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In this episode of the Strong Towns Podcast, Chuck is joined by Mark Moses, author of “The Municipal Financial Crisis: A Framework for Understanding and Fixing Government Budgeting.”

Up for discussion today:

• The dangers of relying on “balanced budgets."

• The difference between city and business finances.

• The issues with privatization and regionalization.

• And more!

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  Chuck Marohn 0:00

  Hey everybody. This is Chuck Marohn. Welcome back to the strong towns podcast. There's certain books that you go out looking for and struggle to find, and I've struggled to find a good one that explains what's going on with city budgeting. There's a lot of books that tell war stories, you know, tell accounts that are a little bit salacious and self serving. I've struggled to find a book that lays out here's what's going on with city budgeting. Here's what you need to know, and here's how to fix it. I recently found that book, and Mark, I don't even know when you publish this book. I think it's rather recent. I am chatting today with Mark Moses. He wrote the book The municipal financial crisis, a framework for understanding and fixing government budgeting. And I'm going to tell you, if you are a mayor, city council member, if you are a city staff member, if you remember the public who cares about like, the way your city's running, this is going to be the most valuable book that you will read this year. Mark Moses,

  Mark Moses 1:08

  welcome to the strong nouns podcast. Thank you, Chuck. It's great to be here. When did this drop? When was this book published? Well, it dropped about three years ago, okay, and I will say if I had to rewrite it today, to up, to quote, update it, I would improve some of my formulations. And, you know, there would certainly be, you know, some editing. But the the main message and the main principles are not dated, and part of that is after 2022, the or at the time the book was published, cities had just gotten this huge insurge of funding from the the COVID relief, the ARPA money, and as a result, the financial problems that they were having going into the pandemic and around the time I was writing the book, were really put on hold. They got a bit of a reprieve there for a couple years. Well now here we are 2025 and now you're hearing, well, the COVID money, maybe things aren't so good, yeah. And it's like, now we're back to where we were in 2020, 2021, which was not great and and you would think would have been better after 10 years or so of a good economy and an opportunity to recover from the Great Recession. The last three years, I've been watching the COVID money burn off and cities kind of get back into this sobering position of, holy cow, we've got to deal with our structural deficits.

  Chuck Marohn 2:40

  Yeah, yeah. Let me start this by asking this question in this way, I'm going to try to represent the typical person that I run into when we talk about this, they'll say something like, Chuck, why are you so uptight? The constitution of my state mandates that my city balances their budget. I know that they got to deal with things every year, but the budget's balanced. The newspaper reports on it. I saw the budget report my council member says they balance the budget. Why is this a problem? Every year they balance the budget and it's fine. What's the problem? There's an obvious answer. I want to give you a chance to to reconcile that, because I think most people believe that their cities balances their budget, and that means all is good, right,

  Mark Moses 3:26

  right? And the idea of balanced budget has almost become meaningless, because if you track a city's revenues and expenditures, they're going to track very closely, but that's just reflecting the fact that they spend what they bring in and and there was a time where the projected revenues, or the revenues would be a bit above the spending level, and there would be an ability to expand or add a service. More recently, the phenomenon is there's barely enough to get by, or sometimes not even enough to get by, when you project your revenues, and now you're having to budget your expenditures. So the question I would ask is, How did you balance your budget? Did you balance it by deferring maintenance, by deferring equipment replacement, by eroding the level of service in your community through, through some of your departments and through some of your services. Are you balancing your budget? Because you're running a 10 or 12% vacancy rate, which really, if you've doing that year in and year out, makes me question your organizational chart and you're in the whole idea of, what are you budgeting for when 10% or 12% of the positions go unfilled? So I think that's really the question is, how did you balance your budget? Because when you get underneath that, then you understand what is looming, what is going to. To be dealt with in the future. I feel

  Chuck Marohn 5:02

  like the craziest example I've seen of a city balancing their budget was in Chicago, where they basically hawked all their like decades of their parking meter revenue for one year of cash inflow to balance, like today's budget at the expense of next year's budget, and when I tell people that they're like, well, that doesn't balance the budget. I don't know if you have a crazy example like that, but talk a little bit about the difference between what a cash budget is like. How should people understand that, and what maybe like a normal balance sheet or financial reporting or that. How these things are different. First

  Mark Moses 5:40

  of all, let's maybe deal with what standard of balancing we really are shooting for. Right. Okay, that's f