What exactly is a law of municipal governance, you may ask? Basically, it is a set of rules governed by a governing body or government. These bodies vary greatly from state to state and even from country to country, but basically they try to promote economic efficiency and productivity within their jurisdiction by setting taxes and fees, creating regulations, and generally trying to keep things balanced and maintain a level playing field between those who produce economic value and those who don’t.
Now then, what exactly are economics and what does it have to do with all this stuff anyway? Let’s take a look. First off, let me just say that as someone who has studied both the legal system and public finance myself, I can honestly say that economics is one of the more interesting parts of the Law School curriculum. It covers the many mechanisms that governments use to collect taxes and distribute them to citizens. For example, tax revenues are collected when a citizen has purchased a service or product within the municipal jurisdiction. Then a certain amount of money is deducted from the sale proceeds to pay the tax that the municipality then uses to do something of value – like build roads, develop recreational areas, or even to pay off some of their debt.
Now then, this all sounds very familiar doesn’t it? That’s because it is absolutely true that the revenue generated by all this activity forms the foundation of municipal debt, interest, and taxes. Now then, if we study the manner in which a typical tax raising event occurs then we can begin to understand why and how these events affect the long term viability of our legal and fiscal structure.
For instance, when tax revenues are low or non-existent, municipalities are forced to seek other means of raising the money needed to properly fund their programs and activities. And that’s when they start looking at borrowing. In the past, municipal leaders have used personal assets in order to raise money – such as car loans, home mortgages, business credit, etc. However, these days many jurisdictions have enacted new, more restrictive borrowing requirements for tax repayments. These new restrictions have led to the relative rarity and frequency of municipal credit crisis, where cities and towns are literally hoarding the money they need to properly operate and maintain their programs and projects.
So the question is: Why do we continue to allow our governments to ignore these fundamental questions about the nature of municipal finance? The simple answer is that we do because we like the answers that we get…and we like them almost as much as the tax revenues come in. Indeed, we tend to look towards the long-term sustainable performance of municipalities with a kind of blind optimism, almost worshipful.
So then, why do we continue to ignore what should be obvious to all taxpaying citizens? In fact, we don’t even realize it. But we also don’t seem to care, either. We just go along with the government’s over-all lack of confidence in its ability to properly manage the resources it must use to maintain our communities. Well, take my law economics of municipal governance quiz for me… why don’t you?
Seriously now, just think about it for a moment. If we are going to spend our money at all, why not take my law economics of municipal governance quiz and find out just how much we’re really wasting it on all these crazy projects and ridiculous spending? It’s time for us to start cutting our budgets where we need to, starting with our governments and then everyone else.