Having Great Budget Discussions
You may think it is too early to devote any serious energy to your next budget process. Or, you may be like us here at the City of Redmond where the budget process lasts about nine months and we are already setting calendars, scheduling meetings, and considering proposals (thank goodness we do a biennial budget and this 9-month process occurs every other year!). In any event, an important thing to keep in mind along the way is: ‘How can you set up your process so that you have a great outcome?’
A Great Outcome
In my experience, the best outcome from all the organizational energy that goes into a budget process is a solid financial plan that is understood and supported by all the participants.
In addition, the budget is a great opportunity to get and provide updates on key issues, challenges, and accomplishments across the organization. Councils and boards are presented a proposed budget in the fall and then conduct a series of workshops to gain a thorough understanding of the proposals.
Another great outcome is to have productive budget conversations — so that the resulting financial plan can be understood and supported as your councils and boards finally take the vote to approve the budget.
Over the course of preparing and adopting a budget, the parties involved in the process will have many (many) discussions. These discussions offer opportunities to identify concerns, priorities, and goals, and to make any changes to your policies. Early on, budget discussions will be about goal setting. A leadership retreat is often the best way to get everyone focused on similar priorities and ready to answer the key questions that can be expected along the way.
Along the way more conversations will occur, including how to define the parameters you will use in preparing your budget (Is an incremental adjustment rate anticipated to counter inflation? Are there guidelines for requesting staff changes? Do shared costs such as fleet or technology need to be included?)
Leadership will want to convey the key messages from the retreat to those preparing budget requests. The form of the request itself will be important. You will want to provide guidance on how to efficiently communicate the nature of your services, the value they deliver to the community, and the service levels they represent. I like to say, “Form guides substance.” By that I mean, if you want to encourage budget information to provide certain types of content (substance) then make sure that is clear in the format you are using.
Governmental budgeting is the exercise we engage in to determine (and then communicate) how much value will be delivered to constituents in exchange for the involuntary resources (taxes and other revenues) we collected. This is a big deal.
So, how do we describe value? In local government we do this through measures that reflect the value of our performance — performance measures — which can take various forms. Here is a quick review of some common performance measures local governments can use.
How much we are investing in a given service? Sample input measures include: money (What is the budget for the service?); staff (How many staff hours are assigned to this service?); and other resources (How much asphalt do we use to patch potholes in a given year, or how many consultant hours will be needed to keep our technology current?).
What did we actually do? Sample output measures include: patched potholes (How many were patched last year? How many do we expect to patch with the budget we have?); police patrols (How many were delivered last year? How many do we expect to deliver with the proposed budget?); and acres of park lawn mowed (How many acres did we mow last year using a formula of total acres x the number of times mowed? How many do we think the budget will allow us to mow this year?).
How efficiently did we create the outputs (i.e., a simple ratio of outputs over inputs)? Sample efficiency measures include: patched potholes per employee hour spent; patrol hours per patrol FTE; and the cost to mow an acre of parkland.
How much actual value was delivered by the service? (Now this is getting more complicated!) Sample effectiveness measures include: resident satisfaction with the condition of the streets; the “sense of safety” in areas patrolled (such as a downtown district or neighborhood); and the quality of parks maintenance.
While these performance measures are often an afterthought of the budget process, I would suggest that they should drive the process. We only need money (as provided for through the budget) if we intend to do these things. So, what are the right things to do? How well should we do them (it takes more money to do them better)? How well is “good enough”? In considering these larger questions, there is a balance to be sought between how much we spend and the quality of the services to be delivered to the community.
By focusing your budget work on the services and the performance of these services, you set the stage for a very different type of budget conversation — both with the elected officials who are being asked to approve the budget and with the community.
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