The Pew Charitable Trusts has issued a fact sheet advising states on best practices for analyzing the fiscal health of local governments. Maryland, along with 22 other states, are currently “proactive by assessing and tracking the fiscal health of their localities,” according to the document.
By detecting the early signs of fiscal distress, states can help local governments address problems before they become more difficult to manage or costly to resolve.
Pew recommends the following steps in such an analysis:
- Clearly define what “distress” states will monitor and and attempt to detect.
- Work with agencies and departments already analyzing local government fiscal health, such as offices of auditors, comptrollers and treasurers.
- Identify and understand the data used for the analysis.
- Determine what metrics and indicators will be used, how many, and how often they will be monitored.
- Ensure consistent monitoring.
The Department of Legislative Services (DLS) has ventured into the game of analyzing counties’ fiscal health in Maryland, using data it collects from its regular Local Government Finances in Maryland report, as well as local Comprehensive Annual Financial Reports (CAFRs) and demographic information primarily from the U.S. Census
Bureau and the Maryland Department of Planning. The department looks at a large number of fiscal indicators and outcomes, from fund balances and net operating surpluses and deficits to pension obligations and tax capacity. Its latest report is available here.