Economists are predicting a recession in our economy. According to the Federal Reserve, we are halfway to the point where we meet the criterion for a full-blown recession due to the impact of COVID-19. Naturally, impacts from the economic downturn will filter its way through the state economy and adversely affect town finances.
Charlestown is sitting on a budget surplus, which is quite rare in modern economies because of the temptation for politicians to spend more money and cut taxes. Essentially, Charlestown has managed its budget judiciously and now has to decide what to do with the budget surplus it has accumulated. In an economic upturn, protecting a surplus is usually desirable as a hedge against economic downturns.
Whether we like it or not, we are already in an economic downturn, soon to be a recession, and possibly worse. So protecting the surplus is not economically feasible. During a recession, with a budget surplus, “the government can use the surplus revenue to pay off public-sector debt” (Tevyan Pettinger, Oxford University). The people of Charlestown, in 2019, proposed that the Town Council lower taxes, and this was accomplished in this year’s budget. They also proposed to pay off financial obligations and debt. The 2020 budget proposal will accomplish this and the taxpayers will have been heard.
Because of COVID-19, state budget shortfalls could be the largest on record (Center on Budget and Policy Priorities). Therefore, Charlestown can expect a reduction in financial support from the state in 2020. “Rather than protecting the budget surplus, we should be increasing spending and cutting taxes to contain the looming recession” (RePEc-Research Papers in Economics, Federal Reserve).
In our current economic situation, protecting a surplus is economically irresponsible and neglects the proposals of the townspeople. You can listen to the experts or listen to the politicians — it’s your choice.