How Are Local Governments Managing Their Distressed Financial Conditions?

Nicely, thank you… West Orange School District in central New Jersey (not rated by S&P, Baa2 rated by Moody’s) is an example of a low investment grade municipality that, in 2010, was facing deteriorating fiscal conditions.   The school district was unable to rely on economic growth to fix its budget and, therefore, needed to reduce its expenditures.

 Recently posted 2011 year-end results show the school district has improved its financial situation from 2010.   Reduced spending more than offset lower state aid, increasing net assets by 4.9%.  Costs saving actions are highlighted as follows:

  • Renegotiation of health benefits and salaries for school district workers.
  • Renegotiation for the cost of services provided to the school district, such as snow removal, school bus service, and the use of cooperative bidding contracts for energy costs.

 The budget imbalance situation that was facing the school district is very characteristic of what is going on amongst the older, slower growing school districts in the USA.  States have been reducing their financial aid to localities, and then the local governments have had to make adjustments to their services to save money.  The ability of West Orange School District to post positive 2011 results is encouraging and shows how municipalities can make the necessary adjustments to balance their budgets on an annually basis.

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Posted in Economic theories, General, Munis in the news, State Budgets, Uncategorized

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