Local Fiscal Stress ‘Early Warning System’ Discussed

April 18, 2017

On April 11, a working group convened by Martha Mavredes, the Auditor of Public Accounts, met to discuss the development of an “early warning system” for localities in fiscal distress.  This meeting was a continuation of discussions held last year and responds to language in the state budget directing the creation of a set of criteria to identify localities in financial trouble.

Staff from the Pew Charitable Trusts briefed attendees on approaches taken by other states to identify and respond to local fiscal stress.  States are using a variety of methods to identify localities in financial trouble and take differing approaches to state intervention in local affairs, ranging from limited technical support to state approval of the issuance of local debt.  Indicators used by states to flag potentially troubled localities include levels of debt per capita, liquidity, tax revenue per capita, and on-time filing of required audits, among other factors.  Some states include “environmental” factors as well, such as poverty rates, reliance on a single industry, or changes in population.

The workgroup will reconvene in the coming months to review sample models using historical data from Virginia localities.  The best method to present the results of such modeling will also be discussed; Ms. Mavredes expressed a preference to provide contextual information along with raw data, as there are economic development concerns associated with designating a locality as distressed.

VACo will continue to participate in the workgroup and will keep members apprised of future developments.

VACo Contact: Katie Boyle

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