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How local governments and municipalities can prepare for 2023

Dec 01, 2022

Local governments received millions of dollars in federal relief funding related to the COVID-19 pandemic — but barely any guidance on how to spend the money.

Without clear spending guidelines, it took longer for money to flow to county, city and village entities where it could have had the greatest impact. Some relief funding is just now being disbursed over two years into the crisis.

That money is being released into a completely different reality than leaders predicted. Many communities expected sales and income tax revenue to plummet after the pandemic. Instead, many municipalities are holding record-high fund balances. For two years in a row, sales and income tax contributions have been higher than prepandemic levels.

Can there be too much of a good thing?

No, but the windfall does make it more difficult to budget.

Fiscal leaders need to plan and invest responsibly, without any reliable baseline. There’s no way to tell whether these revenue streams are sustainable or long-tail side effects of other relief programs.

Local government trends for 2023

Elected officials need to be prudent in their spending and pursue the greatest good. These four strategic priorities can help communities maximize their resources and invest in tomorrow.

1. Develop longer-term budgets and plans

The budgeting process is designed to keep public money organized and transparent. Working sessions and review cycles can take up to six months — and the focus is on what officials should do right now.

However, leaders also need to need to consider the impact money could have over the next five, 10 or 15 years. Local officials should project their communities’ needs (and wants and wishes) beyond the year-to-year budgeting cycle. What type of infrastructure or facilities will the community need as it grows? Or to stay compliant with regulations (e.g., jails)? When will it need new IT systems? Or more staff?

It’s easy to focus on immediate needs (or what can be accomplished during an elected term), but communities benefit from longer-term financial planning. Leaders need to consider the future needs of their communities, not just the year-to-year view. Elected officials and board members are governing for the future, not just a term.

2. Establish policies and procedures

Local governments need to document their business processes, from issuing payroll to paying bills. Municipalities are struggling to keep staff (like every other industry). Clear documentation can help governments maintain continuity, compliance and customer service during periods of heightened turnover.

Documenting can help leaders identify risks, as well as opportunities to streamline operations. Local governments are expected to use taxpayer dollars efficiently. With staffing levels where they are, they don’t have a choice not to.

Communities that have clear guidelines can also avoid unproductive debates. As part of long-term financial planning, decide how the community will handle financial scenarios. Then, establish a policy. For example, a policy could state that a percentage of surplus revenue is set aside for a rainy day fund or disbursed via wage increases.

Clear financial policies can speed up decision-making and help governments stay on track with long-term goals, even when leaders change. They also make actions transparent and compliant.

3. Recruit expert help

Public employees get extra scrutiny and less pay, which has made them easy to recruit into private-sector jobs. Finance, HR and IT teams have been hit the hardest in the ongoing war for talent. Local governments need to build skills in these key departments and cross-train existing employees to protect continuity.

Sometimes, that won’t be enough.

Outsourcing can help fill the talent gaps. It can also deliver specialized skills for short-term projects or lessons learned.

Boards and commissions can benefit from expert counsel, too. They have a lot of responsibilities on their (mostly unpaid) shoulders. They can’t be experts in everything. Acknowledge where the community could benefit from outside help and start building a network of professional support.   

4. Practice inclusive, productive leadership

Politics are a polarizing force in America, even at the local government, commission and governing council level. It’s easy to get caught up in day-to-day mudslinging, but it’s not productive.

Local governments need to build community, not division. That’s a tall order, especially when they’re leading through turbulent times and rapid change.

Build safe and inclusive spaces for public servants, boards and commissions. Teach teams how to have difficult conversations with respect, and lead by example.

Not everyone has to agree. In fact, it’s best if they don’t. Opposing opinions can help communities arrive at the best solutions (if they are civil and kind). Don’t take team development for granted; it never happens by accident.

How Wipfli can help

Want to jump on these trends in local government? Wipfli can help. From strategic planning to outsourced accounting or IT, we help government agencies adapt to an ever-changing landscape.

Learn more.

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Matthew J. Schueler, CPA
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