When it comes time to begin the development of your jurisdiction’s annual budget, which song immediately pops into your head: “It’s the Most Wonderful Time of the Year” or “Don’t Cry Out Loud”?
We suspect that the answer to this question will be the same whether asked of staff or elected officials.
For most, the budget process is viewed as an accounting exercise that involves a multitude of spreadsheets, request forms and formulas all leading to a “balanced budget”. Oftentimes, the process seems to be cloaked in mystery because no one is quite sure what happens between the time budget requests are submitted and the point at which a draft budget is presented for review. From our experience as a Finance Director and an Elected Official, it felt like a laborious effort that detracted from our actual job responsibilities andwasted a lot of time and paper. The end result is a final Approved Budget document that is full of numbers and graphs, which often falls short of clearly communicating how resources are being allocated to achieve the goals of the organization and meet the needs of community.
If asked, we believe that every elected official would say that the budget is the single most important policy document that a local government adopts. Rather than being viewed as a cumbersome, time-consuming process, the budget should focus on being a:
- STATEMENT OF PRIORITIES – Communicating to citizens and other stakeholders what services they can expect with the tax dollars, fees and other revenues provided; demonstrating clearly how resources are allocated to achieve the results desired by the community; and translating policies set by the organization into action.
- STRATEGIC PLANNING TOOL – Establishing a spending plan for not only the upcoming fiscal year but for the next five; offering a roadmap for carrying out policy objectives, ensuring decision-makers are making the best use of limited resources and providing for the long-term financial sustainability of the organization.
- CONTROL TOOL – Providing the legal authority for staff to conduct day-to-day business; setting well-defined boundaries related to spending oversight; and establishing trust, transparency and accountability around the responsibility of “managing someone else’s money”.
- MANAGEMENT TOOL – Offering a monitoring device to ensure compliance with the spending plan; articulating clearly “how much it costs” to deliver the services needed and desired by the community; and demonstrating how services are being delivered in the most effective and efficient way possible.
At this point, you are hearing another song playing in your head – “Where Do I Begin…..”! We believe there are some fundamentally important questions that need to be asked before any budget request forms are distributed to “kick-off” the process.
- WHAT IS GOING ON AROUND US? – Engaging in an “environmental scan” should be one of the first areas of involvement with elected officials. Looking at what is going on around you and understanding the political, economic and social environment of the community to look for shifts or changes is critical in aligning resource allocations with the needs of your constituents. Additionally, it’s important to identify any new legal or compliance issues that need to be factored in the budget as well as the impacts of any changes or disruptions in your natural environment.
- HOW MUCH DO WE HAVE? – Shifting the first question asked in the budget process from “How much to you need?” to “How much to we have?” might be viewed as subtle but time after time, we’ve seen this change the approach to developing the budget. Starting off with a clear understanding of how much revenue is available to spend for the upcoming budget year sets realistic expectations from the get-go as to whether there is more money available, the same amount as last year or, as all of us often experienced, less money than we had before. Since revenues, not expenditures, are the real drivers of the budget, focusing on understanding where the money is coming from is extremelycritical to the budget process.
- WHAT IS OUR “STARTING POINT”? – Ensuring that everyone understands the base from which next year’s budget is to be built is extremely important before kicking off budget development. Sometimes it can be unclear whether the starting point is the current year’s budget, last year’s budget, last year’s actuals or current year expenditure estimates. A shared understanding of the base from which you are building the budget is vital to the process.
Even if you start off the process with a clearer understanding of the “why” behind the annual budget and ask the right questions before things get underway, you still may not have everyone ready to break into a chorus of “It’s the Most Wonderful Time of the Year”, but least they should be all able to hum “I Can See Clearly Now”.
To learn more about the “what, why and how” of budgeting, please join us at our session “Budgeting Basics – THE WHAT” on Wednesday, November 20th from 9:00 am to 12:00 pm during NLC’s 2019 City Summit Conference in San Antonio!
About the Authors: Serving local government from both sides of the dais, Kathie Novak and Jon Johnson bring a unique perspective of local government budgeting. For over 19 years, Kathie served as a Council Member and Mayor for the City Northglenn, CO during which time she also served as NLC’s President. Kathie currently is on the faculty of the University of Denver and does extensive work with City Councils across the country. Jon has served as a local government Finance/Budget Director for several municipalities followed by his work as Co-Founder of the Center for Priority Based Budgeting. Currently, Jon serves as the Chief Financial Officer for the Alliance for Innovation, a mission-driven non-profit that promotes innovation and transformation within the public sector.