Hot Budget Summer

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This Fourth of July felt like part of a summer-long celebration as Indiana emerges from the COVID crisis. But in local government offices across Indiana, this is a summer of working overtime on plans for a post-pandemic recovery: Budget season is heating up for county and city leaders, and this year is uniquely hectic – and historic – with opportunities to invest in stronger Hoosier communities.

Indiana’s local budget process is complicated even in typical times. Officials get reports on property assessments for the next year’s taxes, how much tax levies are allowed to grow (based on a formula tied to state personal income), tax cap adjustments and estimates of income tax distributions throughout June, July and August. This leaves a brief window to balance revenues against spending before public hearings, deliberations in the county or city council, and wrapping up an approved budget by November.

Local revenues for 2022 are likely to be stable, with a hot real estate market supporting property values and a smaller-than-expected impact on personal income from COVID. The fiscal challenge facing local elected officials isn’t cutting back, it’s thinking bigger to make the most of an unprecedented influx of state and federal resources.

Putting federal funds to work:

First, local governments across Indiana are receiving their own share of the $350 billion in state and local aid from the American Rescue Plan (ARP), roughly $2.6 billion divided among 92 counties, 25 larger cities (50,000+) and hundreds of smaller municipalities.  The funds can be used for COVID-related recovery programs, health and safety initiatives, emergency pay for front-line public employees, water infrastructure and filling in budget gaps created by the pandemic.

I attended a conference of county councilors from around Indiana in late June, and much of the agenda was focused on interpreting the hundreds of pages of technical guidance released from the U.S. Treasury covering ARP-eligible expenses, reporting and accounting requirements.

Aside from the administrative complexities, broader questions loomed over the room: How can these funds best help businesses, workers and families move past the hardships of the past year? And looking longer-term, how can they improve local prospects as post-pandemic trends emerge?

Getting ready for READI:

Local governments have another opportunity to think beyond their basic budgets and even their own city or county borders: The Indiana Economic Development Corporation (IEDC) has launched the Regional Economic Acceleration and Development Initiative (READI), a $500 million program funded in the new state budget by a portion of Indiana’s ARP allocation. READI encourages regional planning (across at least two counties) focused primarily on talent attraction.

READI focuses on one of Indiana’s biggest long-term threats: Our state population growth ranked 29^th from 2010-2020, and has been slowing since the 1990s. Unless we reverse this decline, an aging workforce will erode economic competitiveness, and the effects on personal income and consumer spending will take a toll on the state and local tax base.

READI offers grants up to $50 million for regional growth strategies, ideally covering most of the state (at this writing, 91 of 92 counties intend to participate). But the program’s timeline is nearly as challenging as the demographic dilemmas it aims to address; regions had to identify themselves to the IEDC by July 1^st and proposals are due by the end of August. And while READI emphasized public-private collaboration, local officials will obviously play a major role in crafting plans and committing resources to specific projects.

READI is one of several new or expanded state grant programs supporting local needs. Cities and counties can pursue money for capital investments in roads, water treatment, trails and other infrastructure, broadband deployment, to address public health issues and more.

Help Wanted

It all adds up to a sweltering summer pace for county commissioners and councilors, mayors and city councils. Last week marked a new fiscal year, kicking off the two-year state budget passed in April. But for local officials, decisions made over the next few months could influence conditions years from now.

After all, local governments are on the front lines of economic development and quality of life, closest to the everyday concerns of people and employers. But budget pressures have been building for years before COVID, especially in cities and urban counties, limiting local capacity to invest in housing, police and fire protection, street and sewer upgrades and neighborhood amenities.

Now the end of a global crisis coincides with a generational chance to address many of these priorities. It’s always important to be engaged in government – decisions are made by those who show up, name your own civics cliché – but this summer it’s even more crucial to embrace local budget planning as a community-wide conversation about the future.