There is no doubt that the pandemic created a precarious financial situation for local governments when demand for local services far exceeded capacity. Despite careful and creative budgeting, local government leaders found themselves scrapping programs and long-term strategies to cover the immediate needs of their communities.

Local government managers and their teams went to heroic lengths to ensure the health and safety of residents in unprecedented conditions. As the country emerged from the crisis, the economic outlook for state and local governments improved and remains strong at least for the near-term.

A cornerstone of local government leadership — in fact one of ICMA’s 14 Leadership and Management Core Practices — is financial management and budgeting. I recall one of the first ICMA “green books” to appear on my bookshelf was Management Policies in Local Government Finance, accompanied by the practical A Budgeting Guide for Local Government. Data shared by our members tells us that fundamental sound budgeting principles continue to drive planning and spending — resident and staff engagement remains at the top of the list.

Cities and Counties Post-Recovery

The 2023 City Fiscal Conditions report released by our partner, the National League of Cities, cited several takeaways:

• The cautious approach by many cities in 2023 yielded increased reserves and limited spending, demonstrating that local governments remain good stewards of public dollars.
• Despite the challenge of inflation, the average city experienced more than a 6% increase in general fund revenues. Inflation is more manageable, and cities are reaping some benefits of lower inflation.
• Direct federal aid through the American Rescue Plan Act (ARPA) and the bipartisan infrastructure law were among the factors that had a positive impact on cities’ ability to balance their 2023 budgets.
• Many cities are still very cautious in their budgeting. They anticipate potential risks and uncertainties in the post-COVID era as they plan for the current and next fiscal year. Among the concerns for local leaders is the expected end of federal funding through ARPA.

The National Association of Counties shared highlights of its 2024 County Economies report as well. Some takeaways include:

• Housing availability and affordability is the top inhibitor of population and business growth.
• Expanding broadband is a top investment priority for counties, along with access to childcare.
• In 2023, over half of counties had natural disasters impact their local economies.
• Populations shifted to less dense areas with a lower cost of living.

Innovation Remains Important

A cautious approach to budgeting does not necessarily mean eschewing innovation. You don’t have to look deeply into the ICMA website to find examples of ICMA members and staff sharing innovative initiatives ranging from boosting upward economic mobility for marginalized citizens to practical uses of AI in local government. In fact, our Local Government Reimagined Conferences, which kick off this month, celebrate experimentation, change, and creative problem solving.

I would be remiss if I didn’t reinforce my strong belief that the budgeting process also provides an excellent opportunity to demonstrate leadership skills. I already mentioned the importance of engaging all stakeholders in the process. It’s also an opportunity to encourage innovation, outside-the-box thinking, inclusiveness, commitment, and of course, courage. It is an opportunity to allow others to explore boundaries and share their vision for creating a more vibrant community. Rather than walking away from the process feeling depleted, it’s the time to get energized and begin anew.

MARC A. OTT is CEO/Executive Director of ICMA, Washington, D.C.