Nebraska legislator proposes warning system for at-risk city and county budgets

A Nebraska state senator has floated the idea of creating a state-run warning system to notify state officials when local government budgets are under financial stress.

Republican Nebraska Sen. John Stinner has voiced intentions to introduce a bill at next month’s legislative session to create such a warning system, the Associated Press reports. He has observed many small municipalities struggling with their tax bases amid population declines, as well as municipalities of all sizes being confronted with infrastructural issues.

“If there are patterns or trends that show a town is suffering from financial stress, we should be aware of them,” Stinner said, per the AP. “We need an early warning system so we can be proactive in terms of planning.”

Lynn Rex, executive director of the League of Nebraska Municipalities, voiced concern over the assistance the state could provide to struggling cities considering its own budgetary problems, the AP reports. She also voiced concern over designating cities as “financially distressed,” saying that such a move could hurt attempts to recruit new businesses.

In contrast, Larry Dix, executive director of the Nebraska Association of County Officials, supports the idea, saying that such a system could help financially struggling city or county governments cut spending, the AP reports.

“If we see the trend, we can start to make adjustments,” Dix said, according to the AP. “It’s going to provide the information needed to make better decisions.”

Nebraska would be far from the first state to adopt such a system, as 23 other states have implemented systems to detect financial health of municipalities, the AP reports. Virginia is the most recent state to have adopted such a system, implementing it after Petersburg, Va., nearly went bankrupt.

After financial troubles landed three municipalities under fiscal administrators’ control, The Louisiana Legislative Auditor’s Advisory Services developed an early warning system for local governments within the southern state that show initial signs of financial distress, according to a September 2016 report from the Pew Charitable Trusts, “State Strategies to Detect Local Fiscal Distress.”

The Colorado State Auditor’s Office implemented an online fiscal health analysis tool in 2014 to let local governments assess financial conditions on their own, according to the Pew report.

“It’s not necessarily a tool to point the finger at anyone and say, ‘Naughty, naughty.’ But we feel like it’s a tool to be used by local governments … to start the conversation and to understand what the impacts of their decision-making may lead to,”  Crystal Dorsey, the local government audit manager, said in the report.