What Happened?
Princeton’s proposed $61 million budget includes an almost 1 percent tax rate decrease after the city successfully consolidated a former borough and township into a united municipality. The consolidation strategy also enabled lawmakers to require $3 million less in budgetary demands than was allocated in the 2012 budgets for the township and borough independently.
So What?
After the two entities joined forces to create a consolidated municipality, officials reported $1.3 million savings on salaries and wages for 261 employees instead of 287. In addition, $500,000 was saved by merging police forces, $255,926 from administration efficiencies and $56,012 after the two councils were merged into one body.
Furthermore, the consolidation strategy recommended by the Transition Task Force enabled a $1.9 million decline in town expenses, with the most significant reductions in insurance benefits and police costs. Because the consolidated Princeton municipality is in a strong financial position, residents will have a lower tax rate. The town will pay 46.3 cents per $100 of assessed property value compared to 47 cents in 2012.
Budget Consolidation Guidelines
Many European governments are looking to consolidate public budgets to reduce the impact of interest payments as economies look to rebuild after accumulating deficits. A study from the Austrian Institute of Economic Research discussed the economic value of consolidation strategies in the aftermath of the economic crisis, and a few guidelines to help lawmakers create comprehensive models of merging tasks and reducing costs. According to the study, municipalities should:
- Devise a coherent strategy: Budget consolidation is just one of many efforts municipalities are making to boost innovation and improve services to the public. Tax consolidation reports the highest returns when it is included in a larger comprehensive strategy to increase job opportunities, reduce unnecessary costs and drive successful future investments.
- Communicate the consolidation vision with the public: Officials must establish a strict timetable for consolidation strategies that includes extensive communications of missions and tactics to be implemented. A list of priorities should be made that coordinate with other efforts being made with agencies and the private sector.
- Create stability to support the integration: Tax consolidation adjustments should not be launched until the city has regained economic stability. Strategies must include future investments to stimulate growth in a proactive manner, working to enhance flexibility and opportunities in the short and long term.
- Ensure fairness when distributing costs, responsibilities and burdens: To recover from an economic downturn and create an environment for consolidation opportunities, there must be fair allocation of burdens. Expenditures on low-income support should remain strong, while perks for wealthier sectors should be cut.
- Establish a growth- and demand-sensitive consolidation structure: Consolidation strategies must be responsive to growth efforts and public demands. Taxes must be shifted toward growth strategies rather than inhibit future investments for long-term opportunities. Likewise, consolidation must also be flexible to private sector reactions to public sector reductions in expenditure. Incentives should be made available for private investment so individuals and organizations can fill the gaps created when governments make cuts.
Other Consolidation Strategies
Gov1 has reported on significant savings in public consolidation of school, court and other services.