Debating Myself

Image courtesy of www.dellfreedomriders.com

Anyone who has been to a gas pump lately can attest to the impact of rising energy prices. The price of oil rising to record highs hardly qualifies as news, but it does beg the question–what are some of the wider effects we will see from rising gas prices?

Some of the biggest consumers of fuel are local governments. Metro systems, school buses, and police cars are just a few of the major sources of fuel expenditures that local districts face. The Washington Post published a great article a few days ago about the pressure local budgets are facing due to rising fuel costs. Despite not having to pay fuel taxes and creative ways of purchasing fuel to save money, some local governments are at a breaking point. As prices increase much more rapidly than the expectations of local governments, these governments are faced with hard decisions–reducing police patrols or bus service to disabled or the elderly. (Interestingly, private consumers may be being hit by a double-whammy as a lot of new roads being constructed in urban areas are toll roads–to reduce traffic congestion–as part of a new transportation philosophy championed by the Bush administration)

In the few areas local governments could shift to other modes of transportation, they will also face rising costs on air fare as well. United recently hiked air fares across the board up to $50 to deal with rising fuel costs of its own–a move speculated to be copied by airlines across the industry. In short, transportation will continue to eat up a larger portion of local governments’ budgets–continuing to exceed even the anticipated price hikes built into those budgets.

Aside from the obvious issues consumers face through increased fuel prices, lets look at a few less obvious ways that these higher fuel prices could affect government services and those that rely on them.

Fewer Police Patrols

Rising fuel costs mean that local governments will have to struggle to keep their police cruisers fueled. Aside from switching from gas-guzzling SUVs, police forces have little options open to maintain a police presence and expend less fuel. A particular problem may arise if police forces opt for reducing presence in areas with lower property values (aka poorer) in order to avoid leaving citizens responsible for paying higher taxes feeling unprotected. Of course lower police presence also could lead to a spike in petty crime–increasing insurance rates in some areas.

Decreased Bus Coverage

This could, paradoxically, force some people into driving in order to get to work on time. It could also lead to some people being unable to reach their job, or having to look for employment closer to home. Obviously this is particularly damaging for people dependent on buses, because they already have less financial flexibility.

School District Shifts

School districts that are particularly spread out and face large busing costs, and are typically already financially stretched, may have to start reducing other services within the school, freeze wages, and put off maintenance for school facilities to allow room in the budget for increased transportation costs.

Inflexibility

A major problem is that many of these local governments were already stretched thin, leaving them unable to shift toward more fuel-efficient transportation options. Purchasing more fuel efficient vehicles and optimizing current vehicles for fuel efficiency are capital intensive tasks, and local districts will have difficulties raising the capital to accomplish this.

Positives

There are some positive aspects of the increase in fuel costs. Local governments may feel the crunch, but they will be forced to become more efficient, while also taking steps toward reducing fuel waste. If price hikes are sustained for a reasonable amount of time (a year or so) even if prices come back down it is likely that governments would keep their expense reduction schemes in place to hedge against future price increases. This not only decreases the carbon footprint of local government (good for Mother Nature) but it also increases the fiscal efficiency of the local government (good for Joe and Jane Taxpayer).

Another glass-half-full way of looking at the crunch on local government funds due to fuel costs is that it may force local governments to be more innovative in the delivery of their services–for example by implementing some e-government services–and driving a more consumer oriented form of service delivery to their tax payers. E-government seems to be a place where local governments could see the most gains, and blogger Che Tibby has an interesting way to conceptualize the provision of e-government services online.