A recent report by the National Governors Association and the National Association of State Budget Officers lays out the precarious state of the finances in US State governments.
The report makes the case that US states are currently facing one of the worst, if not the worst, fiscal periods since the Great Depression. During 2009 their respective fiscal conditions significantly deteriorated and the trend is expected to continue into the next three fiscal years. Tax revenues from every source are down and demands on state programs is significantly increased as a result of the recession. Unlike Canadian provinces, US States are not allowed to run a budgetary deficit. They must enact either spending cuts or increase tax and must balance every year.
The increase in expenditure pressures for mandated programs such as Medicare and Medicaid as well as the increased demand for social services as a result of the significant increase in unemployment will mean that US States will continue to struggle to balance their budgets. Obviously each individual state has its own particular struggles, with California the one getting the most press given the fiscal mess that they are in. Can you imagine a Canadian province issuing "IOU's"?
Between the fiscal mess at the US Federal Government level and the struggles at the State level, it seems that only a miracle will resolve the fiscal issues facing the US. Let's hope for one, because the alternative for the world economy and in particular the Canadian economy are too gruesome to contemplate. (Sorry to be gloomy, I guess the February blahs have kicked in!)
Showing posts with label Fiscal situation. Show all posts
Showing posts with label Fiscal situation. Show all posts
Wednesday, February 24, 2010
Thursday, October 22, 2009
Fiscal Advice for Governments
The TD Bank reported today that the cumulative deficits of the Federal, Provincial and Territorial governments will add up to $90 Billion this year. And today, the government of Ontario announced a record-breaking projected deficit for this fiscal year of $24.7 Billion and projected deficits of $21.1B in 2010-11 and $19.4B in 2011-12.
These numbers are staggering and governments will not be able to return to balance in the next 5-10 years unless they take a different approach than has been done in the past. Past expenditure management initiatives have traditionally been "across the board" in nature with a strategic approach being an exception rather than the rule. But what is facing governments across Canada is quite different than in the past.
So what is a government to do today? Well here are some thoughts to assist in dealing with this situation to add to my previous blog....
1. Focus on the core activities of government - decide on what is the function of government.
2. Get out of activities that are not part of the core responsibilities of government. For example, is it a core function of government to issue cheques? Why can't that be done by the private sector under a stringent service level agreement?
3. Review remaining functions of government to ensure that they are being run as effectively and efficiently as possible. Implement a lean approach to these activities - there are lots of examples in the public sector of organizations that have implemented a lean approach to it processes resulting in higher productivity, quicker turn around times and increased through-put.
4. Ensure that the tax regime raises the funds required to deliver the services that society has decided is needed from government. It is a fallacy to believe that you can have gold plated level of government services with a very low tax rate.
5. Use evidence to make your decisions and set up measurable outcomes to track progress on your activities.
6. Don't spend your time on little nickel and dime amounts. Remember that it takes just as long to review a small program with very limited spending than it does to look at major expenditure areas.
7. Be careful of unintended consequences of your actions - take a systems approach when looking at spending as a reduction in one area may result in a new pressure in another area.
8. Continue to invest in your staff - put your money where your mouth is when you say that your staff are your best "resource". If you truly mean that, then they also need to continue to develop their skills and share experiences with peers across Canada.
This will not be easy and will require for government to act courageously (as Sir Humphrey would say) and look to the long term.
These numbers are staggering and governments will not be able to return to balance in the next 5-10 years unless they take a different approach than has been done in the past. Past expenditure management initiatives have traditionally been "across the board" in nature with a strategic approach being an exception rather than the rule. But what is facing governments across Canada is quite different than in the past.
So what is a government to do today? Well here are some thoughts to assist in dealing with this situation to add to my previous blog....
1. Focus on the core activities of government - decide on what is the function of government.
2. Get out of activities that are not part of the core responsibilities of government. For example, is it a core function of government to issue cheques? Why can't that be done by the private sector under a stringent service level agreement?
3. Review remaining functions of government to ensure that they are being run as effectively and efficiently as possible. Implement a lean approach to these activities - there are lots of examples in the public sector of organizations that have implemented a lean approach to it processes resulting in higher productivity, quicker turn around times and increased through-put.
4. Ensure that the tax regime raises the funds required to deliver the services that society has decided is needed from government. It is a fallacy to believe that you can have gold plated level of government services with a very low tax rate.
5. Use evidence to make your decisions and set up measurable outcomes to track progress on your activities.
6. Don't spend your time on little nickel and dime amounts. Remember that it takes just as long to review a small program with very limited spending than it does to look at major expenditure areas.
7. Be careful of unintended consequences of your actions - take a systems approach when looking at spending as a reduction in one area may result in a new pressure in another area.
8. Continue to invest in your staff - put your money where your mouth is when you say that your staff are your best "resource". If you truly mean that, then they also need to continue to develop their skills and share experiences with peers across Canada.
This will not be easy and will require for government to act courageously (as Sir Humphrey would say) and look to the long term.
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