The federal government has a spending problem, and state and local governments would be wise to reduce dependence on federal government funding. State governments rely increasingly on federal funds to provide for their citizens, and in the process, lose control. Those states are also unprepared to fund programs if or when the federal funding disappears. The taxes of hardworking citizens should not have to take a round-trip through Washington, DC.
Accountability in finance is critical to sound governance. When states choose to rely on federal funding they sacrifice local accountability in favor of commitments to the federal government that take precedence over local opinions and can even contradict each other. Pushing back against that federal money requires a thorough understanding of the hidden costs of “free” money.
Financial Ready is a two pronged approach that encourages audits of state budgets to identify federal dependence and make state money go further using performance-based budgeting.
“Leveraged” federal money in the form of grants and matching payments comes with commitments attached. For education, this might mean employing a certain number of teacher assistants, or for infrastructure, producing a certain amount of energy using alternative resources. The long-term costs of maintaining those kinds of projects can often be more expensive than the original amount of federal funding promised. Building more classrooms to put teachers in or building utility lines for new plants are long-term costs that are often unaccounted for. Even worse, states have little recourse to get out of those commitments.
Financial Ready asks states to prioritize the long-term costs of federal money when choosing whether or not to go after federal money. This way states can better balance their budgets in the event that federal money goes away. No state should be at risk of fiscal insolvency for the sake of taking easy money.
Learn more on our Federalism 101 Blog and by reading the articles below: