Connecting state and local government leaders
COMMENTARY | Developing strategies centered on data collection is critical for governments to make sure resources are deployed in an effective and equitable way.
Many municipalities are pushing to be more equitable in everything they do, and rightfully so. For example, in 2019, Milwaukee County became the first county in the United States to declare racism a public health crisis and resolved to assess internal policies to ensure a focus on racial equity and address health disparities between communities of color and their white counterparts. Since then, roughly 70 counties throughout the United States have passed similar resolutions.
This focus is not only occurring at the local and state level, but also at the federal level. As a result of this push for increased equity, many localities want their equity goals to be reflected in their budgets and are tying their investments to equitable outputs and outcomes.
A key way for states and cities to budget for equity and achieve more equitable outcomes is by leveraging data. Data collection ensures that public dollars are used for their intended purposes and equity targets are reached. This can be challenging since different communities have different equity challenges. For example, in areas prone to weather disasters, it could mean the ability for communities of color to adapt to flooding or heat waves. In large urban areas, it could mean providing systematically excluded individuals access to mass transit.
When the International City/County Management Association observed the data collection of social equity in several communities, it identified a wide range of outputs and outcomes measured, such as employment, access to technology, support for immigrants, affordable housing and impacts from exposure to lead. While this is a helpful starting point, there is a need to standardize the way communities collect data and what is measured as it relates to equity initiatives. Standardization allows suppliers to develop common technological platforms, constituents to benchmark with other communities and communities to better identify risks caused by social inequities.
The American Rescue Plan Act offers a starting point for how to create consistent equity measures. Recipients of money from ARPA’s State and Local Fiscal Recovery Funds are required to report on usage of funds to service “disproportionately impacted communities” or communities historically disadvantaged and prone to adverse impacts from a disaster like the Covid-19 pandemic. The federal government has made tools for assessing equitable outputs from programs (not limited to SLFRF-funded programs) available, along with case studies, on its website.
The SLFRF reporting requirements include qualitative and quantitative reporting on plans to ensure equitable outcomes from funded programs. Quantitative data requirements include “using … quantitative data on how the jurisdiction’s approach achieved or promoted equitable outcomes or progressed against equity goals,” and “describing the demographic distribution of funding, including whether it is targeted toward traditionally marginalized communities.”
Societal Best Practices
More guidance along societal-based data collection can be found with the Government Finance Officers Association best practices for measuring social factors in relation to debt issuances. Although the guidance is specific to disclosures for societal issues that could impact credit quality (or the ability to pay debt obligations), this best practice is also applicable for collecting data for monitoring equity.
GFOA’s guidance focuses on Environmental, Social and Governance reporting. This discipline, used for disclosing risks for investors, could also be used to monitor equity within a municipality. For example, availability of housing for impoverished or disadvantaged population groups is one societal factor investors may find useful and it should be disclosed.
ESG reporting is a newer concept and is primarily used by the investor community. It involves disclosing data related to risks along environmental (E), societal (S) and governance (G) factors. For a municipality, environmental risks could include the susceptibility of a city to climate-related weather calamities or the dependence of its economy on carbon-emitting activities. Societal factors include issues such as a population’s collective access to affordable housing, literacy rates and employment rates by socioeconomic factor. Governance measures focus on traditional factors such as strength of internal controls and transparency.
Numerous dataset providers use ESG data for municipalities and for companies within a municipality. Unfortunately, the concept is still maturing, so there is limitation in the scope of the data and how pervasive it is. Despite these limitations, there is significant opportunity here.
As the field matures and more societal factors are tracked, municipalities could utilize such data for third-party verification and benchmarking. Municipalities could also utilize such data to assess what is happening with corporations within their boundaries to generate a larger view of equitable impact. In addition, these datasets could help with measuring outcomes, as the number of factors expands to not just what is observed from government programs, but also to comprehensively measuring what is happening within a jurisdiction holistically. Equally important, municipalities could generate ESG datasets for comparison and standardization.
Data is critical to embedding equity into a government’s operations and budgeting for this reality is paramount. Communities are ramping up the ability to collect data but there are opportunities to standardize how they observe equitable outputs from their programs. Standardization and availability of third-party datasets will only improve the quality and credibility of a municipality’s equitable efforts as well as help direct resources to effective initiatives via the budgeting process.
Hughey Newsome is the chief financial officer of Wayne County, Michigan. He has served as a chief financial officer for local governments since 2017, including for Flint, Michigan after the water crisis.