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How Finance Officers Can Shake Things Up

Local government finance officers can employ revenue, procurement and other tactics that disrupt the status quo to finance important initiatives.

A sidewalk under construction.
A sidewalk under construction. By using sidewalk conditions rather than service requests to prioritize sidewalk repair, Boston has improved vital infrastructure for neighborhoods that need it most — targeting capital investment where it is most needed.
I recently watched Rustin, the biopic about nearly forgotten civil rights leader Bayard Rustin, who was the chief organizer of the 1963 March on Washington for Jobs and Freedom. In 1948, the year of Mahatma Gandhi’s assassination, Rustin traveled to India to learn the techniques of nonviolent civil resistance, which he later taught to Dr. Martin Luther King Jr.

Not long after his India trip, Rustin wrote, “We need, in every community, a group of angelic troublemakers.” These words were echoed by another civil rights icon, John Lewis, who famously said, “When you see something that is not right, not fair, not just, say something. Do something. Get in trouble. Good trouble.”

Local government finance officers might be the last people you would think of as troublemakers of any kind. Their job, after all, is to keep cities and counties out of trouble by ensuring that tax dollars are managed responsibly. The truth is that finance officers are people too, not human calculators. Many of them care deeply about making their communities better — in a fiscally prudent way, of course.

Inspired by Bayard Rustin, here are 10 ways that finance officers can make good trouble by employing budget, revenue, procurement and other tactics that disrupt the status quo to finance important initiatives:

Align your budget with modern goals. Traditional government budgeting starts from the previous year’s spending plan, which perpetuates the values and priorities of the past. To promote a forward-leaning agenda, start your budget process by establishing goals for the future, including ones specific to reducing inequities. Implement outcome or priority-based budgeting to ensure that these goals drive decision-making.

Leverage outcomes to find new revenue. Addressing the root causes of societal problems can actually save money! That’s the basis of social impact bonds, also known as “pay for success.” The city of Denver attracted $8.6 million in private investments to provide permanent supportive housing to 360 chronically homeless individuals. An evaluation by the Urban Institute found that the program reduced jail, health and other costs enough to repay investors with a return. The same concept has been used in other places to increase pre-K slots, enhance prenatal nurse visits and reduce recidivism.

Make fees and fines scalable. One-size-fits-all fee and fine levels disproportionately burden those who are least able to pay. A recent paper by the Government Finance Officers Association argues that “segmented pricing” — charging people based on their ability and willingness to pay — can lead to higher revenue collection. The San Francisco Treasurer’s Financial Justice Project reports that its actions have reduced hardships and, in some cases, increased revenues.

Consider alternative financing strategies. Energy savings performance contracts have been widely used by local governments. They leverage future energy cost savings to install solar panels, convert streetlights to LED fixtures, etc. Newer financing tools of this sort include bonds for green infrastructure to manage stormwater at lower cost than concrete culverts and pipes, and carbon credits that generate revenue for planting and preserving trees.

Target services and capital investment where it is most needed. In 2018, an analysis by Boston’s Department of Public Works found that service requests for sidewalk repair coincided more with household income than actual sidewalk conditions. By using conditions instead of complaints to prioritize projects, the city has improved vital infrastructure for neighborhoods that need it most.

Check your tax expenditures. When Baltimore’s budget office studied the city’s development tax credit programs in 2022, it found many issues. The credits primarily benefit wealthier neighborhoods; they over-subsidize some development without controls on cost and eligibility; and they profit developers, who use them to increase the asking price of houses instead of passing them along to homeowners. Local governments that use tax credits or similar incentives should give them the same scrutiny as other expenditures.

Hold contractors and grantees accountable for results. Many local governments use contracts and grants to deliver social and health services through not-for-profit providers. “Results-driven” contracting shifts provider accountability from compliance with line-item budgets to measurable results for clients and the community. In 2017, Seattle consolidated and competed 26 homeless services contracts that had not been up for bid in over a decade. According to the Harvard Government Performance Lab, the eight new contracts that resulted have given providers more flexibility to meet client needs and the city more visibility into performance and progress in moving people from homelessness to permanent housing.

Give the community a real say in budget decisions. A number of cities have experimented with participatory budgeting, a process in which residents design and vote on projects to fund with a designated (typically small) portion of the municipal budget. Targeting participatory budgeting to low-income neighborhoods can help address hyperlocal needs that can otherwise be overlooked.

Connect zoning and budgeting. Analysis of the fiscal impacts of land-use decisions shows that higher-density development yields more property value per acre than suburban-style single-family zoning. Single-family neighborhoods typically don’t produce enough tax revenue to maintain their infrastructure over the long term. Reconsidering zoning restrictions can help to meet the demand for affordable housing and reduce road maintenance costs.

Run your government more like a business. This last one may seem out of place, but a more cost-effective use of resources is the best way to make room in the budget for forward-thinking initiatives. Examples of how to do this include monetizing assets, competing out service delivery, improving business processes and using data to catch tax cheats.

What these tactics have in common is that they upend traditional thinking when it comes to local government budgeting. That’s what making good trouble is all about.

The commentary is republished from the American Society for Public Administration’s PA Times. Read the original here.

The views reflected in this commentary are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization. Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
Andrew Kleine, a former Baltimore budget director, is a senior director in the Government & Public Sector division at EY-Parthenon, Ernst & Young LLP’s global strategy and consulting arm.
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