The State Budget Crisis Task Force is sounding the financial alarm for local and state governments across the U.S., but who will listen? And if governments are following in the footsteps of the nation’s most recent municipal financial disaster, how soon will they act, if at all?
After three years of research, discussion, contemplation and analysis, the State Budget Crisis Task Force’s final report is now public. Co-chaired by former New York Lt. Gov. Richard Ravitch and former Federal Reserve Chairman Paul Volcker, the Task Force announced that it had
“outlined a troubling picture of the unsustainable and now perilous fiscal position of many states and their local governments across the country.”
Volcker invoked the specter of the financial calamity that is the City of Detroit to warn what is coming for too many governments that – even if not engaging in exactly the same practices as Detroit – are walking too close to the cliff’s edge.
“We need only look to Detroit where debt was leveraged time and time again with no ability to pay, to see that reforms in financial reporting and oversight by states and localities are prudent and necessary,” Volcker said. “The ultimate victims of unsustainable, patchwork budgeting and overextended finances are the citizens dependent upon essential public services.”
Perhaps to avoid stepping on toes or because it had no special authority, the Task Force stopped short of taking positions on “particular public policies and programs.” Instead, it made recommendations and encourages that dialogue and discussions be centered around hard financial data and honest budget estimates.
The unfortunate aspect of not taking hard policy positions is that they might have provided benchmarks against which government actions could be measured, which perhaps could have shortened the process between identifying the problem and solving it.
The Task Force report’s focus areas were:
Reporting on the Task Force findings, the New York Times said,
“The report also called for clarifying what could be counted as “revenue” in government budgets. The proceeds of bond sales, or cash raised by selling public assets, should not be counted. In addition, the task force called for multi-year financial plans that would force states and cities to look beyond one year. States should be required to provide better oversight of cities and other local governments, the report said.”
The Task Force report concluded with a message from the co-chairs, who summed up the state of affairs facing local and state governments in this way:
“National inattention to the financial pressure bearing down on state and local government can no longer be tolerated. “What is at stake is the strength of our educational institutions, of our infrastructure and public systems, of our health care and judicial systems, and of the safety and security of the American society.”
In other words, there’s not a moment to lose. And it depends on who’s listening.