Auditor Blaha Presents 2023 State of Main Street Findings - April 17, 2023

Contact: Donald McFarland | 651-236-0494

“Using one-time funds effectively was key to local governments weathering the global pandemic”

St. Paul, MN – “Understanding the differences between how one-time and ongoing funding affects local budgets is the first step in managing a local budget well,” said Auditor Blaha. “Using one-time funds effectively was key to local governments weathering the global pandemic.”

The State of Main Street launched in 2020 at the start of the COVID-19 pandemic and included listening sessions across Minnesota where local government officials provided feedback on county, city, and township financial data. The annual event provides on-going conversations between the Office of the State Auditor (OSA) and those that guide local budget decisions and policies.

This year, our goal was to examine the concerns, obstacles and successes of the federal relief programs that impacted local governments.

“Three years ago, the listening sessions revealed that local governments were concerned about what the pandemic would do to their bottom line and if they would be able to transition back to a time without extra COVID-related funds,” continued Blaha. “Two years later, the data generally shows spending, debt levels, and reserves are like those before the pandemic.”

Local government leaders from across Minnesota were on hand to share their unique experiences during the listening sessions.

Hennepin County Commissioner Kevin Anderson: “We wanted to take these one-time dollars and build for the future. Whether it’s improving our housing continuum, guaranteeing that everyone has access to affordable, reliable broadband, or reducing persistent disparities, we need solutions that work across Minnesota.”

Moorhead Mayor Shelly Carlson: “The CARES Act funded a $2 million small business relief plan in Moorhead that boosted our city’s economic development by supporting our small businesses through the pandemic. Businesses shared that without those resources they would have had a much more difficult time surviving.

“This federal-state-local partnership was an excellent example of strengthening our national economy by starting at the local level. The state’s help with administering those funds was also essential to making sure that the funds were used as effectively as possible.”

Ashland Township Supervisor Jim Checkel: “Seventy percent of our township funds go towards roads and emergency services. Fire and emergency services need attention because they are not being funded at the mandated level. Because of heavier equipment on our roads, for instance, they require additional funds.”

Marshall City Administrator Sharon Hanson: “We are a rural community, and our city is competing with South Dakota and Iowa. As a result, we need flexibility and less red tape with funding. There are additional federal grants available, but we need to be sure we can dedicate the appropriate staff if it’s going to be complicated.”

Ramsey County Commissioner and President of the Association of Minnesota Counties Mary Jo McGuire: “Thanks to CARES and ARPA funds, counties across Minnesota finally had funding to do the work that state and federal government asked us to do. This one-time money led to partnerships that can be sustainable into the future.”

As a result of our findings, the OSA has made a series of recommendations.

Recommendations for Grantors

Extend Timelines: Funding with longer timelines for obligating and spending funds is easier to use effectively. The extra time increases the depth of planning and expands the number of projects that an entity can consider. Generally, projects well-planned and chosen lead to more efficient and effective spending.

Provide Flexibility and Clarity: Clear and complete parameters save time in planning and vetting projects. Difficult to understand application processes, reporting requirements, and spending parameters caused some entities to forego funds they would have qualified for. Flexibility was also key for entities to be able to leverage local government’s ability to customize a solution for a local area. Overly restrictive rules about the use of funds meant that entities, particularly smaller ones, were unable to find a local use of the funds that matched their specific needs.

Maintain Ongoing Funding Streams: Ongoing funding provides consistent and reliable revenue on which one-time projects can be built. Projects with the most long-term impact were those that complemented or expanded projects already in existence. Starting systems from scratch under tight timelines and resource pressures led to more errors and less direct benefits than those that were built on existing planning and processes. Funding for long-term needs increases the chance that adequate infrastructure will be able to assist during a crisis.

Recommendations for Local Governments (Grantees)

Prepare for One-Time Opportunities: To increase the time available for a project, reduce the time needed for planning and choosing projects with regular consideration of one-time opportunities. Archiving discussions, decisions, and brainstorming from previous one-time funding opportunities gives an entity a head start on future projects. Including discussion of potential one-time projects in regular planning improves an entity’s readiness to seize a one-time opportunity.

Collaborate: As we saw throughout the pandemic, entities that were connected to their peers and other networks were able to respond more effectively to one-time opportunities. Sharing ideas among a wide network and advocating for more flexibility as a group increased creativity and range of options an entity could consider. Pooling resources to dedicate staff to clarify requirements led to fewer false starts and detours due to confusion.

Plan for the End at the Start: Entities that made specific plans for how they would end a project funded with one-time money were able to protect their bottom lines when the project ended. By preventing long-term obligations of a project and ensuring that essential services were not shifted to a time-limited funding stream, entities avoided a spike in debt or a draining of reserves.

You may read the entire State of Main Street Final Analysis on the OSA website.