Spring 2010 issue of Horizons

Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

Reductions in spending are nearly inevitable in most cases, but that doesn’t always mean reductions in workforce (salaries being the largest expenditure for many governments). Delaying large capital projects, restructuring debt, modifying benefits for employees, changing hours of operation for facilities (four 10-hour days instead of five eight-hour days) and working with employees to develop creative solutions to reduce spending all can be alternatives to simply reducing head count. Having a clear, attainable vision in place is a great start. Budgeting for the upcoming year alone may not cut it. Looking forward, thinking about a long- range plan and getting key personnel on board with its implementation are steps in the right direction. The vision is a team effort and the governing body will need buy-in at all levels (employees and citizens) with their vision for the future of the organization to give their plans the best chance to be effective and for sustainability to be attainable. Local governments can weather this economic storm. The ride may just be a little slower and bumpier than any encountered in recent memory.

For local governments that have sought to aggressively attract and expand a commercial presence within their jurisdictions or those that have taken on substantial debt to expand facilities and services in recent years, these tactics may not be enough. So what does all of this add up to? In many cases, it means a combination of higher taxes and fewer services. Fees related to permits and licenses could be increased, as well as user fees for recreation facilities. Reductions in hours of operation or closing facilities altogether may be necessary for some local government organizations. In many communities, arts and recreational facilities could be the first to feel the impact. Increased support from user fees and nonprofit organizations may be necessary to relieve the burden on taxpayers to maintain operations for certain non-critical services. of the nation’s total output (including employee salaries) and local government employs more than 14 million people, these cuts could have a significant impact on the recovery of the economy. In addition, there is difficulty in controlling costs related to workers’ pension and benefit plans at many government entities. So, when many economists say the broader economy is turning the corner, state and local governments may be well served to remain skeptical. The trickle- down starting to affect state and local governments now may require a longer recovery period, and the impact on governments could affect a significant portion of employees and consumers across the nation. In summary, local governments have a hill to climb, and there are some obstacles along the way. The recession has forced businesses in the private sector to be more efficient, and many government organizations may have to start thinking the same way. Governments may have to get creative about how they raise additional revenue from existing sources or tap into new sources. When taking into account that local government spending alone accounts for nearly 10 percent

Questions? Contact:

Jeff Winter, CPA, CGFM Partner-in-Charge Public Sector Services Group 314.290.3408 jeff.winter@rubinbrown.com Kaleb Lilly, CPA Manager Public Sector Services Group 314.290.3243 kaleb.lilly@rubinbrown.com

52 u spring 2010 issue