Unbalanced Mayhem Trends, Challenges & Failures in  Local Government Budgeting         Presented By      Kenneth Hunter, MPA
What’s On Tap?        Current Trends     The Economy’s Impact Revenue & Expenditure IssuesThe Good, the Bad & the Bankrupt...
About ABFMThe Association for Budgeting and Financial Management (ABFM) is a section of the American Society for Public Ad...
About ABFMAnnual Membership $25 for ASPA Members $50 for Non-ASPA Members $150 for InstitutionsMembership includes subscri...
www.ABFM.org        Organization Info & Updates            Valuable Resources  Public Finance News & Commentary
Current Trends Six straight years revenue decline   Overall expenses kept in lineMunicipalities responding effectively  Co...
Meeting Financial NeedsNational League of Cities, City Fiscal Conditions in 2012
External PressuresNational League of Cities, City Fiscal Conditions in 2012
Pressures Influence BudgetsNational League of Cities, City Fiscal Conditions in 2012
The Economy’s Impact       Loss of manufacturing,         private investment   Localities show wide varianceEmployment sti...
National GDP                      Performance Index (Year 2000=100)                US Real GDP & Components, Annual, 2000 ...
National GDP                            Performance Index (Year 2000=100)                      US Real GDP & Components, A...
Metro GDP Performance125%                     Percentile Analysis of GDP Growth,2000=100) Areas (%)                       ...
2-Yr Employment Trend                  Percentile Distribution of Job Growth/Decline in US Counties,50%                   ...
5-Yr Employment Trend                  Percentile Distribution of Job Growth/Decline in US Counties,50%                   ...
Personal Income125%                Percentile Analysis of Per Capital Personal Income Growth,                             ...
Revenues & Expenditures  Six straight years revenue decline    Overall expenses kept in line Municipalities responding eff...
Revenues & Expenditures     Six straight years revenue decline         Overall expenses kept in line   Municipalities resp...
Tax Revenues     Six straight years revenue decline         Overall expenses kept in line   Municipalities responding effe...
How Is Housing?      Inventories decliningPrices stable, slightly increasing   Slight uptick in constructionLag effect on ...
How is Housing?Housing Data Wrap-Up, Wells Fargo, October 2012
Increasing Revenue     Six straight years revenue decline         Overall expenses kept in line   Municipalities respondin...
Adjusting Spending     Six straight years revenue decline         Overall expenses kept in line   Municipalities respondin...
Personnel Cuts     Six straight years revenue decline         Overall expenses kept in line   Municipalities responding ef...
To What End?     Six straight years revenue decline         Overall expenses kept in line   Municipalities responding effe...
The Good…    Stable bond marketsPotential for salary increases
Stable Bond Markets              “Humming along”              No “earth shattering” changes  Dan Smith              Munici...
Employee Salaries             Current environment remains              “cautious”             “Expect this trend to revers...
…The Bad…Property Tax may not have “bottomed”       Borrowing too much?         Pension liabilities       Declining state ...
Property Taxes              Housing assessments do not               reflect prices “in many areas”              “Housing ...
Borrowing Too Much?Atlanta Federal Reserve
Borrowing Too Much? Property Tax may not have “bottomed”      Rising municipal bond defaults             Pension liabiliti...
Pension LiabilitiesCenter for Retirement Research, Boston College
Declining State RevenueNational League of Cities, City Fiscal Conditions in 2012
…& The Bankrupt   28 Total Since 2010  7 Local Governments21 Authorities (9 in Omaha)
…& The Bankrupt          Debt IssuesJefferson County, Central Falls,           Harrisburg    Pensions/Real Estate  San Ber...
Where Are We Heading?       Prepare for the fiscal cliff!Emphasize price discovery for local debt     Employee benefits wi...
The Fiscal Cliff!        Federal budget sequestrationExpiration of Bush Administration tax rate cuts      Expiration of th...
Price Discovery & Debt                Bond insurance “gone” for                 municipal market… rating                 a...
Price Discovery & Debt                Means of enabling price                 discovery                  – “More frequent ...
