Exactly! For example, revenues flow sporadically in municipalities that rely heavily on property taxes, which are usually paid once or twice a year. Financially sound municipalities can close the gap by drawing on their reserves or taking out a line of credit. But what do financially distressed municipalities do? “They get desperate,” Unkovic wrote. ”Maybe they improperly charge for unrelated services, maybe they deplete assets, maybe they incur lots of debt and use the money for current services, maybe they do an interest rate swap for upfront money, and maybe they stretch out their payments to vendors.”
Unkovic didn’t say if he saw the same things in business. But, in the Fifth Discipline, a business book on organizational problem solving, Peter Senge described how “the long-term, most insidious consequence of applying nonsystemic solutions is increased need for more and more of the solution.” Short-term fixes often overlook how problems evolved. “Underlying all of the above problems is a fundamental characteristic of complex human systems: ‘cause’ and ‘effect’ are not close in time and space.”
Unkovic might agree with these generalizations. As he wrote, “The primary cause of municipal distress is that the system is often rigged under state law so that the revenue/expenses/assets/liabilities/cash flow of certain municipalities simply do not work, and the desperate short term measures then taken by desperate municipal officials make matters worse and worse.”
