May 11, 2020
The coronavirus has greatly amplified local governments' pre-pandemic financial concerns, leaving them to tackle significant new fiscal challenges while simultaneously facing increased demand for social services. Securing federal and state support is important, but in itself will not provide the financial stability that cities and counties need to operate efficiently and effectively.
While higher taxes and fees will be part of the solution in many jurisdictions, cost reductions will likely be on everyone's agenda for the foreseeable future. But the current situation, coupled with new technology tools, provides governments with a once-in-a-century opportunity to change many of their outdated procedures permanently — to build strategic fiscal management into their operations and cultures.
May 04, 2020
Amid the finger-pointing and blame-throwing about the mess that is the Paycheck Protection Program, the U.S. Treasury and Small Business Administration seem to have forgotten why Congress enacted it: so businesses would keep people on payroll instead of laying them off.
The PPP idea is simple: rather than have businesses lay off tens of millions of people until the COVID shutdowns are over and customers come back, the federal government will pay businesses to keep them on the payroll for a couple of months whether they work or not. The alternative is worse: joblessness, hopelessness — and governments paying hundreds of billions of dollars in unemployment benefits anyway.
Unfortunately, Congress chose to run what should be a grant program as a “loan.” If PPP money is used for payroll (with some for rent and utilities), the “loan” is forgiven and the money never comes back to Uncle Sam. But the loan design means PPP is slower and more complicated, that it goes through banks instead of IRS computers, and that Congress had to set a limit on how much could be used. And it means that businesses aren’t actually required to use the money for payroll at all.
April 22, 2020
I vividly remember Earl’s call. It was early in 2009. The U.S. faced a growing economic crisis as a global recession continued to unfold. President Obama’s American Recovery & Reinvestment Act (ARRA) had just been signed into law and I was at the Office of Management and Budget (OMB), which was tasked with distributing the nearly $800 billion Congress green-lighted. Earl Devaney, chair of the ARRA oversight body (lovingly known as the “RAT” board) called to tell me he was standing in a newly rented empty office on Pennsylvania Avenue, chosen for its direct line of sight to the White House. His message was not subtle: The overseers were going to watch every move we made as we distributed the funds.
Earl and I became close colleagues. In addition to helping us prevent fraud and ensure critical funds made it into the economy, his oversight board built the Recovery Operations Center (ROC), which proved to be a paradigm shift in how big data and forensic analytics are used to track government program spending. Now that our nation is facing another unprecedented crisis, we need another shift in how government leverages digital, AI, and analytics to monitor spending.
As the Coronavirus Aid, Relief, and Economic Security (CARES) Act is implemented, oversight committees should draw upon the lessons learned from ARRA and launch the next-generation ROC.
April 17, 2020
As researchers at the University of Nebraska at Omaha, we appreciate your April 12 editorial about the importance of the “rainy day fund” (RDF) for Nebraska’s state budget. While Nebraska has a good reputation for fiscal prudence, maintaining an average RDF balance of 15.2% from 2007 to 2017, the fund fell to 8% in 2018 and 7% in 2019. In ongoing meetings with the Nebraska Legislature’s Planning Committee, a committee developed with the intent to explore the long-term trends that impact Nebraska, the lawmakers have expressed considerable concern about this decline. The alarm they sounded was heeded by the full Legislature, which acted over the past two years to increase the fund balance to healthier levels.
In general, long-term planning is not overly exciting, but its importance is no more obvious than in times like these.
April 06, 2020
As Congress and the Administration begin trading proposals on the contours of what a fourth COVID-19 relief package might look like, I agree with your assertion that a robust infrastructure component should be a central part of any future plan.
With the likelihood of long-lasting economic dislocation caused by the COVID-19 pandemic, we should consider infrastructure investment both as a way to create jobs and as a bridge to the future, literally and figuratively. To accomplish both purposes effectively we need streamlined regulatory processes as well as creative financing, including approval of a broader array of critical infrastructure projects. Simply appropriating funds for a massive infrastructure package without addressing regulatory reforms would likely slow the economic recovery from the pandemic.
While there is no doubt that significant direct federal investments will be needed by our cities to respond to the economic fallout from this pandemic, I believe that whatever degree of federal infrastructure funding is made available should include its own expedited process that minimizes bureaucratic approvals such that obtaining necessary permits is fast-tracked. Velocity counts.
March 25, 2020
On Wednesday, Senate negotiators announced that they had reached a deal on a $2 trillion stimulus package in an effort to bolster the economy that has been devastated by measures meant to attempt to contain the coronavirus outbreak in the United States. Our new “big government” consensus, though, is as shortsighted as it is striking.
Writers and politicians across the spectrum have begun to call for the government at all levels to take a major, if not massive, role in combating the coronavirus pandemic and the ensuing global recession. All of this is necessary.
Yet big government can’t just mean sending money, the tactic the current stimulus measure is centered upon. The government we forge for this crisis has to have some permanence, has to provide jobs and not just income, and has to have a human face.
March 25, 2020
I feel guilty writing about the state’s finances. There are more pressing events to worry about. But best to be prepared.
First, let me observe what a great job our governor is doing to address the coronavirus situation. Always available; always explaining the problems and his proposed solutions in a clear manner. Does he have all the answers? Of course not — but he is addressing the problems forthrightly and explaining his actions without blame and with confidence and reassurance. A striking contrast to the actions of the president.
While health concerns dominate the news, it’s also important to review the major finance issues the state will soon be facing, including revenue collections, future tax policy, spending, pensions, cash flow and unemployment insurance. Our financial situation could be dire or just troublesome. I hope for the latter, but I fear the former.
March 24, 2020
As Congress readies the largest economic stimulus bill in American history to help stem the fallout from the COVID-19 crisis, fraudsters are waiting in the wings. Fraud flourishes when oversight is lacking or nonexistent. And when the federal government’s goal is to get as much money as possible into the hands of people who need it, as quickly as possible, oversight is usually an afterthought. The final bill is still being worked out, but the size of the stimulus—close to or exceeding $2 trillion—and the speed with which the money will be made available, should make oversight paramount.
The risk here is real. With fast-moving economic stimulus, there are requests for accelerated payments, obligations, and contract awards, which is a recipe for decreased oversight. Scammers preying on individuals with fake offers of stimulus grants will be prolific, which will require public service campaigns and other strategic communications efforts. Nearly every dollar spent will come with the potential for fraud or abuse.