Changing BenefitsCobalt Community Research, 2012 National Survey of Local  Governments
Changing BenefitsCobalt Community Research, 2012 National Survey of Local  Governments
What Do We Need?        Applicable analysisTime-sensitive & concise commentary     “Shovel-ready” graduates
Questions?kwhunter@gmail.com   252-557-9594   www.abfm.org  www.nclgba.org
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Unbalanced Mayhem Presentation (National Trends in Municipal Finance)

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"Unbalanced Mayhem" presentation on municipal finance, presented by Kenneth Hunter for American Society for Public Administration (webinar), November 2012

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Unbalanced Mayhem Presentation (National Trends in Municipal Finance)

  1. 1. Unbalanced Mayhem Trends, Challenges & Failures in Local Government Budgeting Presented By Kenneth Hunter, MPA
  2. 2. What’s On Tap? Current Trends The Economy’s Impact Revenue & Expenditure IssuesThe Good, the Bad & the Bankrupt Where are we heading? What do we need?
  3. 3. About ABFMThe Association for Budgeting and Financial Management (ABFM) is a section of the American Society for Public Administration (ASPA).ABFM aims to promote the professional development of budgeting and financial management in the public and non-profit sectors.
  4. 4. About ABFMAnnual Membership $25 for ASPA Members $50 for Non-ASPA Members $150 for InstitutionsMembership includes subscription to Public Budgeting & Finance Journal2013 Conference - Washington October 3rd-5th
  5. 5. www.ABFM.org Organization Info & Updates Valuable Resources Public Finance News & Commentary
  6. 6. Current Trends Six straight years revenue decline Overall expenses kept in lineMunicipalities responding effectively Considerable external pressures
  7. 7. Meeting Financial NeedsNational League of Cities, City Fiscal Conditions in 2012
  8. 8. External PressuresNational League of Cities, City Fiscal Conditions in 2012
  9. 9. Pressures Influence BudgetsNational League of Cities, City Fiscal Conditions in 2012
  10. 10. The Economy’s Impact Loss of manufacturing, private investment Localities show wide varianceEmployment still millions of jobs less than pre-recession levels Stagnant wages & income
  11. 11. National GDP Performance Index (Year 2000=100) US Real GDP & Components, Annual, 2000 to 2011 Real GDP, +18.6% +0.7% since 20072000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011National League of Cities, City Fiscal Conditions in 2012 Total Real GDP
  12. 12. National GDP Performance Index (Year 2000=100) US Real GDP & Components, Annual, 2000 to 2011 Federal, +50% Personal Consumption, +24% Government, +20.3% Real GDP, +18.6% State & Local, +5.8% Gross Private Investment, -11.2% Net Exports, +11.1%2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011National GDP Total Real Net ExportsLeague of Cities, City Fiscal Conditions in 2012 Personal Consumption Government Consumption Gross Private Investment Federal Government State & Local Government
  13. 13. Metro GDP Performance125% Percentile Analysis of GDP Growth,2000=100) Areas (%) Performance Index (Year US Metro US Real GDP & Components, Annual, 2000 to 2011 Federal, +50%100% Personal Consumption, +24% Government, +20.3%75% Real GDP, +18.6% State & Local, +5.8%50% Gross2001-2010 MSA Private Investment, -11.2% 2001-2010 US Distribution25% Baseline, +15.2% 0% Net Exports, +11.1% 2007-2010 US 2000 20012007-2010 2002 MSA2003 2004 2005 2006 2007 2008 2009 Baseline, 2011 2010 Distribution -1.1% National GDP-25% Total Real Net ExportsLeague of Cities, City Fiscal Conditions in 2012 Personal Consumption Government Consumption Federal Government Gross Private Investment 0 State & Local Government 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
  14. 14. 2-Yr Employment Trend Percentile Distribution of Job Growth/Decline in US Counties,50% March 2010 to March 2012 Maximum 153.0%25% National Growth: 3.127% 0% 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 1st Quartile Median 3rd Quartile -1.1% 1.8% 4.7%-25% 62% of US Counties BELOW National Rate 1/3rd of US Counties experienced Job Decline Minimum National League of Cities, City Fiscal Conditions in 2012-50% -44.6%
  15. 15. 5-Yr Employment Trend Percentile Distribution of Job Growth/Decline in US Counties,50% March 2007 to March 2012 Maximum 226.1%25% 0% 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 National Growth: -3.057% 1st Quartile Median 3rd Quartile -8.5% -3.7% 1.2%-25% 54% of US Counties BELOW National Rate Minimum 70% of US Counties experienced Job Decline National League of Cities, City Fiscal Conditions in 2012-50% -41.1%
