How to help newly elected local officials understand government finance
- By Charlie Francis
- Feb 18, 2021
In states, cities and counties across the country, newly elected officials are settling in and seeking to make an impact as quickly as possible. With the COVID-19 pandemic still raging and unemployment at record highs, a slow start could have immediate and dire consequences.
Yet, for officials joining state and local government for the first time, the public-sector finance learning curve can be steep. Many politicians lack financial experience altogether, and those with some experience have often learned it in corporate environments, which operate by a very different set of goals and rules.
It’s critical that state and local government finance staffers educate newly elected officials to bring them up to speed as fast as possible. The building blocks necessary to achieve this are not complicated themselves, but often are challenging to achieve: a sound five-to-10-year strategic fiscal vision plus the right supporting technology that helps set goals, manages performance and offers transparency to citizens and stakeholders. The good news is that financial training and transparency can also help cities and counties stay agile and better confront current and future challenges.
A new financial playbook
Most newly elected local government officials lack relevant expertise in public-sector finance. Many are transitioning to the public sector after years in political or private-sector roles where financial knowledge may not have been needed. Others may have corporate financial experience but find themselves faced with a completely new government financial playbook to learn and incorporate into their day-to-day practices.
Unlike corporations, local governments do not accumulate wealth and by law are not allowed to run deficits. Rather than focusing on “bottom line” profit, governments are concerned with managing the flow of revenue and expenditures on an ongoing basis. Additionally, a private-sector company typically has only one set of books. Local governments may have multiple, separate funds with their own P&L lines and reporting requirements. The result is a complex and demanding system that simultaneously requires greater level of transparency with citizens and other stakeholders while making it more challenging to achieve that goal.
The fiscal crisis facing local government
COVID-19 created a public health emergency, and greatly exacerbated the fiscal challenges facing local governments as a direct result. The crisis has led to a decrease in tax revenue while increasing emergency spending, forcing government officials to make extremely difficult financial decisions.
They must carefully balance the need for additional emergency services and equipment with less money to cover the costs, all without the ability to run a deficit. They have to find ways to cut the budget to pay for any new expenses, without fully knowing how long the crisis will last. This is especially true in localities with tourist and hospitality-based economies. With policies under discussion that could have a broad and sweeping impact on the future of their jurisdiction, newly elected officials must quickly grasp the intricacies of their budgets in order to make the most informed decisions possible.
Medium-term strategic foresight backed by smart technology
To ensure elected officials are brought up to speed as fast as possible, it’s critical to have in place a five-to-10-year strategic financial vision with a corresponding management plan that details a range of possible scenarios and action triggers. Think of this as the financial version of a GPS-enabled map, allowing governments to continuously track a course, recalibrating with new routes and assumptions based on evolving circumstances as well as actual money spent against a forecast. This is different than a yearly budget, where the money is spent based on known, as well as unanticipated, needs. With this type of medium-term financial vision, new government officials taking the reins can easily understand the short- and long-term fiscal ramifications of enacting a particular policy and, thus, its effect on the strategic vision.
Trust through transparency: smarter technology to support local government
The right technology is key to building and nurturing a meaningful financial vision that can be used to help quickly educate elected officials and help guide fiscal decisions both during and after their term.
The first requirement is a quality strategic financial planning and performance management software platform designed specifically for state and local governments. The right platform can help local governments streamline the process of running multiple “what if” scenarios, in addition to tracking KPIs across programs to measure success. It’s important that the solution possess flexible integration capabilities and application programming interfaces that allow for the easy import of data from disparate systems into one unified platform. Integration also creates a continuous “intelligence cycle” where data from multiple sources is acquired, cleaned and curated to ensure readiness for real-life application.
Second, it’s critical to create one set of “fiscal truths” and ensure that those truths are transparent for citizens and stakeholders. In this way, local governments can help build trust within their communities, while helping elected officials get down to the business of governing. Online finance portals are a great way to achieve this.
Transparency portals provide a singular picture of a city’s financial health and strategy. These online platforms, hosted on the local government’s website, allow stakeholders to easily access information about their municipality’s plans, projects and other issues. Transparency portals become most effective over time when they’re consistently updated, prioritized and promoted through ongoing communication efforts that encourage citizen site visits and interaction.
Hitting the ground running
Today, with local governments struggling under the financial strain exacerbated by the pandemic, elected officials must understand the nuances of government finance faster than ever before or risk real consequences for citizens and business.
The right approach, driven by a strategic plan backed by smarter technology, can not only help get elected officials up to speed on government finance more quickly, it can also help foster trust among constituents. By planning a fiscal vision in five- to 10-year increments backed by tools to integrate data and make it more transparent to citizens, local governments can more quickly and effectively confront today’s challenges while positioning future leaders for tomorrow’s opportunities.
Charlie Francis is a senior consultant with Questica.