Financial Leadership in a Crisis: Financial Leadership in a Crisis: - - PowerPoint PPT Presentation

Financial Leadership in a Crisis: Financial Leadership in a Crisis: Mapping a Course Through the Mapping a Course Through the Crisis for your Town, City, or Crisis for your Town, City, or County County

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Host and Panel Host and Panel

Mike McCann Mike McCann

Vice President & Former City Finance Director OpenGov OpenGov

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James A. Bell, CPFA, CPFIM Director of Finance Huber Heights Bethany Staats, CPA Bethany Staats, CPA

Finance Director New Albany New Albany

Housekeeping Housekeeping

• Webinar is being recorded
• Questions are encouraged
• Q&A session at the end of webinar
• All participants are muted by default
• E-mail to follow with slides, surveys,

and chat comments

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Warm Up Poll Question: Warm Up Poll Question: What type of entity are you representing?

• 1. County
• 2. Township
• 3. Municipality
• 4. Special District
• 5. School District
• 6. Library

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Setting the Stage: We have a problem, globally Setting the Stage: We have a problem, globally

• Reporting on statements by the OECD (Organization for Economic Cooperation

and Development) yesterday, June 10, was dramatic: By the end of 2021, the loss of income exceeds that any previous recession in the By the end of 2021, the loss of income exceeds that any previous recession in the last 100 years, outside of wartime, with dire and long last 100 years, outside of wartime, with dire and long

• lasting consequences for

lasting consequences for people, firms and governments. people, firms and governments.

• OECD chief economist Laurence Boone

OECD chief economist Laurence Boone

• OECD expects the global economy to contract 6 % before rebounding in 20 21
• A second wave of coronavirus infections would lead to even more disruption

and economic scarring

• World Bank forecast earlier this week that global output would shrink 5 .2% in

20 20

• IMF(International Money Fund) estimated a 3% contraction in April

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Setting the Stage: We have a problem, locally Setting the Stage: We have a problem, locally

• Aurora, CO:

Aurora, CO: $20 -25 million budget shortfall for this fiscal year, have to furlough employees, cut services and pursue other cost

• cutting measures.
• Louisville, KY:

Louisville, KY: The budget shortfall is too large to be absorbed and will result in cuts across every agency, including public safety. Revenue shortfall of $46 million this fiscal year, and estimated $69 million in next. 380 already furloughed.

• Akron, OH:

Akron, OH: 319 City employees remain furloughed, City expects 20

• 35 percent

revenue drop due to COVID -19.

• Cincinnati, OH:

Cincinnati, OH: City furloughs 20% percent of workforce, faces $106 million deficit in FY 2020 and FY 2021.

• Lancaster, OH:

Lancaster, OH: $2 million to $4 million income tax revenue shortfall, 10 to 20 percent of the general fund budget; 70 percent goes for police and fire ops.

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Financial Leadership in a Crisis: Professionals at work

"Right now, in every municipality, county, special district, and school the executives, legislators and residents are looking to their finance leadership for guidance:

• What are the short and long-term revenue impacts on our budget?
• How long is this going to last, and what will the recovery look like?
• What should we do with the budget this year, and how should we approach
• ur next budget?
• And how do we communicate effectively with non-financial

stakeholders/council?"

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No one can forecast whether we will see an L, U , V or W shaped recovery from this COVID-Recession. The shape and length of the recovery curve will impact local revenues and service needs for the next five years

• r longer.

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Shape of the curve from best to worst scenario:

• 1. “V” A sharp dip and rapid rebound with minimal long

minimal long -term term effects

• 2. “U” Sharp dip, more time at the bottom

more time at the bottom , followed by a strong but slower recovery much like the Great Recession of 20 0 8 -0 9 . In

• ne survey companies considered this most likely scenario
• 3. “W” multiple dips and recoveries from repeated economic shocks

caused by continuing COVID outbreaks continuing COVID outbreaks

• 4. “L” Long-lasting recession with slow or flat recovery caused by

failure to contain spread of COVID failure to contain spread of COVID and resume normal economic activity

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Panel Discussion Question One Panel Discussion Question One How does your government rank the likelihood of each shape - what type of recovery curve are you planning for?

