My Turn: Be cautious when the economy is strong

Don't go overboard on spending

Posted

Last week, the Page City Council agreed to move forward with the 2017-18 budget without making many changes, but while discussing the budget they did get into an important discussion on spending levels in the future.
I didn’t attend the meeting, so most of what I know right now is from hearing other people talking about it. But to my understanding, several members of the council raised concerns about spending too much money, something easy to do when times are good.
Thanks largely to continued increases in tourism, the city of Page is collecting increasing amounts of revenue year after year.
As a result, the city has been steadily increasing spending. There’s no doubt most of the spending is wanted by local residents and needed in the community.
Road repairs are badly needed in some parts of town. Upgrades to the city’s water and sewer system are desperately needed. The hiring of more police and giving the officers adequate equipment is necessary.
But there is a danger when government spending levels increase during good times. I’ve seen it way too many times. When revenue increases, spending jumps quickly. When revenue decreases, it becomes difficult if not impossible to make the same spending cuts. The biggest problems happen when the spending increases are used for new employees. When the revenue slows down, it is hard to cut back staffing.

Much of what the city is proposing is not staffing related, but there are new positions in the budget, positions that will require funding long after the streets are fixed, parks are renovated and the sewer system in upgraded.
In Page, the local economy, and as a result, the local government relies heavily on tourism. Tourism has been good to Page and all indications are it will continue to be good. But it’s also very unreliable historically.
Imagine if another terrorist event like the Sept. 11, 2001, terrorist attacks were to happen.
It would probably curtail air travel, at least temporarily, and could send the entire world into a economic recession.
Page relies heavily on visitors from Europe, Asia and other parts of the world. If they could not travel or had less money due to a recession, tourism would slip. If tourism slips, so does the money coming into the city of Page.
In addition, some day soon, whether in weeks or two years, Navajo Generating Station will close. That will have a direct impact on the city’s bottom line and also an indirect impact as hundreds of people now making big paychecks won’t have them and won’t be spending as much.
We’ve all seen this cycle in the federal government. Spending grows and grows, but even the mention of a cut leads to calls of trying to kill Americans. I saw it firsthand in North Dakota. When oil was booming, state revenue grew immensely and state spending soon followed. Now that oil has cooled, the Legislature is struggling to cut back. I don’t want to see it in Page, so I am grateful the council is having this discussion.
When times are good like they are now, it’s the perfect time to improve infrastructure — roads, parks, sewer and water systems. In most cases, those are one-time expenditures with little long-term financial impact. This is a good time to do that and I am glad the city is using the increased revenue to make those needed upgrades.
But the risk is adding too many new employees. Those expenses carry over year after year and only increase over time. If tourism slows, paying those positions will become more and more difficult.
My suggestion is to spend on infrastructure now when money is good, but rather than load up on new employees build up the city’s surplus so we are better prepared to handle tough days when they come.