Fiscal Reality versus Political Need; The Truth about Obama’s Jobs Bill

Posted by on October 29, 2011 10:58 pm
Tags: , , , , , , , , , ,
Categories: Missouri National Debt The Nation

Fiscal Missouri
LEE’S SUMMIT, October 26, 2011
– Last week every station carried Vice President Biden’s plea to pass the $35 Billion pared back jobs bill to put “teachers, firefighters and policemen back to work”.  Vice President Biden tried his best to convince people to call congress by claiming in that to not pass the bill would affect local community’s ability to fight crime and control fire and emergencies.

AP reported that “Thursday’s $35 billion measure combined $30 billion for state and local governments to hire teachers and other school workers with $5 billion to help pay the salaries of police officers, firefighters and other first responders. The White House says the measure would “support” almost 400,000 education jobs for one year.”

The rhetoric was intense, but the fiscal reality of what he said does not pass the truth test.  This week I reached out to Lee’s Summit City Manager Stephen Arbo, to Congressman David Cross of Missouri’s 48th district, and Senator Will Kraus (MO 8th District) to ask a simple question: What is the fiscal impact of a one year stimulus on the State and local level?

At the local level it is important to note that while the United States was downgraded, Moody’s Investor service currently has Lee’s Summit “ranked Aaa” said Stephen Arbo.

Arbo continued by saying, “The achievement is significant. It means Lee’s Summit can secure the lowest interest rates available when issuing bonds because of low risk associated with its debt as well as an acknowledgement of the City’s sound financial policies and procedures.”

Lee’s Summit does not take a short term view and uses two models to “show long-term impact of financial decisions regarding revenue policies and expenditure commitments.”

The hiring of Police Officers or Firefighters is a long term decision.  No one wants to hire for one year and hope we have money next year to pay you.

City Manager Arbo clarified further that, “A key [litmus test] for the City Council and staff is the impact financial decisions will have on the City’s reserve balance. Generally if a decision, such as adding new employees is not financially sustainable and indicates a negative impact to the reserve balance, the City would not proceed with that decision. In order to do so, there would have to be an equal offset in cost-savings or perhaps revenue growth by the City to support adding new employees.”

So from Lee’s Summit’s City Manager’s point of view “if the City were to consider a [one-year program] for additional police officers and firefighters, the decision would be based on the program’s sustainability once federal funding is no longer an option. I would not recommend participating in this program to our elected officials if the financial models reveal a negative impact to our General Fund due to such an employee expansion.”

This makes perfect sense both fiscally and socially.  It is unfair to hire someone knowing you won’t have the funds to keep them, and fiscally it also makes no sense to put the City’s finances on a bad path, simply to make it “Politically Beneficial” to the Federal Government.  They may not be able to keep the financial house in order, but Lee’s Summit certainly tries to and for the most part succeeds.

At the State level I was able to talk to Senator Krus’ office and during the discussion it was clear that Missouri has been fighting a difficult battle the last few years adjusting its budget to keep pace with the lower revenues.  It has been rough economically since 2008.

Senator Kraus has fought to make sure we only plan to use money the State controls in the budget process, rather than to plan on the Federal Government’s stimulus money – this was true as a Representative and continues to be true by his voting record in the Senate.

When asked what would the impact of a onetime stimulus as proposed by Obama and voted down by the Senate Senator Kraus said “More one-time stimulus money will put state and local governments in more financial jeopardy, not less. If a government entity hires or retains a position because the federal government is paying for their first year, what happens in years two and beyond?”

The reality of the State and Local Government is that you have to balance the budget.  They cannot print money.  If they borrow they have to pay back: so for a one year stimulus when it comes to the State, Kraus continued “The government is stuck with a cost they cannot afford.  The best option is for everyone to tighten their belt now, and be better prepared for growth once the economy recovers.”

President Obama, Vice President Biden, and the Democrat Caucus my find it a politically appealing idea to have a 1 year stimulus for Policeman, Firefighter and other State and Local workers; however the fiscal reality of what they are proposing is not promising.

If you’ve asked yourself why did the previous stimulus didn’t work, understand that the State and Local governments – where the rubber literally meets the road – have to be very careful with the money they get from the Federal Government, weight it out against all the unfunded and underfunded mandates in the form of regulatory compliance at the very least and see what impact the so called stimulus will have on the financial realities.

In short, I’m glad the Senate voted it down.

Respectfully submitted,
The Lee’s Summit Conservative