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Audience Pool: Question One Audience Pool: Question One How does your government rank the likelihood of each shape - what type of recovery curve are you planning for?

• 1. V - sharp and short, minimal long-term impact
• 2. U- sharp drop, longer bottom, slower but strong recovery
• 3. W - Sharp drop, uneven recovery, COVID related setbacks
• 4. L - Deep sustained bottom, COVID blocks recovery

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Financial Leadership in a Crisis: Expertise Financial Leadership in a Crisis: Expertise “Scenario-based planning” is a hot topic today

Every jurisdiction needs strategies and plans for likely recovery scenarios

One academic paper on scenario planning in government concluded: “Our case example supports the use of scenario planning as an organizational process-focused intervention that enhances individual and team views about the nature of the future. This enhanced understanding is, as we have demonstrated, likely to invoke an action

• riented response.”

Budget scenarios are comprehensive models of a government’s financial plans, including all revenue and expense accounts in all or selected budgeted Funds and Departments. Any number of scenarios may be needed to help decision makers evaluate the range of

• ptions placed before them.

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Scenarios have three distinct components:

• 1. Each begins with a revenue forecast based on the government’s view of a specific set
• f future events such as the COVID recovery curve and timeline. Revenue accounts

are revised in light of this scenario, generating a new top-line total revenue forecast for appropriation.

• 2. Second, internal funding sources are considered. Funds which can be made available

from economic uncertainty reserves, reclassified from of other reserves, or inter-fund charges, may be significant.

• 3. The new level of available external and internal funding is appropriated to operations

and programs in as summarized or detailed manner as required by the situation. At completion the scenario should be in balance overall and by Fund.

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Budget scenarios should be

• 1. Complete: Including all funding sources and appropriations
• 2. Transparent: Summarized, but with detail accessible
• 3. Organized: Clear logical, non-technical reporting
• 4. Comparable: Easy to evaluate side-by-side with other scenarios
• 5. Accessible: Stakeholders can find, research and provide feedback
• 6. Digestible: Presented in set formats for decision makers

Especially when difficult choices must be made

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Panel Discussion Question Two Panel Discussion Question Two What scenarios or other alternative budget models has your government built to evaluate the impact of COVID-19?

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Audience Pool: Question Two Audience Pool: Question Two What scenarios or other alternative budget models has your government built to evaluate the impact of COVID-19?

• 1. New revenue models
• 2. New personnel and operating expense budgets
• 3. Program priority ranking models
• 4. Complete new budgets
• 5. Other models

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Financial Leadership in a Crisis: Judgement Financial Leadership in a Crisis: Judgement

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When and how hard - won “rainy -day” Economic Uncertainty Reserves and other internal funding sources are used deserves careful consideration.

When should Economic Uncertainty Reserves and other internal funding sources be used:

• Should economic reserves be used now to ease immediate

pain, or held back in preparation for worsening scenarios?

• Should other reserves be repurposed for this crisis?
• Should utilities be billed more for services, subsidies to other

funds reduced, capital projects delayed?

• Who decides?
• Does the community get a “vote”?

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Panel Discussion Question Three Panel Discussion Question Three What reserves has your government used, set aside for the future, or is considering for use in your next budget?

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Audience Poll: Question Three Audience Poll: Question Three What internal reserves or resources is your government considering for use in your next budget?

• 1. Reserve for Economic Uncertainty
• 2. Repurposing other General Fund Reserves
• 3. Repurposing Capital Project Reserves
• 4. Changing Interfund cost allocation (internal billing) methodologies
• 5. Changing levels of support from General Fund to other Funds

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Financial Leadership in a Crisis: Communications Financial Leadership in a Crisis: Communications Effective communications with legislators, stakeholders, and the public is critical for sharing economic forecasts, building plans, and creating consensus supporting difficult decisions

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Sharing with staff, legislators, stakeholders, and the public

Traditional distribution:

• Hardcopy mail-out budget updates or newsletters
• Agendize discussions at regular legislative meetings

Modern communications:

• Hold special public budget-related hearings
• Show financial and budget reports on the Government’s web site

Meaningful two-way engagement:

• Highlight narratives with reports and other materials on web pages
• Use social media to frame budget issues and solicit input from community

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Panel Discussion Question Four Panel Discussion Question Four How does your team communicate around budget issues with internal and external stakeholders?

