. Federal Funds

These make up roughly 10 percent of district revenue, supporting:

  • Title I
  • IDEA special education
  • school nutrition programs
  • and other targeted mandates

These funds help but are not the backbone of Texas school finance.

III. How Texas Calculates Funding: Tier I and Tier II

Texas uses a tiered structure.

Tier I — The Foundation Program

This ensures a minimum educational program for every student through:

  • Basic Allotment × WADA
  • special-population weights
  • transportation
  • small/midsize adjustments

Tier II — Local Enrichment

Districts can raise additional M&O pennies called golden pennies and copper pennies.

  • Golden pennies: high yield, not subject to recapture
  • Copper pennies: lower yield, recaptured above wealth thresholds

Most enrichment beyond the compressed rate requires voter approval through a VATRE.

IV. Recapture: The Equalizer Few Love but Courts Demand

Recapture exists because property values vary wildly across Texas. Districts with high property wealth per WADA (often due to mineral values or commercial tax bases) generate far more revenue per penny than property-poor districts.

The formula is simple:

When local wealth per WADA exceeds the Equalized Wealth Level, the surplus must be recaptured.

It is politically controversial but constitutionally necessary.

Districts like Austin ISD — wealthy tax bases but high needs — often pay recapture amounts far larger than their own programmatic flexibility would prefer. Meanwhile, rural or urban property-poor districts rely heavily on these equalized dollars.

V. Texas in the National Landscape

Texas educates one of the largest student bodies in the nation yet consistently ranks in the lower third for per-pupil spending. Factors include:

  • rapid population growth
  • inflation decreasing the value of the Basic Allotment
  • aging facilities in older districts
  • special-education obligations that exceed state reimbursement

The teacher-retention crisis reflects these funding pressures directly.

VI. Vouchers and Education Savings Accounts (ESAs)

The introduction of ESAs in 2025 marked a structural shift. These accounts divert state dollars to private education options. Crucially:

  • ESA dollars are removed before school-finance formulas operate
  • which reduces the total funding pool for public education
  • and increases the state’s long-term cost obligations

Supporters emphasize choice; critics highlight the impact on district resources.

VII. Tax Compression and Homestead Exemptions

Texas has repeatedly compressed school M&O tax rates — most dramatically in 2006 and again in 2019 under HB 3. Recent constitutional amendments increased homestead exemptions and compressed rates further.

This means:

  • homeowners feel relief
  • but the state must backfill more revenue
  • and state obligations grow exponentially over time

If the economy slows, the state may struggle to maintain these commitments.

VIII. Governor Abbott’s Proposal: Eliminate School Property Taxes

Governor Abbott has stated he wants Texas to eliminate school property taxes completely. This would shift the largest funding mechanism for public schools to:

  • sales taxes
  • consumption-based alternatives
  • growth revenue
  • or new statewide tax instruments

This raises critical questions:

  • How do we preserve local control?
  • How do we ensure equity across 1,200+ districts?
  • What happens in recessions?
  • How do ESAs interact with a fully state-funded system?

It is the most ambitious tax proposal in modern Texas history.

IX. Where Funding Pressures Are Felt Most

Teacher Pay

Texas trails the national average, especially in large urban districts.

Special Education

State funding does not cover true required costs; districts subsidize heavily.

Facilities

Older urban districts face major reinvestment needs, while fast-growth suburban districts must build rapidly.

Operational Costs

Inflation affects utilities, transportation, insurance, and program expenses.

Across Texas, educational needs are rising faster than revenue.

X. Adequacy and Equity in a Changing State

Texas is now more:

  • urban
  • suburban
  • economically diverse
  • demographically complex

than at any point in its history.

Equity concerns involve not just property wealth but:

  • disability status
  • rural decline
  • special-population needs
  • enrollment patterns

Ensuring adequacy will require updating the Basic Allotment and adjusting cost structures to reflect modern realities.

XI. What a Stable System Would Require

A modern, stable school finance system would include:

  • indexing the Basic Allotment to true local inflation (can be much higher than the national headline inflation!)
  • meaningful local discretion without destabilizing equity
  • predictable state funding even in downturns
  • sustainable integration of ESA costs
  • adequate support for special-population students
  • transparent outcomes and accountability

Without long-term structural reforms, Texas will continue to struggle with volatility.

XII. The Elephant in the Room

Every major issue — teacher pay, property taxes, recapture, ESAs, special education, enrollment shifts — all trace back to one fundamental question:

How does Texas choose to fund its schools?

Until the state updates this architecture for a 21st-century population, every subsequent debate will remain a patch on an aging foundation.

APPENDIX A — Key Definitions and Formula Explanations

Basic Allotment (BA): foundational per-student funding.
Weighted Average Daily Attendance (WADA): adjusts attendance for special-population weights.
M&O Tax Rate: used for daily operations.
I&S Tax Rate: used for bond repayment and facilities.
Tier I: baseline program funded by state and local revenue.
Tier II: enrichment funding through local discretion (golden and copper pennies).
Golden Pennies: high-yield pennies, free from recapture.
Copper Pennies: enrichment pennies subject to recapture.
Foundation School Program (FSP): state’s primary funding system.
Equalized Wealth Level (EWL): recapture threshold.
Recapture: excess local property wealth reclaimed by the state.
ESA: Education Savings Account for private schooling.
Tax Compression: state-mandated lowering of local M&O rates.

APPENDIX B — Major Historical Milestones in Texas School Finance

Late 1800s–1950s: Foundation of statewide public education; wide funding disparities.
1989–1995 (Edgewood era): Courts declare system unconstitutional; recapture created.
2006: HB 1 compresses tax rates after West Orange-Cove.
2019 (HB 3): Major reform expanding Tier II, adjusting weights, compressing M&O rates.
2023–2025: Homestead-tax changes; continued compression; ESAs approved; funding obligations expand.

APPENDIX C — Data Landscape & Current Funding Realities

Texas spends below the national average per pupil. Recapture exceeds $3 billion yearly.
Districts across Texas experience:

  • fast-growth facility pressures
  • rural staffing shortages
  • urban aging infrastructure
  • special education obligations beyond state reimbursement
  • recapture obligations that limit program flexibility

Teacher turnover is high, especially in high-need districts.

Despite GDP strength, education funding levels struggle to keep pace with demographic realities.

APPENDIX D — Policy Options, Trade-Offs, and Pathways Forward

1. Index the Basic Allotment to inflation

Maintains purchasing power and stabilizes district operations.

2. Reform recapture but preserve equity

Consider raising EWL thresholds or adjusting guaranteed yields
while still ensuring a constitutionally “efficient” system.

3. Provide recession-proof state support

Create rainy-day triggers that stabilize district budgets during economic downturns.

4. Integrate ESAs into long-term fiscal planning

Ensure private-education subsidies do not undermine district stability or local control.

5. Support special-population students adequately

Reevaluate weights for bilingual, special education, and compensatory education.

6. Rebalance state–local responsibility

Clarify long-term commitments given rapid local tax-base shifts.

7. Increase transparency and public accountability

Build trust in allocation decisions and avoid opaque formula adjustments.

APPENDIX E — Top 100 Districts Paying Recapture Amounts.

Rethinking Disaster Relief in America

.Reading time 17 minutes.

Why States Can Absorb More—and Why the Federal Government Should Become a True Backstop

A collaboration between Lewis McLain & AI

Introduction

For decades, disaster relief in America has operated under a familiar assumption: states cannot reliably handle the financial shock of natural disasters, so the Federal Emergency Management Agency (FEMA) must stand ready as the first and primary payer whenever storms, fires, floods, or earthquakes strike. This model dates back to 1979, when President Jimmy Carter created FEMA to consolidate civil defense and disaster-response functions into a single federal agency. After the attacks of September 11th, FEMA was folded into the Department of Homeland Security in 2003, broadening its responsibilities and cementing its role as the nation’s manager of both large and routine emergencies.

Yet the fiscal and operational landscape has changed sharply since those foundational decisions. States today maintain much stronger budgets, far deeper rainy-day reserves, more diversified revenue sources, and more mature emergency-management agencies than they had in the late twentieth century. Meanwhile, FEMA itself has grown increasingly bureaucratic, with administrative costs rising from around 9 percent of disaster spending in the early 1990s to roughly 18 percent between 1989 and 2011, and often exceeding its own internal cost targets. The agency has become indispensable in catastrophic cases but inefficient and slow in everyday ones.

This white paper examines whether FEMA must continue to function as a first-dollar payer, or whether a more modern system would assign routine responsibilities to states and reserve federal involvement for extreme, budget-threatening disasters. What emerges is a surprising conclusion backed by hard data: most states can, in fact, absorb the disaster costs FEMA typically covers, which ranged from 0.41 percent to 5.58 percent of state spending in the 2022–2024 period, with a national average of 1.19 percent. At the same time, states have median rainy-day reserves equal to 13–14 percent of their general-fund spending, and many maintain reserves far larger than that.

The implication is profound. FEMA is essential for rare catastrophic events—but its role as the payer of routine disaster bills imposes high overhead and creates slow, inefficient recovery cycles. This paper lays out a new model in which states pay their own ordinary disaster costs up to a clear percentage of their budgets, and the federal government becomes a streamlined, formula-driven backstop above that threshold. The goal is to reduce federal bureaucracy, preserve national capacity for massive events, and match responsibilities to the actual fiscal capabilities of states today.

I. FEMA’s Role and the Growth of Federal Disaster Spending

When FEMA was created in 1979, the federal government consolidated more than 100 disparate disaster- and civil-defense programs. Its newer home in the Department of Homeland Security expanded its remit, placing it at the center of national preparedness, mitigation, response, and recovery. Through its Disaster Relief Fund (DRF), FEMA has spent approximately $347 billion (in 2022 dollars) over the past three decades, with more than half of that total coming after 2005 as disasters increased in frequency and severity.

Despite the DRF’s historic role in major recovery efforts—Hurricanes Katrina, Sandy, Harvey, and Maria being among the most notable—the agency has become known for slow reimbursements, multi-year project closeouts, and a documentation system so complex that many counties wait months or even years to recover funds already expended. A single North Carolina county spent more on debris removal after Hurricane Helene than its entire annual budget and waited over a year without full reimbursement, a pattern familiar to many local governments.

