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Time To Set The Policy Framework For Your Next Budget

Time To Set The Policy Framework For Your Next Budget

An organization’s budget should reflect their mission, values, and policy goals for the agency. In fact, the budget can be a powerful policy tool for your entity. Too often, however, policymakers miss the opportunity to enable the real power of the budget to move your entity towards your policy goals. In this article, we’ll talk about the benefits of starting your budget process with a strong policy conversation and explore ways to enable this to occur.

The benefits of focusing on a budget's policy elements

If you adopt an annual budget, now is the time to begin to lay the groundwork for the best results. A best practice for this work is the Government Finance Officer Association’s (GFOA) National Advisory Council on State and Local Budgeting (NACSLB). In that work the mission of the budget is described as:

To help decision makers make informed choices about the provision of services and capital assets and to promote stakeholder participation in the process. (Emphasis added)

I like this description as it appropriately focuses the purpose of the budget on the policymakers as the ultimate decision-makers. In addition, it also incorporates “stakeholders” into the process.

GFOA’s criteria for their peer-review program for the budget identifies four elements of a budget or budget process: policy, operations, financial, and communication. Again, I appreciate their inclusion of the policy element because it sets the stage for the organization to pursue its intended outcomes through the allocation of resources toward those purposes. This counters the tendency to “stay the course” or continue conducting organizational business the “way we’ve always done it.” Without clear policy guidance, it is unreasonable for policymakers to expect that a proposed budget would reflect any interests they might have in different or specific outcomes. This is difficult but essential work for getting the most from limited public resources.

How to create a strong policy element for your budget

With a clear sense of organizational priorities, the rest of a budget process can (and should) honor those priorities as the basis for subsequent decision-making. Additionally, a good budget document will illustrate the connection between policy goals and the administration’s preliminary choices, such that the decision-makers who must review and take a final vote on the document understand these connections.

Clear policy direction will put the power in your budget process: So how can we effectively create this clear policy direction? As noted in the NASCLB comment, promoting stakeholder involvement is a good first step. As I like to say, a local government’s budget is “other people’s money.” Thus, it is essential that stakeholders believe we will spend these scarce community resources carefully. An effective community stakeholder element provides real input into the policymaking process and helps to address the communications element of the budget process as well.

Stakeholder involvement can take a few forms, with a community survey being most common and popular. Surveys are typically done on either an annual or biennial basis. There are several good examples out there, but one good source is the Washington State Auditor’s Center for Performance and Innovation’s Resources Database. Using this database, you can search for and find examples of community surveys.

Some jurisdictions prefer a statistically valid result, which often calls for hiring an external consultant with this expertise, while others are less concerned about statistical validity. If you fall in the latter group, a stakeholder survey can be conducted using a free (or low cost) online service. Some best practices for conducting a community survey are as follows:

  • Create the online survey and add any hot topics of particular interest to your community.
  • Get the word out as broadly as possible that the survey is available. Start with a list of email addresses you may already have and advertise it on your website and in your local newspaper.
  • Be sure to send the survey link to those who have already invested time and energy into your organization—your voluntary boards and commissions.

Regardless of your approach, be sure to “close the loop” on your survey once you finished collecting stakeholder input. Summarize survey findings and how you intend to use these results in budget planning. If your community becomes concerned that survey results weren’t taken seriously or used during the decision-making process, they’ll be less inclined to participate the next time. Even if you incorporate stakeholder input into your budget process but fail to inform others of having done so, not communicating the value of this input damages the public’s trust that local government is spending their resources wisely.

Using a retreat format

After gaining input from stakeholders, policymakers then need to have a discussion regarding policy guidance for the organization. This is not a typical topic for a business meeting agenda—or one that is even adequately addressed during a work meeting or study session. Instead, I strongly encourage a “retreat” type of meeting for this discussion.

I recommend retreats for a variety of reasons including the need to treat this discussion differently than typical business topics. This discussion involves both “brainstorming” and a more structured approach to get to a final result (which you’ll want to adopt during a regular business meeting of the organization).

I’ve often heard from frustrated elected officials who claim that the organization has not made progress on their specific policy initiatives. Typically (though not always) this is a result of that elected official’s inability to get a broader consensus with regards to these ideas. I like to say that an elected official can’t do anything on their own but the elected body can do whatever it wants! (within reason and state law, of course). Elected officials must get the support of their peers and have a majority of the elected body agree with their initiatives in order to expect the organization to pursue them in the budget.

Budgetary policy guidance can also come from a strategic plan, since the strategic planning effort itself results in strong and clear policy guidance for the entity. The type of policy guidance that is most helpful for budget planning includes affirmation (or adjusting) of the mission statement (i.e., statement of organizational purpose) and a vision statement (i.e., statement of what will be achieved on a broad scale at some point in the future).

Specific policy guidance comes from strategic goals, or what the NACSLB calls “broad goals.” Additionally, those broad goals could be supported by more specific goals—or action steps toward pursuit of the broad goals. If these exist in your strategic plan then you’ve got a great policy foundation for your budget.

When to bring in outside help

The budget retreat essentially serves the same purpose identified above as part of the strategic plan, though it can also be more specifically focused on the upcoming budget process. Additionally, it will be important to finish the work and prioritize goals and policy guidance. This is where the planning process can get difficult.

To get to this outcome you should consider bringing in an experienced facilitator for your discussion. An external facilitator can objectively bring up the difficult subjects, help assure that everyone is involved, manage the discussion evenly, and get the group to a conclusion. This can be difficult for an internal stakeholder to do, and the objectivity of an “insider” can come into question. Lastly, an external facilitator can make sure the whole experience serves your purpose effectively: He or she can help you make decisions along the way (like who to include, where to meet, how long to plan for, etc.)

I believe that developing (and guiding your organizations resources to) sound policy goals is one of the most important ways an elected official can make a real difference in their community. When I talk to elected officials, I often discover that’s why they ran for office—to make a difference. Too often, instead, they become frustrated in a lack of progress on topics they care about even though they’ve been involved in local government for many years. Once elected officials do the hard work of helping to set a policy framework they should expect the administration to honor it with work on the preliminary budget (though I’ll admit there is a unique political role for a mayor under RCW 35A.12).

A strong policy element sets the stage for meaningful change and an effective budget process.

MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

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About Mike Bailey

Mike served as a Finance Consultant for MRSC for several years before retiring in 2020.

Mike writes about local government financial management, local government budgeting, financial leadership, and strategic planning processes.