Life in the Time of Shortfall

Posted on March 16, 2020

shortfall post

This guest blog is by an ELGL member who isn’t authorized by their employer to put their name on the post. But it’s still great information to read and share!

Some younger local government staff may not have lived through the lean years.  Some helpful advice of ideas we’ve used in the past.

Revenue Side:

  1. If you have a economic and finance team.  Start having them run stress tests on the General Fund and other large funds to see how bad it will be.
    1. Pay attention to lags.  Some revenue streams will be impacted immediately (sales for example) while others (income and property) may not be as impacted or will lag behind.  Use past recessions to look at lags.
    2. Related to the above – understand your revenue streams and seasonality.
  2. If you don’t have a finance team, consult historical data to see how revenues were impacted in the past.  See if any organizations that you are a member of have a economist on staff to gauge impacts of recessions.
  3. Revenue may also include delinquencies.  For example, do property and other revenue non-payments increase in a recession?  How does that impact your revenue?
  4. Look at all fee supported revenue (parks, event space, licences, etc).  See if how they may be able to fair in the event of a prolonged shut down.
  5. Estimated recovery period?  I would say generally shocks like this (9/11 as a guide) were short lived.  However, it could be longer depending how long people are quarantined.
  6. If revenue is to be raised – how quickly would you get it?  What are the impacts of any revenue increase (i.e. on mill increase on property tax gets…). Are their any impacts on vulnerable populations?

Fund Balance:

  1. Look at all fund balances from rainy day funds to individual funds (maybe your event space has a fund balance).  What processes are in place to tap fund balance to support ongoing operations.  Can fund be borrowed against (for example, borrowing from the motor fleet fund mid year to be paid back when general fund revenues come back in)?

Expenditure Side:

  1. How are funds expended on a monthly basis?  Are their pressure points where abnormally large expenditures are due (for example in North Carolina it’s spring with tax rebates).
  2. Are their large purchases or contracts that can be delayed?  Or just know when the expenditures are coming so you aren’t surprised.
  3. Look at vacant positions and the impact of a freeze on hiring.
  4. Look at the reduction from an unpaid furlough.
  5. Chronicle programs by core function.  Look at reducing/eliminating those that are not required or as less important.
  6. Are certain programs needed more in a recession (for example Medicaid enrollment spikes or libraries for job training)?  What does that increase look like?
  7. What are your must do expenditures?  (Debt service, payroll, insurance, etc).
    1. What are the impacts of the must dos (how much flexibility do you have between must do and discretionary)
  8. What are you mandates from the State or Federal government?
  9. Look at eliminating pilot programs or programs that aren’t jurisdiction wide.
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