Yet reliance on FEMA is not uniform across the country. Some states receive enormous federal aid in catastrophic years; others receive relatively little even across multiple years. It is only by understanding this distribution that a reformed model can be imagined.

II. How Dependent Are States on FEMA? Quantifying the Financial Exposure

The best picture of ongoing reliance comes from the 2022–2024 FEMA obligations dataset, which compared how much FEMA spent in each state to that state’s total expenditures. The findings provide a clear map of how deeply—or how little—states depend on the agency in routine years.

A. National Average

Across all fifty states, FEMA obligations equaled only 1.19 percent of total state spending. This means that for the average state, FEMA’s typical-year disaster role is fiscally small—a burden that could, in principle, be absorbed using normal budget tools without major restructuring.

B. Most FEMA-dependent states (recent years)

Though the national average is small, some states exhibit higher FEMA reliance:

  • Louisiana: 5.58% of total state spending
  • Florida: 4.39%
  • Montana: 3.91%
  • New York: 2.44%
  • Vermont: 2.14%
  • Virginia: 1.72%
  • Alaska: 1.71%
  • Rhode Island: 1.70%
  • Hawaii: 1.60%
  • Colorado: 1.58%

Importantly, even in these “higher exposure” states, the FEMA share of total expenditures remains well below the rainy-day reserves most states currently hold.

C. Least FEMA-dependent states

At the other end:

  • Nevada: 0.41% of state spending
  • Wyoming: 0.48%
  • Oklahoma: 0.58%

For these states, FEMA’s role is nearly negligible as a share of governmental revenue.

D. The catastrophic-year exception

These routine-year percentages mask an important truth: when disasters like Katrina or major multi-storm years hit, federal aid can reach staggering proportions. Pew’s long-term analysis showed that Louisiana’s federal disaster aid approached 19 percent of its general-fund spending in one extreme year. Such rare events are the moments where federal backstop capacity is crucial.

The real message in the data is this: states can handle the predictable; they cannot self-insure the catastrophic.

III. States’ Rainy-Day Funds: A Strong Foundation for a New Model

As federal disaster costs have grown, so too has state fiscal strength. Over the last decade, state rainy-day funds—formally called Budget Stabilization Funds—have reached historic highs.

  • Total U.S. state rainy-day funds (FY 2024): $158 billion
  • Total general-fund spending (FY 2024): $1.29 trillion
  • Median rainy-day balance: ~13–14 percent of general-fund expenditures
  • Some states far exceed that median:
    • Texas holds reserves equal to ~18 percent of annual general-fund spending.
    • Wyoming holds reserves equal to nearly 70 percent.
    • California’s reserve system in 2022 accounted for nearly half of all rainy-day dollars nationwide.

These figures dwarf the routine-year FEMA exposure numbers. For example, Florida’s FEMA dependence at 4.39 percent of spending is overshadowed by its double-digit rainy-day reserves. Montana’s 3.91 percent figure fits comfortably against the national 13–14 percent median. Even Louisiana, at 5.58 percent, can theoretically cover such costs with existing reserves in a typical year.

This means that the primary fiscal justification for FEMA as a first-dollar payer has largely evaporated; states now have mature financial defenses that simply did not exist decades ago.

IV. FEMA’s Bureaucracy Cost: The Inefficient Load-Bearing Wall

The financial problem with FEMA is not simply the cost of disaster payments—it is the cost of administering them. GAO’s multi-decade analyses show a clear historical trend:

  • In the early 1990s, FEMA’s administrative costs averaged about 9 percent of disaster spending.
  • From 1989 to 2011, the average nearly doubled to around 18 percent.
  • Many small- and medium-scale disasters exceeded FEMA’s own internal administrative-cost targets—which ranged from 8 percent to 20 percent depending on disaster size.

These numbers mean that for every $1 billion in disaster assistance, taxpayers may be funding $120 million to $180 million in federal overhead.

This inefficiency is not due solely to waste; it is structural. The current FEMA reimbursement system:

  • requires extensive documentation for thousands of separate projects;
  • demands eligibility reviews, re-reviews, appeals, closeouts, and audits;
  • relies on multi-year case management;
  • burdens counties that must front millions of dollars;
  • often requires several rounds of resubmission for small technical errors.

The system is built for granular reimbursement, not for speed, clarity, or administrative efficiency.

Any serious reform must begin with this reality: FEMA’s overhead is too high for routine work but entirely justified for rare catastrophic events.

V. A New Structure: State-First Responsibility with a Federal Safety Net Above a Threshold

The empirical question—whether states can absorb FEMA’s typical yearly costs—has been answered by the data: yes, they can. What states cannot absorb are the extreme, once-in-a-generation events that create fiscal shocks exceeding 10–20 percent of a budget year.

A modernized system should reflect this difference.

A. States handle their own disaster costs up to a fixed percentage of their budget

A clear and uniform rule could be adopted nationwide:

A state must cover disaster-related costs up to 3 percent of its prior-year general-fund expenditures before federal aid begins.

This threshold is intentionally set:

  • above the national FEMA-reliance average (1.19%);
  • above most moderate-exposure states’ reliance;
  • below the high-exposure states’ routine-year experience (3.91–5.58%);
  • and well within median rainy-day capacity.

This requirement is neither punitive nor unrealistic. It simply aligns responsibility with the fiscal strength states have already built.

B. States rely on rainy-day reserves and disaster accounts first

States already use a mix of rainy-day funds, disaster funds, supplemental appropriations, and budget flexibility to manage emergencies. In a reformed model, these existing tools would be applied in a structured, predictable sequence—not in political improvisation after the fact.

C. The federal government acts only as a high-threshold backstop

Once a state’s disaster costs exceed the 3 percent trigger, the federal government intervenes. For truly catastrophic years—costs exceeding 10 or 15 percent of state general-fund spending—the federal share could increase to 90 or even 95 percent.

This preserves national solidarity for the events no state can manage alone, while eliminating unnecessary federal entanglement in predictable, lower-level disasters.

D. Federal overhead is reduced dramatically

Under the backstop model, the federal government would only process a small number of large, formula-based payments rather than tens of thousands of reimbursement claims. This change alone could reduce federal overhead from the current 13–18 percent range to 3–5 percent, freeing substantial tax dollars for actual recovery work.

VI. Why a State-First, Federal-Backstop Model Is the Right Path Forward

A system in which states handle ordinary disasters and the federal government protects against the extraordinary aligns perfectly with the fiscal and operational realities of the 2020s.

For states, this model restores autonomy and incentivizes better land-use planning, improved mitigation, and more responsible financial preparation. It also removes the long bureaucratic delays associated with FEMA reimbursements, which often burden local governments more than the disasters themselves.

For the federal government, the model offers clarity and efficiency. Instead of struggling to administer thousands of granular projects—including small-dollar repairs that should never have been federalized—the national government can focus its resources on high-impact events, surge capacity, interstate coordination, and macro-level resilience.

For taxpayers, the new model promises a better mix of value and protection. Money that once funded administrative overhead can instead flow to recovery. At the same time, Americans maintain confidence that when the unimaginable occurs—a Katrina, a California megaquake, a Category 5 storm impacting two states simultaneously—the nation remains ready.

Conclusion

The debate around eliminating FEMA has often been framed as a choice between total federal withdrawal and the continuation of an increasingly bureaucratic status quo. The data, however, points to a more balanced and responsible path. Most states rely on FEMA for only 1 to 2 percent of their total spending in typical disaster years. Even the states with higher exposure—Louisiana at 5.58 percent, Florida at 4.39 percent, and Montana at 3.91 percent—retain rainy-day reserves far larger than these amounts. With median rainy-day balances now reaching 13 to 14 percent of general-fund spending, the financial capacity to absorb routine disaster costs already exists at the state level.

At the same time, the extreme years—the years where total federal disaster aid climbs into double digits as a share of a state’s budget—prove unequivocally that a national safety net remains essential. No state can self-fund a shock approaching one-fifth of its general fund, as Louisiana once experienced. In those moments, the federal government must still be the guardian of last resort.

The most effective reform lies in between: eliminate FEMA’s role as the payer of first resort and reshape the federal role into a streamlined backstop triggered only when a state’s disaster costs exceed a fixed percentage of its budget—3 percent being the most logical threshold. This shift would dramatically reduce federal overhead, accelerate recovery timelines, clarify responsibilities, reward mitigation, and ensure that the nation’s full strength remains available when true catastrophe strikes.

In short, the future of American disaster management should not be FEMA everywhere or FEMA nowhere. It should be FEMA where it matters most, and a state-first model where it does not. This approach honors both fiscal responsibility and national solidarity, and it reflects the actual capabilities of states today—capabilities strong enough to shoulder their own burdens, and a nation still strong enough to stand with them when those burdens become too great.

The One-Page Fix That Costs a Thousand Pages to Execute:

.Reading time 14 minutes.

A collaboration between Lewis McLain & AI

Why Good Intentions Make Bad Laws When Enforcement Is an Afterthought

Every society faces moments of shock: a fire that traps a family behind burglar bars, a child injured by a defective product, a tragedy on a highway that could have been prevented. In the aftermath, the public demands that leaders take action. Elected officials, caught between moral responsibility and political pressure, reach for the fastest tool available — a new law. Something must be done. And too often, that “something” becomes a one-page ordinance drafted in the heat of the moment, written more out of outrage than out of careful design.

The universal political problem is not that lawmakers lack compassion or sincerity. The problem is the widespread illusion that a simple rule on paper automatically translates into a solution in real life. The moment we shift from the writing of a law to the carrying out of it, the entire landscape changes. Costs appear. Complexity expands. Enforcement becomes slow, difficult, and expensive. The people whom the rule was meant to protect often end up carrying financial or administrative burdens that no one anticipated. And the government itself becomes vulnerable when it fails to follow through.

The Fire, the Burglar Bars, and the One-Page Rule

A tragic fire in a home offers a perfect example. Smoke fills a hallway, flames rise, and a family cannot escape because the house has fixed burglar bars welded into place decades earlier. The heartbreak is immediate and raw. City leaders respond swiftly. Within days, a simple new ordinance is passed requiring that all burglar bars have an interior quick-release mechanism. The rule is one sentence long. It seems humane, obvious, and urgent.