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Audience Poll: Question Four Audience Poll: Question Four How does your team communicate around budget issues with internal and external stakeholders?

• 1. Mail out budget updates or newsletters
• 2. Agendize discussions at regular legislative meetings
• 3. Hold special public budget-related hearings
• 4. Show financial and budget reports on the Government’s web site
• 5. Assemble narratives with reports and other materials on web pages
• 6. Use social media to present budget info and solicit input from community

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Financial Leadership in a Crisis: Results Financial Leadership in a Crisis: Results What are the short and long -term revenue impacts on our budget? How long is this going to last, and what will the recovery look like? What should we do with the budget this year, and how should we approach our next budget? The Bottom Line: The Bottom Line: It is the Financial Leadership’s responsibility to propose a balanced budget

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CARES Act and Ohio SB 310 for Local CARES Act and Ohio SB 310 for Local Governments Governments

• 1. House passed SB 310, Senate refused SB 310 and amended many
• f the provisions into HB 481 – House may act on today
• 2. Governments must register with OBM for disbursement

https://grants.ohio.gov/fundingopportunities.aspx

• 1. Funds will pass from the State through Counties based on Local

Government Funding

• 2. Each local government will be considered a subrecipient of the

state for Federal dollars for reporting and monitoring

• 3. Determine if your County is requiring any additional steps to be

taken at the local level (ie. Franklin County requires a resolution to be passed by council)

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Revenues shortfalls: vs. Revenues shortfalls: vs.

• 1. Income taxes
• 2. Sales taxes
• 3. Hotel (tourism) taxes
• 4. Gas Taxes
• 5. Property taxes
• 6. Utility rev. (no shutoffs)
• 7. Fees, permits & licenses
• 8. Interest earnings

Increasing demands: Increasing demands:

• 1. Police services
• 2. Emergency medical Resp.
• 3. Ambulance services
• 4. Social services (County)
• 5. Utilities
• 6. Libraries
• 7. Education
• 8. Recreation
• 9. Child care

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Panel Discussion Question Five Panel Discussion Question Five

How will you balance your budget?

• 1. Revenue enhancements?
• 2. What services CANNOT be cut back?
• 3. Will reductions be organized by
• a. Service program
• b. Operating department
• c. Labor unit negotiations
• d. Across-the-board percentages

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Audience Poll: Question Five Audience Poll: Question Five How will you balance your budget?

• 1. Will reductions be organized by
• a. Service program
• b. Operating department
• c. Labor unit negotiations
• d. Across-the-board percentages
• 1. Please use the chat box to share revenue enhancements and cost control

ideas and plans. We will share all notes with participants in follow-up email.

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Audience Poll: Follow Audience Poll: Follow -on Webinar

• n Webinar
• 1. How was this webinar useful to you?

a. Gathered some new ideas or information b. Informative to hear how other governments are thinking about all this c. Less valuable than I had hoped

• 2. What other webinar topics would be of interest?

a. Budget practices b. Audit preparation c. Accounting and Reporting d. Council & public reporting and communication

Please use the chat box to share any other comments or questions

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Questions? Questions?

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Contact us Contact us James Bell James Bell JBell@hhoh.org JBell@hhoh.org Bethany Staats Bethany Staats bstaats@newalbanyohio.org bstaats@newalbanyohio.org Mike McCann Mike McCann mmccann@opengov.com mmccann@opengov.com

• pengov.com/contact
• pengov.com/contact
• us

us gfoa.org/FFA gfoa.org/FFA Thank you for attending Thank you for attending

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