  16. 16. Personal Income125% Percentile Analysis of Per Capital Personal Income Growth, US Counties (%)100%75% 2001-201050% Distribution 2001-2010 National Avg., 36.3%25% 2007-2010 National Avg., 7.3% 0% 2007-2010 Distribution National League of Cities, City Fiscal Conditions in 2012-25% 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
  17. 17. Revenues & Expenditures Six straight years revenue decline Overall expenses kept in line Municipalities responding effectively
  18. 18. Revenues & Expenditures Six straight years revenue decline Overall expenses kept in line Municipalities responding effectivelyNational League of Cities, City Fiscal Conditions in 2012
  19. 19. Tax Revenues Six straight years revenue decline Overall expenses kept in line Municipalities responding effectivelyNational League of Cities, City Fiscal Conditions in 2012
  20. 20. How Is Housing? Inventories decliningPrices stable, slightly increasing Slight uptick in constructionLag effect on property tax revenue
  21. 21. How is Housing?Housing Data Wrap-Up, Wells Fargo, October 2012
  22. 22. Increasing Revenue Six straight years revenue decline Overall expenses kept in line Municipalities responding effectivelyNational League of Cities, City Fiscal Conditions in 2012
  23. 23. Adjusting Spending Six straight years revenue decline Overall expenses kept in line Municipalities responding effectivelyNational League of Cities, City Fiscal Conditions in 2012
  24. 24. Personnel Cuts Six straight years revenue decline Overall expenses kept in line Municipalities responding effectivelyNational League of Cities, City Fiscal Conditions in 2012
  25. 25. To What End? Six straight years revenue decline Overall expenses kept in line Municipalities responding effectivelyNational League of Cities, City Fiscal Conditions in 2012
  26. 26. The Good… Stable bond marketsPotential for salary increases
  27. 27. Stable Bond Markets “Humming along” No “earth shattering” changes Dan Smith Municipalities, counties continueNYU Wagner to have access to credit
  28. 28. Employee Salaries Current environment remains “cautious” “Expect this trend to reverse itself over the next several budget cycles Steve as the economy strengthens & Condrey unemployment declines.” ASPAPresident- Elect “There is pent-up demand for salary increases, governments are going to have to respond to this or risk loosing their best employees.”
  29. 29. …The Bad…Property Tax may not have “bottomed” Borrowing too much? Pension liabilities Declining state revenue
  30. 30. Property Taxes Housing assessments do not reflect prices “in many areas” “Housing may have bottomed,Christopher but revenues have likely not Goodman and wont until assessments Rutgers- Camden catch up… vary by jurisdiction based on assessing practices and the state of the housing market.”
  31. 31. Borrowing Too Much?Atlanta Federal Reserve
  32. 32. Borrowing Too Much? Property Tax may not have “bottomed” Rising municipal bond defaults Pension liabilities Reducing federal revenueMoody’s
  33. 33. Pension LiabilitiesCenter for Retirement Research, Boston College
  34. 34. Declining State RevenueNational League of Cities, City Fiscal Conditions in 2012
  35. 35. …& The Bankrupt 28 Total Since 2010 7 Local Governments21 Authorities (9 in Omaha)
  36. 36. …& The Bankrupt Debt IssuesJefferson County, Central Falls, Harrisburg Pensions/Real Estate San Bernardino, Stockton Legal DisputesBoise County, Mammoth Lakes
  37. 37. Where Are We Heading? Prepare for the fiscal cliff!Emphasize price discovery for local debt Employee benefits will change
  38. 38. The Fiscal Cliff! Federal budget sequestrationExpiration of Bush Administration tax rate cuts Expiration of the 2% payroll tax cut Implementation of taxes associated w/the Affordable Care Act Expiration of Federal funding for extended unemployment benefitsExpiration of bonus depreciation deductions, which will impact capital investment
  39. 39. Price Discovery & Debt Bond insurance “gone” for municipal market… rating agencies “recalibrated” Justin Marlowe “How do investors fill theUniversity of information gap?”Washington Local issuers need to “expedite the price discovery process”
  40. 40. Price Discovery & Debt Means of enabling price discovery – “More frequent financial disclosure” Justin – “Aggressive investor relations… Marlowe quarterly conference calls… budgetUniversity ofWashington updates… road shows” – Strong state oversight (ex, NC Local Government Commission)
  41. 41. Changing BenefitsCobalt Community Research, 2012 National Survey of Local Governments
  42. 42. Changing BenefitsCobalt Community Research, 2012 National Survey of Local Governments
  43. 43. What Do We Need? Applicable analysisTime-sensitive & concise commentary “Shovel-ready” graduates
  44. 44. Questions?kwhunter@gmail.com 252-557-9594 www.abfm.org www.nclgba.org

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