But the unseen consequences emerge almost immediately. Many older homes have bars so firmly welded that retrofitting them requires grinding, re-cropping, and re-anchoring — a major metalworking project that costs far more than homeowners expect. Thousands of residences suddenly need professional work, and installation prices spike because demand overwhelms supply. Inspectors who were already stretched thin must now visit property after property, unsure whether they should enforce the rule retroactively, gradually, or with some form of grace period. Elderly residents, fixed-income families, and absentee landlords all face the same problem: they cannot comply quickly, and in many cases, they cannot afford to comply at all.

What began as a compassionate one-page fix turns into a months- or years-long administrative and enforcement burden. The good intention remains, but the machinery required to turn that intention into reality simply was not considered.

And this same pattern repeats itself in city halls across the country.

Other Cases Where a Simple Rule Created Complex Enforcement

Consider smoke detector mandates, which often follow a fatal fire. The ordinance usually states that all homes must have working smoke detectors in certain locations. It sounds like a straightforward safety measure. But in older houses without existing wiring, even a basic battery-powered unit may not be enough to meet the fire code. Landlords must retrofit dozens of apartments at their own expense, often discovering that chirping detectors lead tenants to remove the batteries, leaving the owner liable. Inspectors, already responsible for restaurant checks, rental registrations, and fire lane reviews, suddenly face a tripled workload just to verify compliance. A rule that looked effortless on paper becomes a citywide logistical challenge.

A similar situation arises with ADA-compliant handicap parking spaces at older businesses. A short ordinance may require every business to provide at least one properly sized and striped space. On paper, it is a hallmark of accessibility and fairness. But many small storefronts built decades ago have parking lots too narrow to meet the required dimensions without removing all other usable parking. Simple striping becomes an expensive project involving repaving, regrading, and reconfiguring the entire lot. Small business owners, already struggling with rent and utilities, find themselves facing thousands of dollars in unplanned costs. The city, meanwhile, must process waves of variance requests, appeals, and inspections — none of which were contemplated in the original vote.

Short-term rental regulations — the Airbnbs and VRBOs of the world — also illustrate this point well. Cities often pass two-page ordinances requiring hosts to register, meet safety standards, and pay a modest fee. But enforcement becomes a technological and legal minefield. Identifying unregistered properties requires ongoing web-scraping, sophisticated tracking tools, and interdepartmental coordination. Noise complaints surge. Neighborhoods push back. Large corporate rental companies hire attorneys to challenge citations. What seemed like a simple licensing rule becomes a multi-year enforcement project that consumes far more staff time than anticipated.

Plastic bag bans follow the same pattern. A half-page ordinance prohibits thin plastic bags at retail counters. It appears clean and elegant. But stores quickly switch to thicker bags that still count as plastic, just technically meet the law. Small retailers struggle with the cost of paper or reusable bags. Inspectors must decide which kinds of plastic sleeves, produce bags, and delivery packaging are exempt — a process that often requires issuing clarifying memos and amendments. A symbolic environmental gesture becomes a regulatory tangle.

Even texting-while-driving laws, which seem universally logical, reveal the same problem. Officers must determine whether a driver was texting, dialing, using GPS, or simply holding the phone. Proving intent becomes a courtroom battle. Defense attorneys argue privacy issues, argue that GPS use is protected, or claim the driver was simply moving the phone out of the sun. The law, though well-intentioned, is far easier to write than to enforce fairly.

Fire sprinkler retrofit mandates in older apartment complexes are another classic case. After a tragic fire, a city requires that all older buildings install sprinklers. But the cost per unit can run between six and ten thousand dollars, a financial shock that owners cannot absorb without raising rent sharply or closing the property. Inspectors cannot keep up with the inspections, owners beg for extensions, and cities often quietly delay or soften the rule because the housing market cannot handle the immediate impact. Again, the intent is noble; the implementation is overwhelming.

Even drought-triggered lawn-watering restrictions illustrate the same dynamic. A simple rule allows watering only on certain days. But enforcing the rule requires inspectors driving around at dawn or dusk, when sprinklers actually run. Complex irrigation systems malfunction. Elderly residents forget their watering day and unintentionally violate the rule. Neighbors call code enforcement on each other. What seems like a routine drought-management law turns into a delicate exercise in neighborhood diplomacy and enforcement discretion.

The Biggest Cost of All: When the City Gets Sued for Not Enforcing Its Own Laws

Beyond installation costs, administrative burdens, and inspector workloads lies an even greater consequence — one so significant that cities often hesitate to speak of it openly. When a city passes a law and then fails to monitor or enforce it, the government can find itself in the middle of lawsuits alleging negligence, indifference, or failure to uphold its own safety standards.

Courts sometimes treat a safety ordinance as a kind of promise. When a city requires smoke detectors, quick-release bars, ADA access, sprinkler systems, or short-term rental safety checks, it creates a public expectation that these rules will not merely exist on paper but will be enforced. When tragedy occurs — a fire in a unit the city never inspected, a crime at a short-term rental the city never registered, an accident in a business that never complied with parking mandates — attorneys do not hesitate to include the city in the lawsuit.

The legal cost of defending these cases can dwarf the cost of implementing the rule in the first place. Years of depositions, expert testimony, and appeals drain city budgets. Settlements are quietly negotiated because the cost of fighting is even higher. And the political consequences are severe. Newspaper headlines do not say, “City Struggled With Limited Staff Resources.” They say, “City Failed to Enforce Safety Law Before Deadly Fire.” Even when enforcement lapses are rooted in budget constraints or administrative overload, the public sees only that the city wrote a rule it did not uphold.

This is the deepest irony: the cost of not enforcing an ordinance can be higher — sometimes exponentially higher — than the cost of enforcing it.

Why Governments Keep Repeating This Mistake

This dynamic repeats itself across time and geography. The reason is simple. Writing a law is fast; enforcing it is slow. Writing a law is cheap; enforcing it is expensive. Writing a law is politically satisfying; enforcing a law is administratively difficult. And writing a law happens at the height of emotion, when a tragedy is fresh and the public clamors for action, whereas enforcement occurs quietly, day after day, long after public attention has moved on.

Legislators legislate. Administrators administer. Budgets lag. And the machinery required to implement a rule rarely matches the emotion that produced it. The one-page fix becomes a long-term burden, often borne by people who were never considered in the original debate.

What Good Governance Would Require

A better, healthier way of governing would pair every urgent rule with a sober and realistic analysis of what it will take to make that rule real. That means identifying who will carry out the inspections, how long the work will take, what it will cost residents and businesses, how the city will fund the enforcement, how exceptions will be handled, and how the rule will be revisited after the initial surge of compliance. Good policy demands a slower, steadier rhythm than the rapid political impulse that produces these one-page solutions. It requires clarity, patience, and a willingness to acknowledge complexity.

The Universal Lesson

Whether the issue is burglar bars, smoke detectors, ADA parking, short-term rentals, sprinkler systems, plastic bags, or drought-time watering schedules, the pattern is the same. The simpler the law looks on paper, the more complicated it becomes in the real world. The true work of government is not the drafting of a sentence but the building of the machinery behind that sentence.

Until policymakers take the time to consider the cost, the complexity, the staff workload, and the legal exposure that follow every new ordinance, we will continue to pass rules that feel good in the moment yet falter when confronted with the realities of implementation. A tragedy may demand action, but action must be grounded in humility — the humility to recognize that real-world solutions require more than good intentions. They require the discipline to think through the entire life cycle of a law, from its birth in crisis to its long-term enforcement in the quiet, everyday life of a city.

Two Days of Service, One Story of the Nation

.Reading time 9 minutes.

A collaboration between Lewis McLain & AI

Each autumn, as cool air settles and flags flutter in shorter daylight, our nation observes two consecutive days that together form a quiet bridge of gratitude and memory. On November 10, we mark the birthday of the United States Marine Corps; on November 11, we observe Veterans Day. One day celebrates the birth of a fighting tradition; the next honors all who have borne the uniform. Side by side, they invite us not just to remember—but to reflect on the meaning of service, sacrifice, and citizenship.

The Birth of the Marines: November 10, 1775

On November 10, 1775, the then-Second Continental Congress met in Philadelphia and resolved that “two Battalions of Marines be raised” to serve aboard the fleet, “for service of the United Colonies.” United States Marine Corps University+2HISTORY+2

At the time, America was still a collection of colonies, the outcome of war was uncertain, and the idea of a dedicated corps of Marines—trained both for land and sea operations—was an experiment in military adaptation. The first recruits were mustered at places like Tun Tavern, symbolizing the marriage of common citizen-warriors and emerging national identity.

From those beginnings grew a tradition of adaptability: shipboard security, amphibious landings, expeditionary missions; Marines have served on every continent, in every major American war. Wikipedia+2United States Marine Corps University+2

In 2025, the Corps marks its 250th anniversary, a milestone that invites both acknowledgment of legacy and reckoning with what the future of service demands. U.S. Marine Corps+1

In Marine units world-wide, the birthday is observed with precise ritual: the oldest Marine present takes the first slice of cake, hands it to the youngest Marine present; the Commandant’s birthday message is read; toasts are made to absent comrades. Military.com+1
These rituals are more than formalities—they are acts of continuity.

Real Story:
Consider the Marine on Guadalcanal in November 1942. On the Corps’ birthday, 10 November, far from home, under stress of jungle, shortages, and enemy fire, the men did what traditions require: they paused, shared what little they had, remembered those absent, and reaffirmed their bond. It’s one of many unheralded moments that give the birthday its meaning. Facebook

Veterans Day: November 11 – The Eleventh Hour of the Eleventh Day of the Eleventh Month

If November 10 celebrates a founding, November 11 commemorates a broader covenant. At 11:00 a.m. on November 11, 1918, the guns of the First World War fell silent. The armistice ended a conflict whose scale and terror reshaped modern warfare. National Archives

Originally known as Armistice Day, the observance focused on “the war to end all wars.” But by 1954, as America’s armed forces and global commitments expanded, Congress and President Eisenhower transformed the holiday into Veterans Day: a recognition of all veterans—those who served in wartime and in peace, across all branches of the military.

