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MANAGEMENT UPDATE.

PULLING BACK FROM THE FISCAL CLIFF

Back in 1996, the Advisory Commission on Intergovernmental Relations (ACIR) was shuttered.  Its goal since 1956 had been to study and provide meaningful information about the federal government's intergovernmental relationships. It served “to strengthen the American federal system and improve the ability of federal, state, and local governments to work together cooperatively, efficiently, and effectively,” according to a 2020 paper in The New Localism newsletter.


Ever since it closed, we’ve heard repeatedly from experts in the fields of state and local government finance that they miss the ACIR and wish it could return. There’s never been a time when this was more important. The phrase “fiscal brink” has become commonplace in many references to coming years’ budgets as the funds from the federal government, notably the American Rescue Plan Act, will soon run their course.



On November 16, a persuasive paper was published in The New Localism, which called for an “Emergency ACIR to provide a dependable and consistent source of data that can be used to develop a fiscal ‘stress test’. Such a stress test will account for the variation in fiscal architecture across the country, which necessitates a more nuanced assessment of urban vulnerability to remote work trends. Furthermore, we need an Emergency ACIR that will foster more cooperation and coordination between federal, state, and local governments, so that they are equipped to respond to fiscal crises.”


The call to action was written by Bruce Katz, the Founding Director of the Nowak Metro Finance Lab at Drexel University; Deborah A. Carroll, the Director of the Government Finance Research Center (GFRC) at University of Illinois Chicago; Michael A. Pagano, Dean Emeritus of UIC’s College of Urban Planning and Public Affairs and Founding Director of the GFRC; Avanti Krovi, a Research Officer at the Nowak Lab; and Frances Kern Mennone, the Managing Director of FBT Project Finance Advisors.


Their Recommendation: “As an independent research commission comprised of action-oriented experts, the Emergency ACIR would employ data collection methods to develop a ‘fiscal stress test’ that assesses the financial conditions of cities and their vulnerabilities within their respective fiscal architectures. 


The idea would be for the Emergency ACIR to use these stress tests to analyze the potential problems when cities miss revenue goals and critical civic services are cut – notably those that impact the most vulnerable populations. The Emergency ACIR would be employed to develop solutions and technical assistance to states and localities. 


Obviously, such a major venture will need to be funded, and the authors are turning to major philanthropic organizations and/or a collection of local and state governments.


They conclude that “on our current trajectory, and without any intervention, many cities will not be prepared for the looming fiscal storm. We need an organizing task force like an Emergency ACIR to delineate responsibilities for our levels of government, drive relevant data and research, and create effective policy solutions.”  Otherwise, as Katz wrote back in February, “cities may find themselves in a Wile E. Coyote moment, staring down into the fiscal cliff, with nowhere to turn.”


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