Rob Douglas: Budgeting for the new normal
January 17, 2013
Like a scene from "The Wizard of Oz," the economic stagnation hobbling America in the wake of the Great Recession has pulled back the curtain of market bubbles — housing being the most recent — to reveal an American economy that is a pyramid scheme devoid of the labor participation rate and overheated consumer spending that temporarily fueled economic growth while hiding the unimaginable cost of government.
Now that the curtain is withdrawn, Americans have realized that their previous assessment of what they could afford and what the government could afford were delusional. America is awakening to the reality that individually and collectively, we must transition from buying whatever we want to calculating how to pay for what we truly need.
Just as Americans are learning to live within their means, government must learn to prioritize spending in a manner that doesn't further burden current citizens or future generations. The new normal for government spending should be to budget only for services that can be paid for within a generation at, or under, existing tax rates.
From unfunded military engagements and entitlements at the federal level to underfunded pension and welfare systems at the state level to an unquenchable thirst for local services and facilities, Americans must stop asking their elected officials to provide more until we meet our moral obligation to pay for what's already on the balance sheet.
Even in Steamboat, a wealthy city that has weathered the economic storm better than most, prioritization of needs rather than wants must remain the order of the day.
This week, a draft of Steamboat's new Stormwater Master Plan was made public. According to the city's engineers and Interim City Manager Deb Hinsvark, the costs contained in the plan — coupled with anticipated expenses to meet new federal stormwater requirements, the cost of land purchases needed to implement improvements to the system and the cost of restoring and maintaining the city's existing stormwater infrastructure — could be $40 million.
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Commenting on those costs, Hinsvark told the Steamboat Today, "It's kind of a big issue and a new issue that I can assure you we cannot address with the funding we currently have or get. We could spend every penny we have on it and still not address it."
Of course, that statement comes from a government official who is one of the architects of the plan to spend upward of $10 million — almost the entire unrestricted reserve fund — on new police and fire stations that weren't even priorities on the city's capital improvement plan until former City Manager Jon Roberts offered to sell the downtown emergency services building at, arguably, a $900,000 discount.
Meanwhile, although city officials plan to create a task force to determine how to pay for the stormwater system upgrades, Hinsvark repeatedly has stated the costs should be paid as a monthly fee by Steamboat property owners. And it's a fair bet the task force will agree with Hinsvark because they will be advised that's what most cities do.
But that's the old method of government budgeting — spend and raise taxes. It's time for a new normal when it comes to government budgets. It's time to recognize that we shouldn't blow $10 million of reserve funds on new police and fire stations that aren't a priority on the city's capital improvement plan while potentially forcing property owners to cough up $40 million for stormwater infrastructure. Instead, the sale of the emergency services building and construction of new police and fire facilities should be shelved so the $10 million is available for stormwater infrastructure that truly needs immediate attention, backlogged maintenance for city facilities, raises for city workers and higher-priority items contained in the capital improvement plan. While $10 million won't cover all those items, proper long-term budgeting will reduce or eliminate the need for higher fees and taxes.
Bottom line: If we can't budget within our means in local communities like Steamboat, we have no chance of stopping overspending at the state and federal levels.
To reach Rob Douglas, email rdouglas@SteamboatToday.com.