Veterans Day differs subtly from Memorial Day (which honors the fallen). Veterans Day honors those who served and returned—but it also carries the weight of remembrance for those who did not. It invites us to see veterans not as abstractions, but as neighbors, colleagues, family.

Real Story:
In a Veterans Day memoir, a veteran wrote:

“I’ve always held the proposition that Veterans Day was my day of rest… my day to sleep in, visit the fallen heroes I personally know… Mostly, I’ve always felt inadequate to what Veterans Day represents.” The American Legion

His humility underscores a deeper truth: many who served struggle to match their internal sense of worth with the gravity of the holiday. Their service, after all, cannot be neatly packaged into celebration.

Another story: an Iraq-War veteran, after returning home, walked over 7,000 miles across America in his “Drum Hike,” carrying a drum and a message: We remember you. His journey became a living tribute to fellow veterans, their families, and the burdens they bear. Wikipedia

Two Days, One Narrative of Service

These two days—November 10 and November 11—are not independent—they form a continuum. On November 10 we honor the formation of a fighting tradition; on November 11 we honor the men and women who embodied the wider tradition of service. The one day sets the stage; the next acknowledges the cast of thousands who stepped into that tradition.

Imagine: A Marine unit celebrates its birthday in barracks or aboard ship. The next morning, veterans of that unit march in a local parade, families stand by sidewalks, a high school band plays “Taps.” The sense of lineage is palpable: from first strike in 1775 to the present deployments; from formation to reflection.

The Living Legacy

To observe these days well requires more than flags and speeches—it requires curiosity, humility, relationship. We must ask: Who served? What did they leave behind? What are we to do with their legacy?

From that Marine cutting cake on November 10 to the veteran pulling on a cap on November 11, the heritage of service lives in individuals: the recruit sweating through boot camp; the service-member overseas missing home; the veteran adjusting to civilian life; the spouse waiting, the child growing up under a parent’s absent uniform.

Here are a few threads worth following:

  • Adaptation: The Marine Corps began as a duo of battalions serving with the Continental Navy. Over 250 years it transformed, but its core remained: ability to land on shore, fight both at sea and on land. United States Marine Corps University
  • Sacrifice: Veterans’ stories are filled not just with action, but with waiting, transition, reintegration, hidden burdens.
  • Citizenship: Service isn’t only military. Veterans’ experiences remind us that freedom, order, and democracy require custodian-citizenship: men and women willing to act, then return, then live responsibly.

From Tun Tavern to Arlington

Picture the Philadelphia tavern, 1775: a few men signing enlistment papers, uncertain of the cause, committed, nonetheless. Picture the Tomb of the Unknown Soldier at Arlington National Cemetery: a sentinel place of national vow. Between those moments lie 250 years of war, peacekeeping, humanitarian aid, training, deployment, and return.

Each observance—birthday or holiday—is a chapter in the same book. The cake-cutting ceremony? A ritual of continuity. The Veterans Day parade? A street-level pulse of civic gratitude.

Closing Reflection

On November 10 they raised the flag of a corps.
On November 11 we stand beneath that flag and say: we remember you.
Two days. One story.
Freedom purchased. Gratitude received. Responsibility renewed.

This year, as the Marine Corps marks its 250th anniversary, and as Veterans Day once again calls on us to pause, we are invited to ask: What will we do with their legacy? How will we live as those who’ve been defended did so—with courage, honor, commitment?

When a Reopening Bill Isn’t Really a Reopening Bill (Updated Nov 10th)

.Reading time 11 minutes.

A collaboration between Lewis McLain & AI

I. The Headlines vs. the Fine Print

When the Shutdown Fairness Act (S. 3012) first appeared on news tickers, it sounded like the long-awaited solution to the nation’s longest government shutdown on record. “Senate Moves to Restore Federal Pay,” the headlines proclaimed, and for a moment, optimism broke through weeks of gridlock. Markets climbed, pundits nodded, and weary federal employees allowed themselves a cautious breath of hope.

But headlines have a way of simplifying what the legislative text complicates. Once the fine print emerged, it became clear: this bill didn’t reopen the government — it merely papered over the pain.

II. What the Bill Actually Does

The Shutdown Fairness Act, introduced in October 2025, provides appropriations for pay and allowances of “excepted employees” — those federal workers already required to report to duty during a lapse in funding (TSA agents, border patrol, air traffic controllers, etc.).

It also extends coverage to certain contractors who directly support those workers, a gesture meant to include the unseen workforce that keeps critical operations running during crises. On paper, that’s progress. But beneath that headline, several key limitations emerge:

  1. It doesn’t fund the government. Agencies remain closed, programs remain suspended, and the rest of the workforce remains furloughed.
  2. It transfers discretion to executive branch appointees — the bill empowers each agency head to determine who qualifies as “excepted,” effectively giving the President sweeping authority to decide who gets paid and who doesn’t.
  3. It blurs accountability. By easing the pressure on both parties while keeping the government officially shut, the bill risks normalizing shutdowns as a recurring political tactic rather than a national emergency.

In short, it treats the symptoms without curing the disease.

III. The Politics Behind the Vote

On November 8, 2025, the Senate voted 53 to 43 to advance the bill — seven votes short of the 60 needed to overcome the filibuster.

Republicans uniformly supported it, framing the legislation as an act of compassion for unpaid federal workers. Democrats, however, largely opposed it, citing both structural and ethical concerns. They argued that the bill gave too much unilateral power to the executive branch and failed to address the broader shutdown itself.

Still, a few cracks appeared in the Democratic wall.

  • John Fetterman (D-PA), who had already sided with Republicans in calling for a “clean reopening,” stayed consistent with his prior votes.
  • Raphael Warnock and Jon Ossoff (both D-GA) and Ben Ray Luján (D-NM) broke ranks for the first time, voting yes. Their explanation: the prolonged hardship on federal workers and contractors in their states had become intolerable.

These defections didn’t change the outcome, but they did change the temperature. For the first time in over a month, the Senate’s political map showed visible strain.

IV. Why the Bill Fell Short

The problem wasn’t the intention; it was the architecture.

While restoring pay for “excepted employees” sounds reasonable, the bill’s narrow scope meant that most of the government would remain frozen. Museums would stay dark. Grant reviews would stay paused. Routine operations — from the EPA to housing vouchers — would stay idle.

Worse, by selectively paying some workers, the bill threatened to dull the political urgency that historically forces compromise. If the pain of a shutdown is eased but not ended, there’s less incentive for lawmakers to fix the underlying appropriations impasse. In effect, it could have turned a temporary failure into a tolerable new normal.

That’s why Democrats — even many moderate ones — balked. Supporting the bill might have looked compassionate, but it risked legitimizing shutdowns as a viable governing tool.

V. The Market Misread

Wall Street, as usual, traded first and read later.

Stock futures jumped after headlines announced “Senate Votes to Restore Federal Pay.” The S&P 500 futures rose about 0.5%, the Nasdaq 0.7%, and the Dow about 135 points — all on the hope that this meant a full reopening was near.

But the fine print cooled that optimism. Analysts realized the Shutdown Fairness Act wasn’t a reopening bill at all; it was a partial relief measure. By Sunday evening, futures flattened, and analysts described the move as “hope without foundation.”

Markets crave certainty, not theater — and the Senate had offered more of the latter than the former.

VI. What This Reveals About Governance

The deeper story isn’t just about one bill. It’s about how governing by crisis has become the new normal. Each year, shutdowns are handled less like emergencies and more like bargaining tools. And each time Congress tries to mitigate their effects without fixing their cause, the precedent hardens.

The Shutdown Fairness Act offered temporary fairness — but at the cost of long-term accountability. It tried to make a shutdown less painful instead of making one less possible.

VII. A Final Thought

Sometimes the measure of good governance is not what’s easy to pass, but what’s honest to reject. Senators who voted no weren’t denying workers their pay; they were resisting a bill that risked institutionalizing dysfunction.

The Shutdown Fairness Act was born of good intentions and bad timing. It addressed hunger without restoring work, anxiety without restoring trust.

The government doesn’t need another half-measure; it needs a full reopening and a return to the quiet, unglamorous work of budgeting like adults. Until then, the shutdown may end, but the crisis of governance continues.

Appendix: A Realistic but Positive Scenario for Full Reopening

If this standoff ultimately leads to a genuine reopening, the most realistic yet hopeful path looks something like this:

1. A Face-Saving Compromise That Works

Both sides inch toward a short-term continuing resolution (45–60 days) to reopen government fully. Republicans agree to move the health-insurance subsidy debate to a separate track, while Democrats accept temporary funding without policy riders. Each side can claim victory: Republicans restore normal operations; Democrats protect core programs.

2. Confidence and Functionality Return

  • Federal employees get their paychecks and dignity back.
  • Markets rebound as predictability returns.
  • Public sentiment steadies as Washington finally behaves like Washington used to — imperfect but functional.

3. Structural Reform Momentum

In the aftermath, moderates on both sides revive shutdown-prevention proposals:

  • Automatic continuing resolutions to prevent future lapses.
  • No budget, no pay for lawmakers who fail to act.
  • Transparency rules requiring agencies to publish contingency plans.

These modest but meaningful steps make shutdowns rarer and shorter.

4. Economic Recovery and Civic Reset

As contracts resume and delayed data flows again, the economy catches its breath. Federal projects restart, local grants flow, and household spending normalizes.
The political temperature cools just enough for leaders to reconsider governing as service rather than spectacle.

5. The Quiet Victory

A reopened government, a calmer public, and a Congress reminded of its duty — that’s the attainable, not utopian, win.

The crisis will have hurt, but it will also have humbled.

If lawmakers learn from it, the Shutdown Fairness Act might ultimately be remembered not for what it failed to do, but for what it forced others to finally fix.

Update — November 10, 2025

In the days since this essay was written, the Senate advanced a continuing resolution (CR) by a 60–40 vote — the first credible step toward ending the historic shutdown. The measure would fund the government through January 30, 2026, while granting full-year appropriations for a few essential agencies such as Veterans Affairs and Agriculture. In return, Republicans agreed to schedule a separate December vote on extending the Affordable Care Act subsidies — the core Democratic demand that helped trigger the impasse in the first place.

