Highlights of the past, but nothing compared to the highlights of the future….

Jan 6, 2020

Executive Director, Government Finance Research Center (GFRC)

Whether in good times or bad, the nation’s cities, states and local governments must deal with a wide array of complex financial issues. The challenges and opportunities to learn from one others’ successes and failures push them to continually collect, analyze and share data, information and perspectives.

That truism provides the environment that fostered the creation of the Government Finance Research Center. If coverage of issues that are on the minds of state and local leaders is a mark of success, the GFRC has had a terrific year.

Our blogs, prepared by a host of thought-leaders in the broad area of governance and public finance, covered a wide range of issues just beginning with ethics, partisan polarization, accountability, pensions, fiscal stress, marijuana taxes and so on.

Additionally, GFRC covered the Puerto Rico default, fiscal mismatch with economic bases, pension crises, tax increment financing, and more.

Along with our partners at the Chicago Federal Reserve Bank, GFRC hosted a conference that asked how prepared cities and states were for the next fiscal crisis.

But resting on the laurels of the year past doesn’t mean we at GFRC intend to declare victory and go home. The new year is upon us. What does it have in store? What new or continuing challenges and opportunities await us? Let’s take a brief look at the crystal ball or, as I think of it, my Magic 8-Ball.

One perennial issue that will likely amplify in the future is infrastructure. In fact, it’s almost hard to find that word unaccompanied by the word “crisis.” It’s been 40 years since we were informed that infrastructure was crumbling, America was in ruins, and the once-vaunted publicly owned and regulated concrete-and-steel fixed assets were in sad need of repair. Yet, as we turn the page to Year 4 of the Trump Administration that campaigned on a trillion-dollar infrastructure program, we operate under the same situation as the pre-2016 election.

Is this the year? I predict a low probability of progress by the feds and a higher probability for the other levels of government. Money can’t be cheaper; needs can’t be greater. States and localities know that to build a strong private economy, there must be a strong public infrastructure base.

Another challenge this year: As the oceans’ reefs are bleaching and algae blooms are choking water supplies (and literally choking fish), pure and potable water are evolving from an invisible problem to an inescapable one. The Flint (Michigan) episode reminds us that lead is dangerous (banned for drinking water pipes in 1986) but nearly ubiquitous throughout the nation. Cost of replacement is roughly estimated at $30 billion nationally. Replacing lead lines is a life-or-death proposition and not a luxury, so it will need to be addressed. Who will pay? Who can afford to meet the customers’ demands for safe drinking water and who can’t? How will cities and water authorities deliver a safe public good at a reasonable price? The Magic 8-Ball suggests that this is an issue that won’t go away quickly, and though work may be done, solutions are somewhere down the road. My personal bias: Before anything substantial can be done, significant research and data collection will be needed.

The housing market is deeply influenced by federal government actions. Nearly $200 billion in tax deductions for mortgage interest payments, plus another $50 billion in affordable housing payments, amount to a huge infusion of federal tax support to the real estate industry. Yet, the need for adequate housing and the number of homeless people grows. Although the real estate market is highly variable, not only by region of the country but even within metropolitan regions, the construction of new housing has not been robust enough to absorb growth in households. What adjustments to housing policies, at the federal and local level, might address those needs? And what can we expect in our forecasts of property tax revenues, which are intimately tied to the housing market? Though HUD appears to have lost interest, my 8-Ball says, “Be optimistic, as cities step up.”

A few more, entirely clear, predictions for the coming year.

Pension liabilities for state and local governments will continue to be of paramount importance
Demand for a skilled government workforce will escalate.
Government officials will be charged to balance demands to increase service levels and quality with resources that grow more slowly than they’d like.

The GFRC sees all these problems and challenges as central to the public sector dialogue in the year ahead., We expect to be right in the middle of the conversations. GFRC will be a busy place in 2020, considering appropriate state and local fiscal policies, fair and equitable tax burdens, robust analytics of government performance, and the need to cooperate on addressing the intractable fiscal problems of our cities, states and local governments.

The future may be cloudy, but when asked if GFRC is up to dealing with the new year’ travails, my 8-Ball says “It is decidedly so”