Article
Building fiscal sustainability in the public sector: A case for proactive long term planning
May 20, 2025 · Authored by Steve Toler
Many local governments face challenges in achieving fiscal sustainability, often realizing the need for a balanced budget and adequate reserves only when confronted with financial difficulties. When a city struggles to balance its budget, depletes its reserves or faces cuts to core services, the long-term picture becomes clearer. By that point, options are fewer, tensions are higher, and the decisions are harder.
Fiscal sustainability shouldn’t be a panic response. It should be a core responsibility of every finance department and city leadership team. Like a capital improvement plan or asset management system, it belongs in the basic toolbox of public sector financial stewardship. Cities and counties that understand their financial trajectory and act early can preserve services, avoid crises and maintain the public’s trust.
What is fiscal sustainability?
Fiscal sustainability refers to a local government's ability to consistently provide essential public services now and in the future without relying on temporary measures like one-time revenues, deferred maintenance, or depleting reserves. It indicates the structural health of a city or county, ensuring ongoing revenue is sufficient to cover recurring costs and whether the government can handle future challenges without compromising service quality or financial stability.
Several indicators help gauge whether a local government is on a sustainable path. First, structurally balanced budgets, where ongoing expenditures are matched by ongoing revenues, are foundational. Healthy reserves, typically in the range of 15 to 25 percent of annual operating expenditures, provide a buffer against economic downturns or unexpected costs. A well-balanced revenue portfolio that grows with the economy is another sign of sustainability. And perhaps most importantly, a city should have a credible, long-range financial forecast that identifies fiscal imbalances before they become unmanageable.
Fiscal sustainability allows leaders to shift the focus from year-to-year survival to long-term service delivery and investment. It creates space for smarter decisions, greater transparency and better alignment with community priorities and long-term financial goals.