For now, this deal signals relief: agencies could reopen, workers could return, and markets have already priced in a modest rebound. But it’s still a temporary armistice, not a peace treaty. The same structural fragilities remain — partisan brinkmanship, dependence on continuing resolutions, and a budgeting system that governs by countdown clock.

If the CR passes both chambers and is signed, the lights will come back on in Washington — but they may flicker again soon. By early 2026, Congress will once more face another funding cliff, another negotiation, and another test of will.

In other words, this crisis may be ending — but the next one is already on the calendar.

Rightsizing Under Enrollment, Funding & Choice Pressure

.Reading time 21 minutes.

A collaboration between Lewis McLain & AI
(With suggested guidelines for any rightsizing exercise for public facilities)

I watched the McKinney ISD Board of Trustees meeting last night as they made the decision to close three elementary schools. It was emotional. It was intense. It was brutally honest from both the parents testifying and the Board members sharing about the difficulty of making hard decisions. In my own mental preparation for the event, I had put together these thoughts. Congratulations for these unpaid elected officials taking their jobs seriously. LFM


Executive Summary

Texas public education is at a turning point. Declining birth rates, smaller family sizes, flat per-student funding, the growth of homeschooling and private-school alternatives, and the weight of under-utilized facilities have combined to create a historic fiscal and structural challenge for nearly every district in the state.

For McKinney ISD (MISD), as well as neighboring Allen, Frisco, Plano, and Richardson ISDs, the question is no longer whether change is coming—it is how responsibly that change will be managed. Some campuses are now operating at 50–70 percent capacity. Maintaining them drains resources that could otherwise go to teachers, programs, and student safety.

This white paper explains why “rightsizing” through the consolidation or repurposing of under-utilized campuses is not an act of retreat but of stewardship. It details the statewide context, selection criteria, emotional and community impacts, financial rationale, and examples of how similar districts have adapted successfully. It concludes with a statement from the McKinney ISD Board of Trustees affirming both compassion and fiscal prudence—the twin obligations of public service.

1. Statewide Context: Demographics, Funding, and Choice

Demographic Shifts and Smaller Families

Texas has experienced a steady decline in birth rates since 2007, especially in inner-ring suburbs and mature neighborhoods. As families age and household sizes decrease, fewer children enter kindergarten. This “population echo” now reverberates through elementary and middle schools statewide.

In many communities, houses that once held three or four school-aged children now have one—or none. Districts built facilities for a baby boom that never fully arrived. As a result, entire wings of some campuses sit under-used, even as fixed costs for staffing, utilities, and maintenance persist.

Under-Utilization and Facility Inefficiencies

The problem is not just smaller classes—it is financial inefficiency. Schools must maintain minimum administrative and operational staff regardless of enrollment. A 350-student school costs nearly as much to operate as one with 600. When multiplied across several campuses, this structure creates unsustainable overhead and forces painful cuts elsewhere.

State Funding Constraints

The Texas Basic Allotment—the base per-student funding amount—has remained $6,160 since 2019, despite years of inflation and surging costs in special education, transportation, security, and staff benefits. Without an inflation index, the real purchasing power of that funding has fallen dramatically.

State law also limits how much local districts can raise through property taxes. Even when voters approve rate increases, state “recapture” mechanisms often offset local gains. Thus, districts are constrained between rising costs and capped revenue—a pressure cooker forcing attention to efficiency.

Homeschooling, Private Schooling, and Vouchers

During and after the COVID-19 pandemic, homeschooling surged. The Texas Home School Coalition estimates that more than 50,000 students withdraw from public schools annually to homeschool. The Johns Hopkins Homeschool Hub reports that 6.3 percent of Texas students were homeschooled in 2023–24, one of the highest rates in the nation.

Meanwhile, Christian and independent private schools have grown in Collin County, offering smaller class sizes and faith-based curricula. In 2025, Governor Greg Abbott signed Senate Bill 2, creating one of the nation’s largest Education Savings Account (voucher) programs, allowing parents to use public funds for private tuition or homeschool expenses.

The result is unprecedented school-choice migration—and an enrollment base for public districts that is smaller and more fluid than ever before.

Combined Implications

When birth-rate decline, small family size, school choice, and flat funding converge, no district can sustain the same footprint it built for 1990s-era growth. Rightsizing is not optional—it is essential to preserve program quality and teacher stability.

2. How Districts Choose Schools to Close or Consolidate

Purpose of a Transparent, Data-Driven Process

A closure or consolidation plan must rest on objective, measurable factors, not intuition or politics. A transparent rubric ensures fairness, maintains public trust, and demonstrates that each decision was made for both fiscal and educational reasons.

Proposed Selection Rubric (for MISD)

FactorWeightDescription
Utilization & Enrollment Trend30%Measures capacity use and 3- to 5-year enrollment trajectory.
Facility Condition & Life-Cycle Cost20%Evaluates the physical condition, deferred maintenance, and modernization needs of each building.
Operating Cost per Pupil15%Compares per-student costs in staffing, utilities, and transportation.
Academic & Program Fit15%Protects unique programs (dual-language, IB, SPED) and ensures receiving schools can sustain them.
Geography & Attendance Boundaries10%Considers distance, neighborhood continuity, and travel time.
Reuse or Repurpose Potential10%Assesses whether the facility can become an early childhood center, alternative program site, or community resource.

Transparency Requirements

  • Publish campus scorecards showing utilization, cost per student, and FCI (Facility Condition Index).
  • Provide five-year financial projections including both transition costs and long-term savings.
  • Identify receiving schools, showing enrollment impacts and program continuity.
  • Announce reuse plans for each closed campus before the final vote.

Alignment with TEA

The Texas Education Agency requires that displaced students be moved to equal or higher-performing schools, and that transition and communication plans be publicly documented. Following TEA guidelines not only protects equity but strengthens community confidence.

3. Community Reactions, Adaptation, and What Works

Emotional and Practical Impacts

A school is more than a building—it is the heart of a neighborhood. Closures evoke grief, nostalgia, and resistance. Teachers feel displaced; parents feel unheard; students feel uncertain. Without empathy and transparency, even financially sound decisions can damage community trust.

Common Concerns

  1. Fear of losing a neighborhood’s identity and “walkable” campus.
  2. Anxiety about longer commutes or split friend groups.
  3. Confusion about program continuity.
  4. Concern for staff job security.
  5. Worry about abandoned or blighted buildings.

Mitigation Strategies

  • Announce changes early and publish all relevant data.
  • Guarantee staff retention and re-assignment where possible.
  • Provide grandfathering options for current students and siblings.
  • Host family transition events, campus tours, and summer “bridge” programs.
  • Commit to clear reuse or redevelopment of closed facilities (early childhood centers, adult learning, community hubs).
  • Monitor post-closure academic and social outcomes for at least two years.

Examples of Successful Adaptation

  • The Texas Education Agency’s “Close & Consolidate” study found measurable academic gains when students moved to higher-performing campuses.
  • Aldine ISD (2024–25) closed nine campuses but retained 90 % of affected staff, redeployed programs effectively, and reported improved morale after transition.
  • Richardson ISD’s “Project RightSize” (2024) consolidated five elementaries, saving millions in fixed costs and redirecting funds to instruction.

4. North Collin County and Regional Snapshots

McKinney ISD

McKinney ISD’s Educational Facilities Alignment Committee (EFAC) is evaluating capacity, enrollment, and program distribution. Growth remains robust in the northern sector but stagnant in older southern zones. The committee is expected to recommend three elementary closures or repurposings.

Public comments reveal both empathy and apprehension—citizens want transparency, data, and fairness. The Board’s challenge will be to combine fiscal necessity with relational sensitivity.

Allen ISD

Allen ISD closed two elementary schools in 2022 amid rising costs and softening enrollment. The experience demonstrated that affluent districts are not immune to demographic shifts. Public protests underscored the importance of pacing and communication.

Frisco ISD

On October 20, 2025, Frisco ISD voted to close Staley Middle School after 2025–26. The district’s extensive public transition website—maps, FAQs, and staff updates—became a statewide model for transparent closure management.

Plano ISD

Plano ISD, long a symbol of suburban stability, saw utilization drop from roughly 85 % to 73 % between 2011–12 and 2024. In June 2024, the board voted to close four campuses—Davis Elementary, Forman Elementary, Armstrong Middle, and Carpenter Middle School—saving an estimated $5 million annually. The district emphasized facility repurposing, not abandonment, and made strong commitments to staff and families.

Richardson ISD

In March 2024, RISD approved the consolidation of five elementary campuses under “Project RightSize.” The district cited 9,000 empty seats and forecasted a multi-million-dollar deficit if action was not taken. Though community opposition was emotional, the board framed the plan as the only way to preserve academic integrity and staff quality. Transition support programs helped soften the impact by fall 2025.

5. School Choice, Homeschooling & Vouchers: The New Landscape

Texas now operates under the broadest school-choice environment in its history. Homeschool enrollment is stable at record levels, and private Christian and micro-schools are multiplying across Collin County.

The 2025 Education Savings Account (ESA) law magnifies the effect: state dollars now follow the student, not necessarily the district. While this empowers parents, it erodes the financial base of public schools, particularly suburban districts where private options abound.

For MISD, this means that right-sizing must anticipate—not just respond to—choice migration. A campus that is 70 percent full today could be 50 percent full in three years as vouchers take effect. Incorporating “choice leakage” into enrollment projections ensures that the district consolidates preemptively rather than reactively.

6. Financial Rationale and Reinvestment

Recurring Savings

  • Reduced administrative and support duplication (principal, AP, counselor, nurse, librarian).
  • Lower utilities, custodial, and security costs.
  • Avoided capital costs on roofs, HVAC, and deferred maintenance.

One-Time Transition Costs

  • Moving, signage, and relocation logistics.
  • Transportation route adjustments.
  • Stipends and placement assistance for reassigned staff.
  • Communications, summer bridge, and orientation programming.

