Viewpoints

We can be cautiously optimistic about budgets

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Michael Keating tells why he is cautiously upbeat about the fiscal health of governments in the U.S.

I’ve been tracking budgets in our GPN Keating Report forecasts for the past 35 years or so. Our latest mid-year 2015 forecast at the GPN site shows government officials have a cheerful spring to their step.

The 300+ local government administrators who took part in our mid-year E-survey of subscribers to Penton magazine/sites Government Product News and American City & County say their city budgets are healthier and that spending is growing a little. More than four out of five administrators (88.6 percent) see their government’s budgets in the second half of 2015 equal to or greater than second half 2014 budgets.

John Dougherty, city manager in Kingman, Ariz. (population, 28,393) says his city’s 2016 budget is looking very good. Dougherty tells GPN that city revenues, pre-audit, are higher than budgeted, and that Kingman officials hope to give employees a 3 percent pay hike in the next fiscal year.

Local government officials expect to spend more on several activities in 2015 compared to 2014, according to the mid-year Penton survey. Areas that drew the most votes for increased budgets for 2015 compared to 2014 were health coverage for employees; public safety; and public works, transportation and construction projects.

Infrastructure is top of mind for the mayor in one Midwest city. “Rochester Hills, Mich., is working to aggressively deal with some of our longest standing challenges in this current fiscal year — our roads” says Mayor Bryan Barnett. “We have allocated more money to local road reconstruction in 2015 than any time in the past 15 years.” The population of Rochester Hills is 72,952.

Yes, I’m upbeat. Local governments have experienced six consecutive months of employment growth, and they added 4,900 jobs in June, reports the National League of Cities (NLC).  But I’m concerned about the future. Slow national and global economic growth could derail cities’ progress that has occurred since the end of the Great Recession. What’s more, continued political and policy uncertainty at the federal level can undermine progress on the local level.

And what about that 2016 budget resolution that Congress passed in early May? The Republican-backed resolution offers a long-term plan to bring the budget back into surplus (by 2024) for the first time since the Clinton administration. To reach that target, however, the feds would have to institute more than $5 trillion in planned spending cuts over the next 10 years across a wide assortment of both mandatory and discretionary budget lines. What’s to keep Congress from chopping federal grants to local governments or the safety net programs that protect at-risk urban residents?

Yes, there are some clouds on the horizon. Nearly two dozen states are staring at budget shortfalls, so they are scrambling for new revenue sources, says Sujit CanagaRetna, fiscal policy manager at the Atlanta-based Council of State Governments’ Southern Office, the Southern Legislative Conference. He also tells me “Economic headwinds continue to plague other parts of the globe, crimping U.S. exports, which have also been adversely affected by the appreciating U.S. dollar.“

And here’s the cherry on top. Do mayors, city budget directors or anyone else need another federal government shutdown? It could happen if there’s a protracted standoff in Congress over a federal debt limit increase. The festivities could start two months after the 2016 federal fiscal year kicks in on Oct. 1.

Waiting for the next budget shoe to drop, I remain, Michael Keating (photo above, on right)

Michael Keating is senior editor of GPN, an American City & County sister brand.

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