Handling a Structural Deficit as a Mayor
Jeanna Tinney
GOVT 327: State and Local Government
October 21, 2016
2
Structural deficits are a huge economic issue in the United States. In the scenario I chose,
I would be the mayor of a city facing a structural deficit of $100,000, with annual town revenues
of $1.2 million and outlays around $1.3. Deuteronomy 8:17-18 (GW) says, “You may say to
yourselves, ‘I became wealthy because of my own ability and strength.’ But remember the Lord
your God is the one who makes you wealthy. He’s confirming the promise which he swore to
your ancestors. It’s still in effect today.” Therefore, it is important to remember that everything
comes from the Lord and the money that federal, state and local governments receive is not our
own. Instead, we are called to be wise stewards of money, using it as a tool rather than idolizing
it.
The Need for a Strategic Planning Committee
It is vital to create a strategic planning committee for the locality. Strategic planning is
defined as “an approach to economic development that emphasizes adaptation to changing
conditions and anticipation of future events.”1 The goals of the strategic planning committee
would include: attracting, retaining and developing a “workforce with the education skills to
succeed,” supporting “local developers in the retention and expansion of existing businesses and
employers,” “optimizing [local] tax, incentive, and regulatory policies to best support the growth
of high-value target sectors,” investing “in technology and innovation to attract, launch and
sustain the growth companies of the future,” developing “a culture that encourages small and
minority business development and entrepreneurism” and providing “the infrastructure necessary
for companies and communities to be successful.”2 Also included in their goals would be to
“improve the quality of fiscal policymaking by steadily working to broaden, balance and
diversify…revenue basis while looking to the long-haul fit of taxing and spending” and “seek to
1 Bowman, Ann O'M., and Richard C. Kearney. State and Local Government. 9th ed. Boston,
MA: Wadsworth, 2014.
2 Ibid.
3
stabilize year-to-year finances and narrow structural gaps” through balancing “revenue and
spending.”3 In other words, the group would focus on spending reductions but the increase of
revenue while simultaneously strictly reviewing proliferations of tax reductions that “have made
the revenue system not only narrower, but also more vulnerable to cyclical variations in the
economy.”4 The planning committee needs to create a create a local strategic plan, “driven by
measurable goals” including “as a fundamental premise the need to take actions that will
encourage and sustain economic development” including the re-examination of corporate taxes
and fiscal incentives.5 It is absolutely vital to “address infrastructure, education and workforce
development” which will be discussed further in the next section.6
Increasing Revenue to Decrease the Deficit
Preliminary Steps to Take
The first step in increasing the revenue is allowing greater “local flexibility and control”
within the local governments through the state legislators.7 Granting “greater local control over
revenue generation and public service provision, including access to a variety of general tax
instruments (sales, property and income), increased state aid, and fewer tax and spending
limitation” will also “build balance into the combined state-local system and allow flexibility
when it is needed.”8 The second step would to be obtaining and distributing budgets in a
transparent and user-friendly manner for the city and the citizens. It is important to make the
3 Murray, Matthew, Kristin Borns, Sue Clark-Johnson, Mark Muro, and Jennifer Vey.
"Structurally Unbalanced: Cyclical and Structural Deficits in Arizona." Brookings Mountain
West / Morrison Institute, January 2011, 1-16. Accessed October 21, 2016.
https://morrisoninstitute.asu.edu/sites/default/files/content/products/MI-
BMW_StructurallyUnbalanced.pdf.
4 Ibid.
5 Ibid.
6 Ibid.
7 Ibid.
8 Ibid.
4
budget available for public view in a user-friendly format “along with interpretive narrative” on
webpages, “budget guides for the public and legislators…in clear language historical budget
patterns, current budget policy issues, and the long-term pressures on public finances” in order to
help people “understand the implications of their decisions for the state’s budget future.”9
Budgets available for “public review, and the process should allow appropriate time for public
comment” instead of being “discussed publicly in the abstract…passed quickly and with little
public input.”10 Comparably, improving “tax expenditure reporting” because “giveaways of the
tax base in the form of new and ongoing exemptions and incentives that typically receive no
formal budgetary accounting are key contributors to…structural distress” is also crucial.11 This
will include “services largely exempt from sales tax bases, discretionary incentives to promote
economic development, and preferences granted under personal and corporate income taxes.”12
Next, implementing a “multi-year budgeting” so fiscal year budgets and election cycles
do not conflict is important.13 It is also important to “educate citizens about the fiscal
implications of referenda.”14 Budgetary consequences arise when “economic, demographic
and/or fiscal conditions shift after the initiatives are approved” so it’s important to provide
“unbiased, readily accessible, and transparent information to voters on how proposed referenda
are likely to impact budgets in the shirt and longer term so they can carefully weigh the benefits
