National And International Factors Impact Local Budgets

By Gordon HopkinsWhile currently stable, the City of Fairbury’s finances are likely to be heavily influenced by national and even international factors in the future. That is the assessment of former City Administrator Jacob Matthews, who presented his proposed budget at a meeting of the Fairbury City Council on Tuesday, September 6, 2022.A public hearing was held that day to give citizens the opportunity for input.In that proposed budget, Matthews said, “Even though the city is in a strong financial position we must acknowledge that up until recently, economic and geo-political conditions have been fairly stable, predictable, and did not reflect negatively upon the budget in a significant manner. Indeed, low inflation and stable geo-political relations are akin to charting a path through calm waters. It is easier to predict a path for the future when the conditions with the highest probability to impact the costs of goods and services remain stable. Unfortunately, economic conditions are not as calm as in previous years. Increasingly globally interconnected economies are imperiled by the chilling of international relations, economic sanctions, and the ongoing disruptions of global supply chains due to the war in Europe - which has potential to spill into other countries - and unsound economy wrecking health policies in China. We are not exempt to the impact of these events and the associated uncertainty.”How Foreign Chaos Effects Local EconomiesSignificant disruptions in the supply chain have resulted in long delays for local governments trying to obtain equipment or vehicles.Matthews specifically cited China as an issue, “Of growing concern in my mind is our dependency on foreign goods and domestic products utilizing foreign made components. Chief among these foreign producers of concern is China. Indeed, the full extent to which the US economy is intertwined with China’s economy is unknown to most Americans. Even something as simple and common as Diet Coke, that is enjoyed by many Americans, largely depends on a Chinese produced artificial sweetener. It is currently unknown to the full extent that the entire supply chain that services the City of Fairbury is dependent upon international suppliers of goods and equipment, but we can say our supply chain is equally subject to foreign risk as other municipalities in Nebraska; this risk is real and can almost instantly add challenges.”Local economies, like Fairbury, are having to find ways around the supply chain problems. Matthews noted, “While many essential goods for the City of Fairbury remain fairly accessible with reasonable lead times in range of weeks or months, some capital equipment is currently facing significant delays. Some items are in the range of 1-5 years from the date from which they are ordered. Adding to the challenge, obsolescence of parts is increasingly occurring for some equipment used by the City of Fairbury. It has been reported to me that some parts to repair our equipment are being sourced from junkyards because they are no longer being manufactured. Continuing to repair our old equipment is a solution, but it is not a sustainable one; we cannot extend the life of equipment purchased in the previous century indefinitely.”Labor ShortageMatthews also pointed out that, “Additionally, the ongoing labor shortage continues to play a role in increased pricing and slower transit and manufacturing of goods. And this labor shortage will likely not end in the near future. Current data indicates there are 10 million job openings and only 6 million unemployed in America.”A shortage of workers has forced both private and public entities to increase wages in the hopes of attracting and retaining employees.While labor shortages are occurring throughout the country, parts of rural America, suffer from a lack of appropriate, affordable housing, further exacerbating the problem. The City of Fairbury, Jefferson County and other nearby governments have made building new housing and, thus, attracting new workers a priority.FuelWhile gasoline prices have dropped some in recent weeks, overall fuel prices are still considerably higher than they were two years ago. Matthews said, “I propose the budget line for fuel will double. $49,500 was budgeted for our fuel expense in our FY 2021-2022 budget, but our actual fuel expense is projected to be around $85,700 by 9/30/2022; this is 1.74 times higher than budgeted. There are too many potential internal and external scenarios to describe that could cause fuel prices to increase in the upcoming FY year, so out of prudence I am proposing the fuel budget will be doubled to $99,000. Prices have indeed been volatile and will likely persist for many goods and products and fuel is no exception.”Budget RecommendationsMatthews kept these factors in mind when he made his budget recommendations. He proposed a seven percent increase for the majority of line items and a four percent budgeted increase for wages and benefits.

Duane Arnold

City Administrator Fired

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