The latest news about weakening state revenues, federal tax-reform proposals that target the deduction for state and local taxes, and shifting demographics in the public workforce is giving a lot of state and local government leaders a headache.
It's enough to make anyone reach for the aspirin bottle. But the good news is that, rather than relying on analgesics, thoughtful public leaders are engaging in plenty of dialogue about these issues while keeping a focus on priorities and how to adapt to a challenging future.
Certainly budgeting and spending considerations present a continuing challenge. While state general-fund revenues are projected to grow by 3.1 percent in fiscal year 2018, general-fund spending on Medicaid is expected to grow by 4.3 percent, reports the National Association of State Budget Officers. Revenue collections fell below budgets in 33 states in fiscal 2017, so state budget experts are cautious.
And when state budgets are squeezed, local budgets become even more constrained. Alexandria, Va., has already cut everything it can in recent years, says Mayor Allison Silberberg, so "any further cuts come from the marrow of the bone."
Take housing, a growing challenge in the nation. Local governments would like to see more, not less, state and federal financial support for workforce and affordable housing. The HOME Investment Partnerships Program is the largest federal block grant program designed to create affordable housing for low-income households. Yet, the Trump administration's proposed budget has targeted HOME for elimination. The homelessness crisis is a related challenge that local governments face without sufficient help from the federal or state governments.
Local and state leaders also are concerned that federal tax reform could make it even more difficult for them to retain the level of revenues they need to provide essential services. The deduction for state and local taxes has been targeted for elimination as low-hanging fruit to pay for tax cuts Congress and the White House would like. At a briefing for Congress last month about the impact of eliminating this tax deduction, Gordonsville, Va., Mayor Bob Coiner argued that the effect of the proposed double taxation would be to "take from the middle class to give to the 1 percent."
And when state and local revenues are constrained, it becomes even more difficult for leaders to address the looming workforce issue: wave after wave of retirements as more baby boomers exit the government workplace. Recruiting and retaining qualified personnel was the top priority for 91 percent of respondents to the Center for State and Local Government Excellence's 2017 workforce trends survey.
Police officers were ranked in the survey as the toughest positions to fill, followed by information-technology workers, engineers and health-care professionals. With low unemployment rates in many places, the competition for talent has increased.
In response, many governments are sharpening their talent-development tools, and it is paying off. Hennepin County, Minn., and Sunnyvale, Calif., for example, are willing to hire beyond immediate needs for certain positions, such as those that are hard to fill or where bench strength is needed to develop a pool of talent for upcoming vacancies and retirements. Robust employee-development programs complement these efforts and are a key part of their strategy to be an employer of choice.
As state and local officials address these and other pressing issues, the conversation among them often returns to the theme of how to keep the federal government from making their jobs more difficult. They want to be able to invest in infrastructure, for example, and their most valuable tool is the tax-exempt municipal bond, whose status is also up in the air in Washington. "We have relied on municipal bonds for over 100 years," Mayor Silberberg noted at the congressional briefing. Local borrowing costs, she said, would go up 35 percent without tax-exempt bonds, making it harder to build new schools, repave roads or clean up waterways.
None of these challenges is easy to address. Still, we spend too much time talking about how to reduce taxes or shift responsibility from the federal government to state and local governments. Missing from those debates in Washington -- and most important -- is the conversation about what we most want to accomplish and how best to get the job done. Fortunately, some of those conversations are happening, at least at the state and local level.