Five-Year Net Impact

Typical closure/consolidation recovers transition costs by Year 2–3 and generates net savings thereafter, which can be reinvested into:

  • Teacher salaries and recruitment
  • Technology and curriculum innovation
  • Safety upgrades
  • New program initiatives

Reinvestment Transparency

The Board should publish a Reinvestment Report annually, showing where every dollar saved has been redirected to enhance student learning.

7. Governance, Process, and Timeline

  1. Phase 1 — Data and Transparency:
    Release campus scorecards and utilization data. Launch a public portal.
  2. Phase 2 — Engagement:
    Host listening sessions, surveys, and online Q&A forums.
  3. Phase 3 — Recommendation:
    Present shortlist of campuses, financial models, and reuse plans.
  4. Phase 4 — Board Decision:
    Conduct public workshop and final vote.
  5. Phase 5 — Transition & Support:
    Implement student/staff relocation, launch counseling and welcome events.
  6. Phase 6 — Review & Reporting:
    Publish one- and two-year outcome reports (achievement, travel time, cost savings, climate survey).

A “Right-Sizing Advisory Council” should remain active through the first post-closure year to monitor impacts and advise on adjustments.

8. Ethical and Emotional Imperatives

The heart of public education is people, not property. The moral duty of a school board is twofold: to care for the community it serves and to steward the resources entrusted to it.

Empathy and accountability must coexist. Compassion without discipline leads to insolvency; discipline without compassion leads to distrust. Balancing the two is the essence of leadership.

9. Lessons from Research and Experience

  • When done well, consolidations improve academic outcomes and staff morale within 24 months.
  • When done poorly, they damage trust, depress morale, and can worsen achievement.
  • Success requires early communication, equitable selection, strong receiving campuses, and clear reinvestment of savings.
  • Closed schools must never become “ghost campuses.” Reuse or redevelopment is part of closure responsibility.

10. Trustee Decision Framework

  1. Approve the evaluation rubric.
  2. Publish full data and financial analyses.
  3. Conduct engagement and document all feedback.
  4. Finalize closure and reuse recommendations.
  5. Adopt the board resolution publicly.
  6. Provide ongoing transparency through implementation.
  7. Measure results and adjust annually.
  8. Reinvest all savings visibly in instruction and staff.

11. What We May Have Left Out

  • Bond obligations and facility debt implications.
  • Teacher morale and retention post-closure.
  • Equity analyses for affected neighborhoods.
  • Land-use policy for repurposed campuses.
  • Ongoing public reporting standards.

12. My Version of the Heartfelt Statement from the McKinney ISD Board of Trustees.

To the Families, Staff, and Students of McKinney ISD:

No decision before this Board has weighed more heavily on our hearts than the prospect of closing schools. Each of us entered public service because we believe in the power of education to build lives and strengthen neighborhoods. Many of us have children or grandchildren who attend these very campuses. We understand the depth of history, friendship, and pride bound up in each school community.

Yet we must also confront a difficult reality. Across Texas, districts are facing unprecedented financial and demographic pressures: smaller family sizes, fewer kindergarten enrollments, the rapid growth of homeschooling and private-school alternatives, and a state funding structure that has not kept pace with inflation. The State limits our ability to raise local revenue; each additional dollar of tax effort is constrained by statute. Without prudent consolidation, the only alternatives would be to raise taxes again or make deeper cuts to the very programs that sustain quality instruction. Neither option serves our students well.

The decision to consolidate schools is not a reflection of failure but an act of stewardship — ensuring that McKinney ISD can continue to offer excellent teachers, safe facilities, and robust academic and extracurricular opportunities to all children. We make this choice with both compassion and resolve: compassion for the families who will experience change, and resolve to honor every student and staff member through a thoughtful transition.

In truth, there has never been a local government or public organization that has not, at some point, faced the most fundamental fiscal challenge of all: the reallocation of resources. McKinney ISD is not a static institution but a living organism that breathes, grows, and adapts with its community. If we had possessed perfect foresight decades ago—perfect population forecasts, perfect funding formulas—it is likely that several of our current campuses would never have been built in the first place. Our obligation today is to act with the wisdom we now have, to realign our facilities with the realities of our time, and to preserve the long-term health of the district.

We ask for understanding and patience as we navigate this process together. History and experience show that, while transitions are painful, communities adapt, students thrive, and new bonds form. Our promise is to communicate openly, listen honestly, and invest every saved dollar back into teaching and learning where it belongs.

Fiscal prudence and heartfelt compassion are not opposites; they are the twin obligations of public service. It is in that spirit—balancing empathy with responsibility—that this Board moves forward. We remain, as ever, committed to every child, every teacher, and every neighborhood that makes McKinney ISD the district it is today.

Signed,
The Board of Trustees of the McKinney Independent School District

13. Conclusion / Closing Thought

There has likely never been a city, county, or school district that has not wrestled with the same enduring challenge: how to reallocate finite resources to meet changing needs. That is not a failure—it is the natural rhythm of responsible governance.

McKinney ISD, like the community it serves, is a living organism. It grows, breathes, adapts, and learns. As neighborhoods mature and student populations shift, the district must respond with foresight and balance. If we had possessed perfect information decades ago, several campuses might never have been built—but foresight was limited, and optimism was high. Today, with clearer data and the benefit of experience, we have the duty to act wisely.

Rightsizing is not the end of McKinney’s story—it is a new chapter. It ensures that teachers remain supported, programs remain strong, and every child continues to learn in an environment that is safe, efficient, and sustainable. Change is difficult, but so is growth; both are signs of life.

In that spirit, McKinney ISD moves forward—with empathy for those affected, gratitude for those who serve, and confidence that the steps taken today will protect the strength of public education for decades to come.

Affordability, Not Ideology: What the 2025 New York City Election Might Be Really Saying

.Reading time 13 minutes.

A collaboration between Lewis McLain & AI

I find it easy, given my own anti-socialist and anti-communist persuasion, to dismiss the recent New York City election as another swing toward unsustainable government expansion. Yet, setting that aside for a moment, can I look at the undercurrents and learn something? It is with that tone that I ask the reader to do the same.

1. Beneath the Headlines

The surface story was political: a progressive candidate, Zohran Mamdani, wins the mayor’s office on a platform of rent freezes and expanded public services. The deeper story, however, may have little to do with ideology and everything to do with survival.

By mid-2025, Manhattan’s median rent had climbed above $5,000. Outer-borough rents rose by double digits. Nearly one-third of New York households spent more than 30 % of their income on housing. Real wages, adjusted for inflation, stagnated. Even a two-income household found itself slipping behind.

So, when voters filled out their ballots, were they embracing socialism—or simply trying to breathe? Never underestimate the mind of one gasping for air.

2. The Language of Livability

Affordability has quietly replaced ideology as the true dividing line in American cities. Once, debates centered on party and policy; today, they revolve around whether an ordinary worker can stay in the place they serve. It’s not “left” or “right”—it’s whether the math still works.

When groceries, utilities, childcare, and transportation rise faster than wages, the question becomes practical, not philosophical: How long can I keep this up?

And while official inflation may appear calm at 2–3 %, that number hides what many households actually feel—what I call “personal inflation.” It’s the unmeasured rise in daily living costs that comes from housing, insurance, food, and utilities outpacing wages year after year. (See Appendix A.)

3. Misreading the Message

Some national voices called the election a socialist surge. Perhaps that’s a comforting narrative for those who like clean storylines. But what if it was instead a referendum on affordability itself—a protest against unlivable economics, not capitalism?

People who can no longer afford their city don’t vote for theory; they vote for relief. To interpret that desperation as a political movement risks missing the lesson entirely.

4. A Mirror for Other States

It is no secret that Texas has been one of the largest beneficiaries of the affordability exodus from both New York and California. Companies, families, and entire industries have moved to Texas in search of lower taxes, less regulation, and a livable cost structure. That success is worth celebrating—but it should also serve as a warning.

When infrastructure begins to wear out, when roads, power grids, and water systems reach their limits, and when taxes inevitably rise to repair them, the same logic that drew businesses here could just as easily justify their departure. If our cost of living rises unchecked, Texas could become tomorrow’s cautionary tale.

Economic migration obeys no loyalty. It follows cost, opportunity, and predictability.

5. The Numbers Behind the Feeling

Nationwide indicators tell the same story:

  • The United States faces a housing shortfall of roughly 4.5 million homes.
  • Nearly half of renters are now “cost-burdened,” spending over 30 % of income on housing.
  • Real wage growth since the pandemic lags inflation by about one percentage point per year.
  • In large metros, home-price-to-income ratios have hit historic highs, locking out first-time buyers.

These are not partisan statistics. They describe a system under strain. The vote in New York, then, may have been less about political faith than about financial fatigue—and compounded by the gap between official and personal inflation.

6. What a Professional Reader Might Conclude

A city—or a state—cannot sustain endless cost escalation without losing its workforce and its investors. The “affordability signal” from New York should not alarm us ideologically but alert us practically. It says: If you neglect cost control, people and capital will find somewhere else to go.

For policymakers, that means:

  • Treat affordability as infrastructure—as essential to maintain as highways or water lines.
  • Encourage balanced housing growth, removing unnecessary zoning friction while preserving standards.
  • Manage public debt and taxation with restraint, so long-term costs don’t erode the very advantage that drew new residents and firms.
  • Invest in maintenance before crisis, since deferred repairs always cost more later.

These aren’t partisan remedies; they’re managerial ones.

7. Asking Instead of Declaring

Still, the most productive posture may not be to prescribe but to ponder. What if the real issue beneath New York’s vote was not belief but endurance? What if the new political currency isn’t ideology but livability? Could affordability, quietly, be the next great civic value—the measure of whether a city still works for the people who build it?

If so, the warning is clear and shared: when living becomes unaffordable, no philosophy can hold a city together.

8. Closing Reflection

So, before we dismiss the New York outcome as a drift toward socialism, we might instead see it as a flare on the economic horizon. It reminds us that affordability—whether in New York, Los Angeles, Austin, or Dallas—is not a slogan but a threshold. Cross it, and even the most loyal residents and businesses will leave.

The lesson is not political; it is operational. Affordability is the quiet foundation on which every ideology, every enterprise, and every community must stand.

