New Hampshire Public Finance Consortium Fiscal Forecast Spurs Unique Partnership

By James R. Howard

As a group of local government finance directors gathered in Manchester last spring to discuss the current fiscal state of their communities, unbeknownst to me was the fact that author and competitive government expert David Osborne, in his 2004 bestseller The Price of Government, had already outlined the factors we were meeting to discuss—factors that he sees placing us “in a state of permanent fiscal crisis." Local and worldwide forces are at work right here in New Hampshire. These forces are complex, and most public finance officials either do not understand or do not have the resources in place to develop an understanding of the forces and their implications. We can only react when building budgets or addressing the daily needs of our growing communities and their citizens. We lack the data and the means to respond.

What are these forces that are shaping the cities and towns we are trying to manage? Are they real, or simply a perception? Will they pass or are they here to stay? We know we need more information, but how can we obtain—and share—the information we need in a useful and accessible fashion? And once we have this information: how do we use it effectively?

Bruce Wallin in his 2005 Brookings Institution study, Budgeting for Basics: The Changing Landscape of City Finances, cited a disturbing trend of declining reserves and fiscal problems more related to continuing structural challenges rather than the cyclical financial problems of the past. Also, according to the National League of Cities, public finance faces a number of major challenges: our economic system has shifted from a goods-to-services to knowledge base, yet our revenue structure remains unchanged. The partnerships among the federal, state and local governments have become competitive and have deteriorated, leading to a decrease in revenue sharing and a downshifting of responsibilities. Dramatic demographic changes are impacting the nature and quantity of services needed by residents. Furthermore, there appears to be a lack of civic engagement and growing anti-government rhetoric.

A recent informal survey of sentiments of New Hampshire municipal managers and finance directors likewise reflects an outlook of worsening financial and budgetary conditions over the next three to five years. Many of these leaders see reductions in services concurrent with reductions in budgeted positions. The practical result of this is an effect on our communities as places to work, raise families and thrive as a society.

Existing revenue streams are not performing as needed. Taxable property growth is largely in the residential sector—most communities cannot generate the necessary tax revenue in assessment growth only (either real growth or market value growth). Other sources of revenue like motor vehicle registration fees, revenue sharing, and user charges are not keeping pace. Recent growth in interest income is a result of rapidly increasing interest rates—a phenomenon which has run its course. Compared to the early 1990s, the current revenue milieu is not occurring with an economic slowdown as a backdrop. By most accounts, both national and state economies are good.

The inexorable growth in health insurance costs, systemic problems with employee retirement funding, volatile energy supplies and aging infrastructure (all a focus of recently issued Government Accounting Standards Board (GASB) reporting requirements) are costs in search of a broad range of creative solutions. In addition, cities and towns must struggle to pay market-based wages and benefits essential to attracting the quality employees needed to provide the services our citizen’s demand.

These forces are manifest in the growing unrest of taxpayers. And we cannot blame them. Most of us are taxpayers too! The solutions will not be found in a plethora of misguided legislation intended to stem what is seen as a rampant increase in wasteful local government spending, such as fixing the “view tax" or licensing tax assessors. Expanding and increasing property tax exemptions are not the answer, nor are reducing the interest rate on delinquent taxes or legislating tax caps. Managers and finance directors in the aforesaid survey were realists when they said that the problem was equally both revenue and expenditure driven. We get it!

Yet aside from an intuitive and personal agreement with the above, and aside from my experiences in Concord, I cannot point to other local fiscal conditions to substantiate my position, let alone do much about the problem. Simply stated, we seriously lack the information needed to more fully understand our situation in the broader sense. However, as a public finance official, I feel a responsibility to step into the void, and develop the data needed and the means for making these positions known to the public and to policy-makers.

