Local Municipalities Prepare for Potential Recession, Economic Downturn
Lansing-area municipalities are preparing for a financial downturn or recession in light of more than 70% of analysts predicting a nationwide recession by 2021 in a National Association for Business Economics survey.
Ron Leix, spokesperson for the Michigan Department of Treasury, said economists at past consensus revenue estimating conferences have predicted state and national economies will continue to grow, but at a slower pace, over the next few years.
Despite the inconsistent predictions among economists, Leix said it is still important that local governments prepare for future economic downturns, recessions or emergencies because cities, counties, villages and townships provide many services necessary for a growing, vibrant community.
“Local governments that have a strong foundation in preparation help ensure that unplanned events, such as a loss of a large employer, infrastructure failure or economic downturn have minimal impact on the short-term operation of the community,” said Leix.
Delta Township Manager Brian Reed agreed, saying officials know recessions are going to happen, so governments must be prepared.
“As much as we would like to never see recessions happen, we know that they do,” said Reed. “If you always do everything thinking toward those tough times and whether or not you’re going to be able to afford those (nonessential) services, it helps keep you in the proper perspective so you don’t become too bloated with a lot of services that are difficult to sustain during economic downturn.”
Additionally, Delta Township maintains six months’ worth of operating funds, sets aside money for future capital improvements each year and diversifies industries within the township.
East Lansing also has implemented cost-saving strategies like making significant budget cuts and using five-year financial forecasting to prepare for future economic downturns.
“We are still recovering (from the last recession) but have implemented many cost-cutting measures and efficiencies over the years to safeguard our future financial sustainability,” said George Lahanas, East Lansing city manager. “We also have relied more heavily on our residents by way of voter-approved millages and an income tax.”
Jake Brower, city of Lansing budget director, said the city has adopted recommendations from the Lansing Financial Health Team to help prepare for recessions, including using internal forecasting to incorporate five-year revenue and expenditure forecasts as a supplement to the annual budget and hiring a chief financial officer to explore revenue possibilities and implement strategies to address increasing long-term obligations.
Moreover, East Lansing and Lansing make supplemental pension payments to reduce their funding gaps.
These three Lansing-area municipalities have worked to maintain transparency with residents while preparing for financial downturns through public financial planning meetings, newsletter updates, social media, website updates and more.
To learn about what your elected officials are doing to prepare for economic downturn, contact your local municipality.