For the last several days, I’ve written about the chronic inability of public sector administrators to properly manage public funds. When a financial problem occurs, their solution is to raid the General Fund to make up for the losses. In fixing the immediate problem, they fail to consider what caused their cash problems.
One explanation is that public sector administrators do not understand how to identify and manage risk. Another explanation is that when faced with incontrovertible evidence of failure, they fail to act.
For example, the Village of North Riverside, IL is a suburb of Chicago. In July, village trustees learned that they had a $3M budget deficit. Deficits are relative, but North Riverside had projected revenues in FY21 of $28M, so $3M is a relatively large hole. The village administrator/interim finance director predicts that the village will also have $2.5M deficits in FY23 and FY24.
The police and fire departments represent nearly 75% of the village the budget. To help lower expenses there, the village will eliminate a part-time fire marshal position. In addition, the village will hire a new finance director, an assistant village administrator and a village engineer. (Why does the solution to budget problems always involve hiring more administrators?)
Lack of risk management.
Blind loyalty to Administration causes problems
La Paz County, AZ also finds itself chronically short of cash. County administrators have also shored up the General Fund by borrowing money from other funds. Two different banks now refuse to do business with the County.
One county supervisor claims that he has asked for “real numbers” for several years. Additionally, he says that the County Administrator assured the County Supervisors that the county accounts were all in good shape as of last year. Earlier this year, County Supervisor Duce Minor told Parker Live, “We can’t follow the County Administrator blindly. During the election last year I referred to it as the tail wagging the dog. It’s not an acceptable way to run the County.”
Lack of oversight.
Public sector administrators don’t understand simple business precepts
This summer, Little Falls, NY also found itself short on cash. To pay its bills, the municipal golf course needed to take a loan from the city’s general fund. The city’s general fund needed to take a loan from the sewer fund and also zeroed out the capital fund.
Little Falls has had three treasurers in 8 months. There’s a disconnect between the start of the fiscal year (January), the adoption of the budget (April) and the first tax collection (May). That typically requires the city to issue Tax Anticipation Notes – short term loans that rely on future tax revenues to pay off the loan debt. Short-term loans are expensive. They’re only available at relatively high interest rates. Instead of fixing the problem, public sector administrators there rely on them.
The public sector administrators there don’t want to change the tax collection because Little Falls has a high proportion of older taxpayers who are used to paying their property taxes in May. (“This is the way we’ve always done it.”)
And the golf course? It’s been borrowing money from the general fund for a decade. According to Little Falls mayor Mark Blask, “We’ll have to look at those rates and make sure the golf course functions in a fiscally sound manner.” It’s been running at a deficit. For. Ten. Years. If that’s not a signal to examine the rates, I’m not sure what is.
Lack of action.
Lack of risk management,lack of oversight, and lack of action on the part of public sector administrators. This is what the taxpayers of Washtenaw County can expect if the Washtenaw Community College Board of Trustees approves the WCC Administration’s real estate development aspirations. Do you really want to see WCC waste your tax dollars like this?
Photo Credit: Dale Chumbley, via Flickr