Balanced budgets good idea locally
A proposed balanced-budget law for municipalities in Ohio sounds like a good idea that if already in place may have prevented current problems facing Warren, Niles and Girard. The law should include townships to help avoid situations like that in Liberty.
State Rep. Louis Terhar and State Auditor Dave Yost outlined the proposal during a news conference recently. Their idea is to force counties, cities and villages to spend based on their actual revenue rather than their projections, as is currently the practice.
The proposal, called the Financial Responsibility in Government Act, would also encourage rainy day funds and cap unbonded debt.
The problem is that budgets are made late the year before they’re implemented. A lot can happen – the loss of a large employer such as RG Steel in Warren – between then and the end of the following year. The proposed law forces elected officials in the communities to fix the shortfalls as they occur.
One issue that should be addressed in the proposal is how much money can be accumulated in enterprise funds, how large a general fund balance should be permitted and what restrictions should be placed on using carryovers to balance budgets.
In pre-Great Recession Niles, for example, rather than lower electric rates, water bills or the income tax, massive carryovers accumulated in the light, water and general funds. During the rough financial times that followed, rather than make more severe austerity measures, the city raided the carryovers and beginning in 2014 will increase the income tax.
Warren has also spent years drawing down on its fund balances rather than make more severe budget cuts. Girard is still feeling the effects of spending years in state fiscal emergency and Liberty has borrowed so much money that Yost’s office has called into question the township’s ability to exist.
The proposed law calls for freezing state funds when communities overspend and releasing them when they get their budgets back on track. Addressing budget problems quickly with small adjustments should help prevent radical cuts later, such as the mass safety forces layoffs in Warren.