This year’s budgeting season is unlike any other. Government lockdowns and falling oil prices have given rise to the most challenging fiscal environment seen in modern times. Countless cities, counties, and school districts are currently grappling with declining revenues and widening budget gaps, setting the stage for a raft of difficult decisions in the coming months.1
Complicating fiscal matters is Texas’s weakened economy. To date, approximately 3.2 million Texans have filed for unemployment since mid-March. The state’s unemployment rate stood at 8.6% in June 2020. And sales tax revenue—a key source of funding for state and local governments as well as an indicator of economic activity—declined 6.5% from the previous year.
While most experts expect a robust recovery at some point in the future, our immediate economic outlook remains anemic and uncertain.
The crises we face are great. Our response should be greater. We must meet this moment with reason and resolve, with discernment and determination. Our aim must be ambitious. We must move our institutions in a bold, new direction that is both principled and practical.
This is no time for business as usual. Today’s challenges require operationalizing a fundamentally different framework, grounded in strict fiscal discipline and common sense. The goal must be to prioritize the family budget over the government’s budget.
Such a change can come about in many ways. However, a few specific approaches deserve mentioning. If faithfully implemented over the course of the coming fiscal year and beyond, the recommendations below will remake local government for the better, boost public confidence, and hasten the return of revenues.
- Local leaders should embrace a new tax and budget framework in fiscal year 2021 and beyond.
- A conservative fiscal approach promises to return robust economic growth and restore revenues.
- Local officials should consider committing to no new taxes, cutting existing taxes, delaying going into debt, embracing efficiency, using zero-based budgeting, and right-sizing payroll costs.