Financial Sustainability Resource Center

In GFOA's 2015 member survey, members raised the issue "Financial Sustainability" three times more often than the second highest ranked issue. Also, GFOA members reported multiple pressing issues that are effecting their insitution's financial sustainability. 

A government and its financial resources are owned by all citizens of the government and often share the same sustainability challenges associated with the tragedy of the commons, where stakeholders find themselves competing over the same pool of resources.

GFOA’s new financial sustainability framework is based on strong reciprocity and encourages cooperation, rather than competition. Reciprocity is the practice of exchanging with others for mutual benefit. This framework is designed to help local governments lead their organizations in facilitating a cooperative process based on mutually beneficial exchanges between parties. Local governments face common pool resource challenges from the operating budget to longer-term capital plans, pension, and debt concerns. This framework brings a number of advantages to solving the financial challenges that bedevil local governments, because it:

  • Makes financial sustainability everyone’s business
  • Based on new, more accurate models of human behavior
  • Evidence-based and practical
  • Addresses complexity and transforms decisions.

 

The new financial sustainability framework is based on Elinor Ostrom's work and was developed for over five years using case studies from more than twenty local governments. In her work, Elinor Ostrom identified six leadership strategies and eight institutional design principles to encourage sustainable outcomes for commonly-owned resource systems. The five supports below act as a tool in connecting Ostrom's strategies and principles into an applicable model for public finance.  They help form a path to financial sustainability. On the left side of the bridge is a financially unsustainable city, facing a range of issues, from rising pension costs to disengaged stakeholders who don’t understand the value of local government. As the local government crosses the bridge, and puts each of the five supports in place, they will move closer to financial sustainability. Click on each of the five supports below for more information:

                  LongTrust and OpenCollectiveSet RulesTreat People Fairly

 

Steps to begin your journey to financial sustainability!  

 

  • Share your insights with others in your organization. The goal is build a coalition of supporters who can help make financial sustainability a reality. One of the first things the coalition of supporters should do is articulate “why” financial sustainability is important; make sure to go beyond superficial reasons and consider the fundamental reasons why local government exists.
  • Contemplate holding a conversation about financial sustainability with a wider group of people. 
  • Identify steps, short-term goals, longer-term goals, and dreams that are challenging enough to be inspiring, but also, feasible. Record these and put them somewhere that is highly visible, like a bulletin board or sticky note on a computer monitor, to make sure you don’t lose sight of them. 
 
There are multiple ways to begin! Sustainability requires change and allows for continuous experimentation with new ideas. This approach is transformational, since it shifts from the view that government is unable to change to the belief that experiments and innovations can fundamentally change the people, processes, and decisions that drive government.
 

Click on the case studies below to see real-world examples of the new financial sustainability framework!

                                    

 

Resources

Best practices  Government Finance Review GFOA Research  Videos

YouTube Interview with Shane Kavanagh at 2018 GFOA Conference

YouTubeInterview with Laura Allen at 2018 GFOA Conference 

 

Other Links 

Lincoln Institute of Land Policy

National Civic League

 

Additional GFOA Resources 

Training

GFOA Conference

GFOA Research

 

Best Practices