During the coming weeks a number of Indiana cities and counties are coming to terms with their new budget realities. The property tax caps which will be phased-in over the next two years have prompted discussion of “economic emergency” declarations. I have seen this before, while working at a university in a town that dabbled with bankruptcy for a full three years before coming to grips with a bloated budget. 

The sad truth is that shrinking pains can be as difficult as growing pains, without the soothing balm of a certain happy outcome. Many communities in the Midwest are shrinking. That need not mean life will get worse for their citizens. Smaller, but more prosperous cities are possible. But that requires that community leaders, elected and otherwise, come to grips with the alternatives the future offers. This will take the courage to do what is right, not simply what wins the next election. 

In too many Hoosier communities, an attachment to the past has seriously hindered economic and community development. The property tax alarms that arose last year were caused by ineffective and bloated government in many locations throughout the state. Those communities now feeling the pain of budget cuts created unsustainable conditions. These are the places in which businesses and residents fled. 

The town I used to live in faced bankruptcy. Its tax base had dwindled, property taxes were high, local services were expensive and ineffectual. In the first year of precarious circumstances, many in leadership were unable to face the music. Instead of warning their constituents (the loudest of whom were city employees), they simply begged the state for help. That came to naught and they muddled by until the second year. By then, the reality of self determination struck home. They increased taxes, to include a non-resident income tax. Business fled the city in droves. This has been happening in many Hoosier cities for two decades. 

In year three they cut the budget. The city dramatically cut public safety employment to come in line with national norms. They trimmed non-essential services and they privatized trash collection. Throughout the process they thought carefully about quality of life issues, investing in parks and other amenities. The city emerged much stronger as a result. It still has its troubles but its direction of change is now for the better.

Over the next two years I expect the same scenario will play out in Indiana. In countless places the city council and mayor will wrestle with tough issues. Council meetings will be scenes of participative democracy. This will lead to a struggle between those who cling desperately to a distant past and those who boldly embrace the future. This year we’ll hear lots of debates about the need for new taxes. Many will turn to the state for help. But the fact that new revenues won’t cover costs will force tough budget cuts. But the earlier the budget reality is confronted, the less painful the choices.