Navigating the Fiscal Crisis: Tested Strategies for Local Government Leaders

Source: Gerald J. Miller and James H. Svara, International City/County Management Association (ICMA), White Paper, January 2009

The developing fiscal crisis that city and county governments face calls for extraordinary action by local officials at all levels of government. However, there are lessons to be learned from research on previous downturns and what is known about how organizations achieve excellence and deal with adversity. ICMA commissioned this White Paper by researchers in the Academic Network of the Alliance for Innovation in order to better understand the nature of this fiscal crisis and what steps managers can take to pursue economic recovery. Key findings in the research address the following areas:

This economic crisis is deeper and more severe than what we have experienced in the past 50 years. While some U.S. regions and localities are experiencing the downturn differently, for the first time in the postwar era, all levels of government are impacted with dramatic revenue reductions simultaneously. In addition, this economy has all sectors of the private economy also in a tailspin. Events have already reached crisis levels in some cities and counties, and some say that “we are just at the end of the beginning” of dealing with the crisis. Still, local governments in other parts of the country are just starting to see how the crisis will affect their communities.

These governments can learn from past experience with cutbacks and the response of cities and counties already on the frontlines of the crisis. There are lessons to be learned from past stimulus programs. First and foremost is timing. Only one stimulus package – that of 2001 – was actually approved before the recession had officially ended. In addition, we know that:

• Tax cuts have less impact than cash grant to localities
• Capital project support has a greater impact than operating expenditure support
• Higher level government project and block grants speed recovery in comparison to formula grants

See also:
A web-based “wiki-blog” has been established for local government staff to share ideas on how to weather the economic crisis. Go to www.Transformgov.org – click on the Fiscal Crisis icon.

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