Governing Magazine's December issue offered six fiscal rules for what (political) leaders must learn in a post-recession economy. I believe at least five of the rules can be helpful to the majority of nonprofit boards and execs. Here they are.
1. Live within your means. Set expectations that focus on realistic five-year revenue projections.
2. Look to the future. Set long-term priorities and stick to them -- even though governing bodies tend to focus on the issue du jour and react to the current developments without putting all competing priorities in perspective.
3. Stop deferring expenses. When the economy enters a recession as deep as this one has been, it is natural to cut back on equipment replacement, infrastructure and capital maintenance. But deferred expenses don't go away. They come back and bite you later. Budget officers should prepare a list of all on-going deferred spending and that way the board and management can see what needs to be funded before discretionary programs can be restored.
4. Dedicate your surplus. At some point, state and local revenues will once again exceed budget estimates. When they do, it will still be necessary to focus on fiscal catch-up. Depleted reserves will have to be restored.
5. Set up a rainy-day fund. This may be the most important fiscal policy decision any governing body can make. Once the revenue revival comes and stabilizes, it will be important to set money aside from the operating budget for lean periods in the future. The time to enact such a policy is now, when memories are fresh and the pain of recent retrenchments is vivid.