Report addresses ways local governments can navigate the financial downturn.(News & Numbers)

The Alliance for Innovation and the International City/County Management Association (ICMA) released a white paper aimed at helping local governments successfully work through the current economic downturn. The report, Navigating the Fiscal Crisis: Tested Strategies for Local Leaders, summarizes research by 20 scholars from 12 universities across the country, who prepared short papers on various aspects of the crisis and how local governments can and have responded.

The report looks at previous downturns and looks at actions local governments have taken to alleviate such situations in the past. It explains ways in which many jurisdictions achieve excellence in the face of adversity and identifies strategies local leaders can use to work through existing challenges and even create opportunities for improvement.

Navigating the Fiscal Crisis examines five important questions about the role of local government in the current economic situation:

* What are the dimensions of the current crisis? What defines it?

* What has worked for local governments during previous fiscal cutbacks?

* What characterizes organizations that cope best with fiscal stress?

* Why is innovation critical in hard times, and how can positive action be taken?

* How can local government action contribute to the economic recovery?

The paper first examines the fiscal dimensions of the economic crisis. Governments across the country face different economic problems; the effect of housing foreclosures, for instance, varies across localities. All levels of government, however, are affected by revenue reductions and increased borrowing costs. In the past, cities and counties have combined revenue increases, spending cuts, and cutbacks on capital projects to work through fiscal crises. The paper discusses cutback management concepts and lessons learned from past fiscal stimulus programs, concluding that tax cuts have less impact than cash grants; capital project support has a greater impact than operating expenditure support; and higher level government project and block grants speed recovery, in comparison to formula grants.

Local governments can use the economic crisis to make significant improvements to their financial management practices, if they are well managed and keep a long-term perspective. The paper suggests long-term adaptation techniques (e.g., trying to diversify revenue sources) as well as short-term coping tactics (e.g., reigning in controllable expenses). It also talks about traits that make organizations resilient and the conditions that encourage innovation.

The paper also looks at actions local government leaders can take to stimulate local economic recovery, noting that "intelligent public investment can reap rewards." Its suggestions for actions to promote constructive change include making cuts quickly and avoiding delay; focusing on the organization's core mission; managing revenues as carefully as expenditures, and committing to communicating with all stakeholders.

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The report is available at http:// www.transformgov.org/FiscalCrisis.aspx ?id=2128.

The Alliance for Innovation is also working on a financial crisis Wiki aimed at enabling practitioners to share their experiences. It is available by clicking on the Fiscal Crisis icon at www.transformgov.org.

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