of new mandates against their fiscal implications before making decisions.”15
Subsequent Steps to Take
9 Ibid.
10 Ibid.
11 Ibid.
12 Ibid.
13 Ibid.
14 Ibid.
15 Ibid.
5
Collective bargaining agreements with the teachers union needs to be adjusted. They are
demanding a 1% raise and it will be granted. Unemployment is up 1% and there is no local
college where lobbyists trying to put in a high tech facility. Furthermore, the local population
does not necessarily have the skillsets to work at this facility. Therefore, creative budgeting and
use of available public funds combined with programs, incentives and a tourist tax will all assist
in resolving these problems.
Employing a local tax for “tourist” areas to combat the deficit and create a “rainy day
fund balance to bring greater stability to the overall system.”16 Bringing about programs for local
businesses to be created or expanded; provide tax breaks, public subsidies, venture capital pools
to create small business incubators to initiate “workforce training programs in an attempt to
support homegrown enterprise” will also be included.17 This can be achieved by building a
community college. It would be built near the intersection of many public transportation routes
and the local government would provide programs and incentives for businesses to relocate or
expand in the general area, creating an increase in travel and tourism to the area. Public funding
for the college would be obtained in many ways, including advocating for lesser public funds to
be given to flagship universities and for the state to assist with operating costs for the first five
years; they can determine the feasibility and progress after and vote then. It would be funded
primarily through federal and state government funds, and not local taxpayers. Because
generally, capital funding is easier to obtain than operating, the erection of the building will not
be as much of an issue as operating costs will be. As mentioned, joint ventures with local
organizations and even potentially a bordering state will help defray costs from the local level.
Furthermore, matching, block, categorical and project grants will be utilized to help in whatever
16 Ibid.
17 Ibid.
6
aspect they can. Subsidies will be utilized to cover costs as well. Keeping the community college
free or at the lowest cost possible will be the goal contingent upon participation in the workforce
program.
The workforce program will aim to create a high quality workforce within the locality.
Trainings will be from representatives from area businesses (if they opt in) and will be held at the
local community college. The college will connect with area businesses that need technicians or
lower level employees to help run the business, etcetera and will obtain federal tax stimulus
money for the workforce program and the college itself. Community colleges are the most cost
effective means of public education and is therefore the best way to go.18 “Successful economic
development efforts are built on a high-quality work force” and “sustainable development
strategies that recognize the interdependence of the economy and the environment are
necessary.”19 Because the “new infrastructure is technology and telecommunications” and
“regionalism provides an opportunity for states and others to work together” it would be great to
allow the high tech facility while creating a joint venture with an area state and/or the local
chamber of commerce and/or other similar organizations.20 The programs for local businesses
and people working with technology and communications will be temporary, as to not increase
cyclical variations in economy.21
Conclusion
Restoring more power to the local government is vital in order to allow a proper conflict
resolution, with oversight and assistance from the hierarchy as needed.22 Building a community
18 Ibid.
19 Ibid.
20 Ibid.
21 Ibid.
22 Miller, Ron. "The Biblical Authority for Federalism." Lecture, August 31, 2016. Accessed
August 31, 2016.
7
college and a high tech facility are great options that will not cost the taxpayers as much, with
creative budgeting ideas and the utilization of funds that already exist. Hebrews 13:5 (ESV)
instructs, "Keep your life free from love of money, and be content with what you have, for he has
said, 'I will never leave you nor forsake you.'" It is vital to remember that money is a tool –
nothing more and nothing less.
8
Bibliography
Bowman, Ann O'M., and Richard C. Kearney. State and Local Government. 9th ed. Boston, MA:
Wadsworth, 2014.
Miller, Ron. "The Biblical Authority for Federalism." Lecture, August 31, 2016. Accessed
August 31, 2016.
Murray, Matthew, Kristin Borns, Sue Clark-Johnson, Mark Muro, and Jennifer Vey. "Structurally
Unbalanced: Cyclical and Structural Deficits in Arizona." Brookings Mountain West /
Morrison Institute, January 2011, 1-16. Accessed October 21, 2016.
https://morrisoninstitute.asu.edu/sites/default/files/content/products/MI-
BMW_StructurallyUnbalanced.pdf.
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