Finding Normal – Part One

It is budget season in California cities. Really budget season, not the constant push and pull that has been going on throughout the year for the last four or more years due to the economy, reduced revenues, and rapidly escalating costs. That is not to say those elements don’t impact “real” budget season as well!

However, January to June is when financial plans are presented to governing bodies and the community, priorities are reaffirmed, and the organization must deal head-on with the future financial health of the organization; when judgments must be made on how good or bad cash flow really is. And, all parts of the organization must settle on a common view of the future in order to plan accordingly….together toward the same end.

In 2011, it is a tough process. Municipalities all over the state are struggling with a similar picture of several years of “holding it together” waiting for the revenue rebound that isn’t coming; using one-time resources to bridge the financial gap each year; and watching employee costs escalate beyond even the most astute planning estimates.

The media has been talking for some time now about the “new normal”…referring to the fact that the economy has made a major, and long-overdue course correction and the “good times” aren’t coming back anytime soon. (Refer to these sources and many others: New York Times ; Economix; McKinsey Quarterly.)  The pivotal ingredient in the cycle/circle is, of course, jobs. Unemployment is excruciatingly high in many parts of the state, and without jobs, people have no cash. Without cash, they don’t buy things. When they don’t buy things, things don’t get made. When things don’t get made, manufacturers don’t get loans for inventory and accounts receivable and expansion; and developers and builders don’t get construction loans and don’t build. No loans, no dollars in circulation.  No dollars in circulation, no jobs created. The economic cycle feeds on itself as it always has in a free market, only this time, elements to nurture the beast are in scarce and slowly emerging supply.

Many of the same pundits and experts that write about the New Normal also write about the greater demand this economic state places on government. While they talk about local government as they discourse, they are usually picturing the Federal government and its ability to print money and run at a deficit with booked debt. Local government (cities and counties) are where the needed services are delivered.

Local government cannot print money or operate in the red. Local government is as much a part of the economic circle described above as any business, subject to the same faucet of cash as the market place, and the ebb and flow that faucet and its pipes deliver. While local government can levy taxes, the California Legislature and the initiative process in California has so constrained that ability that it well might not exist in reality. Besides, it makes no sense to ask cash-strapped taxpayers trying to hold their economic lives together for more cash to hold their government together. We are in this together and together we must solve it with mutual sacrifice, realistic expectations, good intent, and intelligence.

Comments

  1. I have to agree with you. My son is a school teacher in Los Angeles. The last thing he needs is more taxes. It is almost impossible to own a home on his salary alone. I see no improvement in his future unless he leaves the state and then CA would loose a great teacher.


    Claudia
    June 6th, 2011