State and Local Funding Crunch: Crisis or Creativity Driver?

February 11, 2011 | By Liza Casabona | Post a Comment

I’m sure I don’t need to tell you, but it’s not real pretty out there. Some state and local governments are faced with frightening shortfalls in federal funding if budget hawks have their way in the next several weeks, which leaves organizations dependent on those dollars potentially scrounging for loose change in a post-recession climate that doesn’t favor those in need.

It’s not an uplifting prospect. The reality is that the same economic conditions that are hamstringing all levels of government are also creating unprecedented levels of need in some areas. It’s your classic Catch-22.

According to experts at a recent conference here in D.C. put on by Governing magazine, things aren’t great, but they definitely aren’t as dire as some folks would have you believe. Experts said the waves of crippling municipal bond defaults that some have predicted are unlikely. But the reality is that we’re all going to have to face up to some pretty tough budgeting decisions. Some important programs could lose funding and the burden on providers of services to those that need them the most is unlikely to let up any time soon.

Despite this not-so-rosy picture, there were a few speakers at the “Outlook in the States & Localities” conference earlier this month who offered a glimmer of hope. Their hypothesis was that with times of great crisis and challenge come great opportunities. It’s an intriguing idea, particularly as we face what are arguably some of the greatest challenges of recent years in the funding arena.

The idea comes from the not-so-distant history of the appropriations process in this country. There’s a lot of talk about the crisis created in the mid-1990s when Republicans and Democrats failed to reach an agreement on a budget, triggering a government shutdown. Many experts argue the crisis created by that impasse allowed for some pretty historic compromises and developments once they’d hit rock bottom, so to speak.

Could tightening budget belts not only force organizations and governments to make tough decisions about their bottom lines, but also allow them to make some positive changes? To paraphrase more illustrious thinkers than myself, is a crisis our one chance to transcend our usual limits? Let us know what you think.

Subscribers to Local/State Funding Report can find more analysis of the outlook for state and local governments in the Feb. 14 issue.

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