Building a Partnership
Since last spring’s meeting of finance directors, two seminal events transpired. First, contact with the University of New Hampshire (UNH) Department of Political Science and associated UNH Survey Center coincided with the appointment of a new, dynamic group of university academicians. Dr. Melvin Dubnick, Professor of Political Science and Director of the MPA program, Assistant Professor Roslyn Chavda, and Lecturer and Assistant Director of the UNH Survey Center Dr. Kamalkant Chavda, have expressed a real interest in pursuing the mission of the University for applied research and serving the “public good" through collaboration and other academic avenues available to them.

The second event was the support by the New Hampshire Government Finance Officers Association (NHGFOA) on February 20, 2007, in creating the New Hampshire Public Finance Consortium as a standing committee of the NHGFOA.

New Hampshire Public Finance Consortium is not a solution. It is a path to finding solutions. It is a charter-driven work group focused on collaboration, data development, experimentation and research. At this time the Consortium has two objectives underway. The first is to organize a core working committee of public finance officials and other government finance professionals. The second is to identify and develop the means of collecting and analyzing the data critical to better understanding those forces shaping the fiscal health of our communities.

Current organizational efforts are focused upon bringing interested people together from a range of business and government sectors that are committed to the principles set forth in the charter. Organizations currently committed to participating in the New Hampshire Public Finance Consortium, or that have expressed an interest in such participation, include the New Hampshire Local Government Center, New Hampshire Municipal Bond Bank, New Hampshire Public Deposit Investment Pool/MBIA, New Hampshire Center for Public Policy Studies and the New Hampshire Department of Revenue Administration. At the same time, UNH is moving forward with developing and implementing plans for their participation during the 2007-2008 academic year. Included is their commitment to join the Consortium and develop a public finance laboratory that addresses many of the activities stated in the Consortium charter.

By the time this article is published, the Consortium will have met also with the Carsey Institute to discuss partnership opportunities. The Carsey Institute at the University of New Hampshire conducts research and analysis into the challenges facing families and communities in New Hampshire, New England and the nation. The Carsey Institute sponsors independent, interdisciplinary research that documents trends and conditions in rural America, providing valuable information and analysis to policymakers, practitioners, the media and the general public. With this mission, it appears that the Carsey Institute and the New Hampshire Public Finance Consortium are well suited to partner their efforts to produce reliable and meaningful data to help address matters of public finance policy.

Developing the Data Model
Drawing from an early model developed by Jeff Harrington, former Finance Director for the City of Dover, the Consortium is working to develop a data model. Further research is needed to insure the composition, consistency, relevance and credibility of the data being compiled. With participation of local finance directors, and the resources and support of our partners, the Consortium will develop an important analytic tool for local governments.

Starting small with readily available financial information, (such as information required for continuing financial disclosure to rating agencies; information on file with the Department of Revenue Administration, Office of Energy and Planning, U.S. Census Bureau; etc.) the Consortium plans to develop a means for data gathering, dissemination, research and “best practices" identification, development and sharing.

UNH is presently designing the public finance laboratory for next fall to initiate its involvement in this effort. Their desire is to integrate practical government participation into their curriculum. This type of practical experience is so important in the development of future local government leaders, as well as improving the abilities of those of us currently at the helm.

Get Involved
How can your municipality be involved in this project? First, stay tuned! Soon the Consortium will be inviting finance officials to participate in a work session designed to further identify and define the elements for the data model. In preparation for this session, finance officials will be provided instructions and samples of data to begin researching from their offices. The idea is to start compiling the data and concurrently question its relevance, composition and source. We’ll ask that questions and ideas be submitted for review prior to the work session. Finance officials can begin now to gather financial records back to 2000 if possible. But do not be deterred if gathering historical data is too onerous. Start compiling information now and in a few years you will have the historical data needed to identify trends and compare your community to others in New Hampshire and throughout the nation.

Jim Howard is Deputy City Manager-Finance for the City of Concord. He was recently appointed as Chair of the New Hampshire Public Finance Consortium by the Executive Committee of the NHGFOA. The Consortium charter is available on the NHGFOA Web site at nhgfoa.org under “NH Public Finance Consortium." Meeting dates for the work sessions, as well as minutes and other updates will also be posted on this Web site.

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