Appendix A: Personal Inflation — The Hidden Multiplier of the Affordability Crisis

Every few weeks a headline reassures us that inflation is “under control,” that the national rate has settled near 2 % or 3 %. Yet nearly everyone you meet feels poorer, not richer. The explanation is both simple and unsettling: the inflation that matters most is personal, not official.

1. The Illusion of Average

The Consumer Price Index (CPI) measures national averages across hundreds of goods and services. It was never designed to mirror the reality of any one household. It’s the economic equivalent of averaging the temperatures of Alaska and Arizona and calling it a mild day.

The CPI basket assigns weights based on the average U.S. household—an imaginary blend that includes homeowners, renters, retirees, students, and high earners alike. But your household’s spending profile—your personal basket—is unique. When your largest costs are housing, insurance, utilities, and groceries, the “average” CPI number becomes almost meaningless.

2. The Real Basket Most Families Carry

Consider two households:

  • Household A, a retired couple with no mortgage and stable investments, spends mainly on travel, entertainment, and medical care.
  • Household B, a working family renting a home, paying for childcare, commuting daily, and carrying health and auto insurance.

Both face an “official” inflation rate of 2 %, yet Household B experiences cost increases closer to 8 – 10 %. Why? Because its essentials—housing, food, energy, and insurance—rise far faster than the discretionary goods that dominate CPI weightings. Economists call this the distributional effect of inflation: the same average conceals drastically different outcomes depending on what you buy.

3. Lagged Housing, Hidden Pain

Housing is the largest single cost in most budgets, yet it enters the CPI through a lagged and diluted formula called Owner’s Equivalent Rent. The index assumes homeowners “rent to themselves” and spreads changes over twelve months, muting spikes in real rents and mortgages.

By the time the official numbers catch up, renters have already moved, landlords have already raised rates, and affordability has already deteriorated. This delay creates a comforting illusion of stability while real budgets collapse.

4. Substitution and Shrinkflation

The CPI assumes that when prices rise, consumers substitute cheaper goods—switching from steak to chicken, name brands to generics. On paper, that keeps inflation low. In reality, it disguises a decline in living quality.

Shrinkflation compounds the deception: packages get smaller, ingredients cheaper, and value erodes while prices stay “flat.” Statistically, that looks stable. To families, it feels like theft by a thousand cuts.

5. The Arithmetic of Erosion

Even modest inflation compounds powerfully. A 4 % annual rise in essential costs over five years represents a 22 % real loss in purchasing power. If wages rise only 2 %, the gap widens relentlessly. The result is what we now see in every major city: households squeezed not by recession but by attrition—the slow bleed of paychecks that never quite stretch to the end of the month.

This is why polls show that even as official inflation cools, more than 70 % of Americans still feel the cost of living is worsening. Their perception is mathematically valid: their personal inflation truly is higher.

6. The Broader Consequence

When policymakers rely solely on headline inflation, they misread the economy’s pressure points. The data may suggest calm while households experience crisis. That false sense of stability delays corrective policy and allows affordability to deteriorate invisibly until it erupts as political unrest or migration.

This is the quiet multiplier behind the affordability crisis. Personal inflation erodes stability one paycheck at a time, magnifying every other vulnerability—housing shortages, wage stagnation, and public frustration. By the time the official metrics confirm distress, the damage is already systemic.

7. Texas and the Next Test

Texas currently enjoys the reputation of affordability that New York and California have lost. But the same arithmetic applies. Housing in major Texas metros has risen more than 40 % since 2019, property taxes are climbing faster than wages, and infrastructure maintenance is overdue. If local cost pressures continue unchecked, the same personal inflation that hollowed out coastal states could quietly take root here as well.

Economic migration follows cost mathematics, not state pride.

8. The Real Lesson

Maybe the story of the 2020s isn’t about whether the Federal Reserve hits its 2 % target, but about whether ordinary citizens can still afford to live with dignity. The charts may show victory, yet the grocery carts tell another story. Personal inflation—unseen, unmeasured, but deeply felt—is how an affordability problem becomes a societal one.

Until policymakers, employers, and communities account for this hidden inflation, they will continue to mistake quiet erosion for progress. Affordability will keep slipping, not because prices explode, but because the numbers that define “normal” no longer describe reality.

The Socialist Experiment in New York City: Vision Meets Fiscal Reality

.Reading time 13 minutes.

A collaboration between Lewis McLain & AI

Introduction

The election of a mayor in New York City who identifies as a democratic socialist signals a dramatic shift in the city’s political narrative. Proposals such as fare-free public transit, universal childcare, city-run grocery stores, and rent freezes have energized supporters who see them as necessary correctives to inequality and high living costs.

Yet beneath that enthusiasm lies a more sobering arithmetic: the city’s finances are already tight, its labor and pension obligations immense, and its economy increasingly dependent on a shrinking number of high-income taxpayers. The balance between compassion and solvency — between vision and viability — will determine whether this new era becomes an urban renewal or a fiscal unraveling.

I. New York City’s Financial Context

The latest Comprehensive Annual Financial Report (FY 2025) shows that the city closed the year with revenues of $117.66 billion and expenditures of $117.69 billion — essentially a balanced budget achieved by drawing modestly from restricted funds. After adjustments, a small $5 million surplus was credited to the Rainy Day Fund, raising it to $1.97 billion.

This appears healthy until one examines the trend lines. The City Comptroller and State Comptroller both forecast out-year deficits of $2.6 billion in FY 2026, widening to $7–10 billion by FY 2028–29. Pension obligations remain enormous despite an 89 percent funded ratio, labor costs are escalating, and COVID-era federal funds have largely expired.

In other words, New York is balancing its budget in a good year with almost no margin for error. A downturn, a real-estate correction, or an over-ambitious spending spree could easily tip it back into the red.

II. The Socialist Policy Agenda

The mayor’s policy wish-list targets affordability at its roots:

  • Free or low-cost mass transit
  • Universal childcare and pre-K
  • City-operated grocery stores in food deserts
  • Expanded tenant protections and rent freezes
  • Greater municipal ownership of infrastructure

Each of these goals carries moral appeal. But together, they represent billions of dollars in recurring obligations that will persist long after political enthusiasm fades. Implementing even half of these programs without new recurring revenues would expand the city’s structural deficit dramatically.

III. Revenue, Tax Base, and Business Climate

The proposed funding approach — raising taxes on high-income residents, large corporations, and real-estate speculation — will face both political and economic resistance.

  • Political resistance: Many of these measures require approval from Albany, where state lawmakers must balance suburban and upstate constituencies less receptive to urban redistribution.
  • Economic resistance: Roughly 1 percent of taxpayers provide nearly 40 percent of personal income-tax revenue in NYC. Even modest out-migration among high earners or firms could erase the expected gains from new tax rates.
  • Market perception: Wall Street, real-estate developers, and major employers watch credit outlooks closely. Higher taxes and heavy regulation could depress hiring, slow construction, and weaken commercial-property values — already under pressure from remote work and high vacancies.

These effects don’t occur overnight, but over several budget cycles they can hollow out the very tax base needed to sustain social programs.

IV. Bond Ratings and Borrowing Capacity

At present, New York City’s credit ratings remain high — Aa2 from Moody’s, AA from S&P, and AA from Fitch — all with stable outlooks. These ratings assume continued budget discipline, strong tax collections, and access to credit markets.

Should the city run persistent multi-billion-dollar deficits or fund recurring programs with one-time revenues, that stability could erode. Even a single-notch downgrade would increase borrowing costs by tens of millions of dollars per issuance. Plus, rating changes usually apply to all outstanding issues, meaning the largest consistency for all governments will get equally stiffed. Given the city’s dependence on annual borrowing of $12–14 billion for capital projects, that would quickly compound into hundreds of millions in added interest.

V. Legal Liabilities and Operational Costs

The city already pays roughly $1.4–1.5 billion annually in legal claims — police misconduct, labor disputes, civil-rights cases, and infrastructure accidents. A socialist administration likely to push faster hiring, expanded benefits, and new regulations may unintentionally increase exposure to lawsuits and administrative complexity.

These are not hypothetical: NYC’s risk portfolio is vast, and new programs create new compliance risks. Legal settlements and overtime overruns have quietly strained the budget for years — issues any mayor, socialist or not, must confront.

VI. The Broader Economic Setting

Even without policy shocks, New York’s economy is fragile in several sectors:

  • Office occupancy remains below pre-pandemic levels, reducing property-tax growth.
  • Hospitality and retail have recovered unevenly.
  • Finance and tech, the city’s fiscal engines, are cost-sensitive to regulatory or tax changes.

Layering aggressive redistribution atop those fragilities could dampen hiring or investment. While not catastrophic immediately, the cumulative effect would be slower growth, fewer jobs, and ultimately lower tax receipts — precisely when the city’s spending commitments rise.

VII. The National Ripple Effect

Other progressive cities — Chicago, Seattle, Boston, perhaps Austin — may watch New York closely. They will adopt pieces of this agenda (municipal grocery pilots, partial transit-fare relief) if results seem favorable. But few will gamble their bond ratings or business ecosystems on full replication.

In this sense, New York’s mayor becomes both pioneer and cautionary tale: admired for ambition, judged by execution.

VIII. The Realistic Risks Ahead

A sober appraisal must acknowledge what can realistically go wrong:

  1. Revenue Shortfall Spiral: If tax hikes trigger out-migration or weak compliance, revenues could decline even as spending rises. Once bond markets sense erosion of the tax base, borrowing costs climb and confidence wanes.
  2. Program Cost Overruns: City-run enterprises and free-service models are historically prone to inefficiency. Without strict oversight, projected costs could double, as seen in past housing and transit initiatives.
  3. Labor and Pension Escalation: Expanding public programs often means expanding payrolls. Each new civil-service position brings long-term pension liabilities the city cannot easily reverse.
  4. State Disputes: If Albany resists authorizing new taxes or programs, the city could face legal stalemates that delay funding while political promises remain unmet.
  5. Economic Shock: A recession, commercial real-estate correction, or major loss in Wall Street profits could instantly erase the city’s narrow surplus and expose the fragility of its social agenda. Recessions are not if but when the next one occurs.
  6. Credit Downgrade: Persistent deficits or fiscal gimmicks would lead rating agencies to shift outlooks to negative, forcing the city to cut spending, raise taxes further, or both — a cycle that can quickly turn populism into austerity. They are the only independent entity that cares not just about today but how the future bondholders are going to get paid.

