US cities pilot new financial risk tools

Salt Lake City (pictured) and two other US local governments are helping test a new financial planning tool that uses computer simulations to determine how much money councils should hold in reserve to withstand economic shocks and unexpected costs.

The project is part of a wider initiative by the Government Finance Officers Association (GFOA), which has launched a technology subsidiary, GovFi Solutions, to develop financial planning and budgeting tools for local governments.

Shayne Kavanagh, Chief Innovation Officer at GovFi Solutions, told Cities Today that the reserves project, developed with The Resiliency Company, is the most advanced of three initial initiatives.

“Our aim is to make that analysis more accessible and easier for governments to update as circumstances change, while expanding what the tools can do,” he said.

Vista, California, and Jefferson County, Wisconsin, are also participating alongside Salt Lake City. GFOA has previously helped governments assess their financial reserves, but the new application is designed to make the process more scalable.

Two other projects are in development. Working with MadisonAI, GovFi is exploring a framework called Three Clocks, which translates financial reports into insights about annual affordability, longer-term trends and obligations to future generations.

A partnership with Polco will develop budget simulations and interactive budget books, allowing officials to explore spending trade-offs and residents to participate in financial decisions.

AI and smaller governments

Kavanagh sees opportunities for artificial intelligence to reduce the cost of developing specialist software and help finance officers interpret complex information.

“AI-assisted coding can reduce the time and cost required to develop and test software,” he said. “That could make it practical to address needs that previously would have been too expensive to serve, particularly for smaller governments.”

AI could also allow finance officers to ask questions in plain language and receive answers grounded in professional guidance, with verifiable references.

“The greatest potential is to reduce the effort required to turn information into useful analysis, giving finance officers more time to exercise judgment and work with colleagues and elected officials,” Kavanagh said.

However, he emphasised that not every application would require AI.

“We will choose the technology to fit the problem. Some solutions will use AI; others will rely on established analytical methods.”

Participating governments will help identify operational challenges, test applications and evaluate their usefulness. GovFi has also heard from finance officers developing their own tools through AI-assisted coding, with some interested in making them available more widely.

For the reserves pilot, success will be measured by the credibility of financial risk assessments, staff time required and whether governments use the findings in budget discussions or financial policies.

“Success does not necessarily mean a smaller rainy day fund,” he said. “It means a better-supported judgment about how much to hold and why.”

Kavanagh added that governments’ experience during testing would also shape the support needed to adopt the applications, ensuring that the tools address practical challenges rather than simply introducing new technology.

Main image: Sean Pavone | Dreamstime.com