IX. The Most Likely Scenario

The most realistic projection is a politically energized but fiscally constrained administration. The mayor will likely succeed in implementing a handful of visible programs — perhaps expanded childcare and targeted transit subsidies — but larger ambitions will stall amid budget shortfalls, business pushback, and credit scrutiny.

The public narrative may celebrate “bold change,” but the spreadsheets will show a city juggling rising obligations, marginal surpluses, and deepening long-term gaps.

In short: the dream will proceed, but only as far as the balance sheet allows.

X. The Black Swan Scenario — The Wrong Time for New York, the Right Time for Texas

While New York experiments with costly new commitments, Texas is quietly building the next great financial center. The Texas Stock Exchange (TXSE), headquartered in Dallas, is preparing to launch with backing from major investors such as BlackRock and Citadel Securities. Goldman Sachs is constructing a campus for 5,000 employees; JPMorgan Chase already employs more people in Texas than in New York; Nasdaq has announced a regional headquarters there.

If a black swan event hits — a financial-market crash, a sudden collapse in NYC commercial real-estate values, or a capital-gains exodus triggered by new taxation — the balance of power could shift rapidly. Texas, with no personal income tax, lower costs, abundant housing, and an open regulatory climate, would absorb the outflow of capital and talent. Texas could be the black swan event!

The timing could not be more opposite for the two states. New York is entering a period of fiscal experimentation with razor-thin margins, while Texas is in a period of economic expansion and institutional investment. A severe downturn would strike New York when it can least afford it — saddled with new spending and declining revenues — but it would strike Texas at a moment when it can capture opportunity.

In that worst-case but plausible scenario:

  • Wall Street decentralizes as firms expand or relocate to Texas, eroding NYC’s tax base.
  • Bond markets lose confidence and demand higher yields on NYC debt.
  • Layoffs and migration accelerate, reducing both population and purchasing power.
  • Property values decline, cutting the city’s largest revenue source.
  • Austerity returns, undoing the very social ambitions that inspired the movement.

It would be, in essence, a black swan reversal of roles — Texas ascending as New York falters, the right place meeting the right time while the old capital of finance learns how quickly vision can collide with math.

Conclusion: Vision Without Solvency Defies Common Sense

New York City’s socialist experiment will test whether progressive ideals can coexist with fiscal realism. The mayor’s heart may be with the working poor, but numbers are stubborn things: every new entitlement must be paid for in perpetuity, not just proclaimed at a press conference.

Without disciplined budgeting, credible revenue streams, and cooperation from the state, even noble ambitions could accelerate the city toward financial distress. Remember 1975? The world’s financial capital cannot thrive if it loses the confidence of those who fund it, employ it, or lend to it.

History teaches that great cities fall not from bold ideas but from ignoring basic arithmetic. Unless ideology bends to economic gravity, the risk is not revolution — it is regression.

The Shutdown That Won’t End: How America’s Fiscal Stalemate Became a Test of Creditworthiness

.Reading time 11 minutes.

And Why the Bond Rating Agencies May Hold the Only Key to Ending It

By Lewis F. McLain, Jr.

I. The Standoff That Never Ends

Another fiscal year, another government shutdown.
The United States now governs by brinkmanship — running on a series of temporary spending bills that barely prevent collapse but never deliver stability. Each new “continuing resolution” buys only weeks of political truce.

In Washington, they call it negotiation. Everywhere else, it looks like a nation living paycheck to paycheck. It is actually worse than that. The U.S. has gotten by only by putting most of its excess on a credit card to the tune of $35,598,000 or $324,100 per taxpayer!

These short-term fixes, designed to “keep the lights on,” have become the defining symbol of America’s fiscal dysfunction. Lawmakers boast of avoiding disaster while guaranteeing the next one. The cost is not measured in missed paychecks alone, but in lost credibility — both with citizens and with the global markets that finance the republic.

II. Why the “Big Beautiful Bill” Didn’t Fix the Problem

When Congress passed the One Big Beautiful Bill Act (OBBBA) earlier this year, it was hailed as the long-awaited cure to America’s budget ills.
It was indeed a sweeping structural law — extending key tax cuts, revising welfare programs, and reshaping federal-state funding formulas.

But OBBBA was a policy framework, not an appropriations bill. It set the rules for how money could be spent but didn’t actually fund the government. The twelve annual spending bills that keep every agency running — from Defense to Education — remain incomplete.

Thus, the government shut down not because it lacked a vision, but because it lacked a functioning process. Even the worst person for financial management on planet earth could do better than the U.S. Government.

III. The Politics of Delay

Short-term CRs are not bureaucratic accidents; they are political strategy.

  1. They Preserve Leverage.
    A short CR allows each side to claim the next cliff as bargaining power.
  2. They Manufacture Urgency.
    By setting artificial deadlines, Congress ensures every debate becomes a crisis.
  3. They Diffuse Blame.
    Everyone claims partial credit for “keeping government open,” while no one takes responsibility for its paralysis.

This cycle — a patchwork of temporary lifelines — has become normalized. Yet in any other organization, such repeated failure to adopt a budget would be grounds for a downgrade, a leadership change, or both.

IV. The Rating Agencies: Watchful, But Timid

The major rating agencies — Fitch, Moody’s, and S&P — continue to issue cautious statements, but their restraint now borders on abdication. One must remember that they charge a fee to the governmental entity being rated, they represent the bondholders! The bondholders are the greatest constituency to be found. There are 350 billion U.S. citizens. Compare that to the $37 trillion “constituents” they represent.

  • Fitch warns that shutdowns “highlight governance challenges” but sees no immediate rating impact.
  • Moody’s, more decisive, already downgraded the U.S. from Aaa to Aa1 in May 2025, citing deficits and political dysfunction.
  • S&P notes that each week of shutdown could shave up to 0.2% from GDP growth but stops short of taking further action.
  • Scope Ratings in Europe calls the shutdowns a “negative signal of democratic decay.”

They are not wrong — just toothless.

Bond rating agencies are worthless when they only rattle sabers, if that.
Warnings without enforcement invite complacency, not reform. If a sovereign borrower can repeatedly risk default on its own operations without consequence, the rating system itself becomes performative — an echo chamber of polite disapproval.

V. The Garland Precedent: When Ratings Spoke Loudly

There is precedent for courage I am aware of. In the 1970s, the bond rating agency visited the City of Garland, Texas in person — not to offer advice, but to deliver a direct warning message.

The message was simple: “Stop playing tough on fiscal decisions. Balance your budget responsibly or face a likely immediate downgrade.”

The City Council took the warning seriously. By the next meeting, they had adopted corrective measures, and the city’s fiscal health stabilized. The visit worked not because Garland Council feared markets, but because it respected accountability.

It’s a story quietly echoed in other cities of that era, I’m sure — times when rating agencies acted like stewards of discipline, not commentators on chaos.

VI. The Case for Action Now

If such resolve worked in a Texas city half a century ago, imagine its effect on Washington today.
Bond rating agencies have the authority — and arguably the duty — to intervene decisively.

They could collectively declare this message before October 1:

“The United States has two weeks to fully reopen and fund the government, or face a downgrade of more than one notch.”

That single sentence would do what months of posturing cannot. Markets would react within hours.
Treasury yields would rise, the White House and congressional leaders would receive immediate pressure from financial institutions and state treasurers, and public attention would snap to the true cost of dysfunction. By the way, do you know how much of the $37 trillion is owned by foreign investors? What happens if the day comes for their $9 trillion in holdings to mature, they take the money, and decide to invest elsewhere? Go to http://www.debtclock.org to appreciate how fast it takes to rack up another $1 trillion in debt!

It would no longer be a debate about ideology — but about national credit survival.

VII. Why This Matters

Bond markets are not emotional. They reward stability and punish delay.
The United States retains its privileged position — as issuer of the world’s reserve currency — largely because investors still believe in its reliability.
But belief is not infinite. Every short-term CR and every unending shutdown erodes the myth of American infallibility.

A bold, time-bound ultimatum from the rating agencies would instantly clarify what is at stake:
that U.S. governance, not solvency, is now the chief risk to U.S. credit.

VIII. The Moral of the Shutdown Era

The nation’s fiscal problem is not a shortage of dollars — it is a shortage of discipline.
The Treasury and Federal Reserve can print money; it cannot print credibility.

Congress treats shutdowns as leverage. Presidents treat them as bargaining stages.
And the bond market, by refusing to act, has become the enabler of dysfunction.

The rating agencies have a choice: to remain cautious chroniclers of decline, or to be the mirror that forces reform. Their ratings are not just financial metrics — they are moral verdicts on governance.

IX. Conclusion: The Rating That Could Save a Republic

“Credit,” wrote Alexander Hamilton, “is the soul of a nation’s economy.”
But in our age, it may also be the conscience of a government that has lost its will to govern.

The bond rating agencies can end this stalemate — not by writing reports, but by drawing a line.
Two weeks. No more delays.
Reopen the government fully or face a downgrade severe enough to awaken both Wall Street and Main Street.

If they have the courage to act — as they once did in Garland, Texas — they could remind America that accountability still matters.

Because credibility, once lost, cannot be borrowed back.

Lewis is a municipal finance expert living in McKinney, Texas. While semi-retired (after 52 years), he was once the Garland Budget Director, the Dallas County Budget Officer (first in Texas) and then a VP in Public Finance for First National Bank in Dallas (now Bank of America). After his first ten years, he started consulting for local governments (about 40).

He still consults with about 16 entities such as DART, Brazoria County and the cities of Denton, Groves, Highland Village, Killeen, Leander, McKinney, Midland, Pearland, Richardson, Southlake, Stafford, Victoria and Wichita Falls. He has written several hundred articles, essays and blogs, most of which can be found at citybaseblog.net. He has also given hundreds of presentations at workshops all over Texas and other states, including a training session for young bond rating analysts in NYC years ago.

He was the Executive Director for the Government Finance Officers of Texas years ago and had an Ethics Award created in his name.