Priority-Driven Local Government Budgeting

Guest Correspondence

We learned a lot from The Great Recession. A priority-driven budget process was one of those important lessons.  Local governments are beginning their budgeting processes now for their budgets effective Oct. 1. As the lessons from the recession fade, we find that the will to address policies through budget prioritization has faded as well.

Now, today, we are finding shortfalls for sudden unprioritized issues in some governments because they failed to budget and plan. Some governments are seeking more revenue sources for items or issues they never identified as a budget priority nor directed staff to prioritize in their budgeting process. They are starting with the premise of asking for additional revenues without ever having prioritized existing revenues or making the issue a part of their strategic plan.

Make no mistake about it, governments are getting more taxpayer money every year.  Property tax values are increasing ever year and have been for a decade, which means government gets additional funds every year with millage rates staying the same. Since they already do have more money every year, they need to tame the government budget beast before it gets out of control. There will be a time in the future when revenue contracts.

So what can be done? Go back to the lessons of the recession. 

In 2011, the Government Finance Officers Association put out a white paper during the worst of The Great Recession for government. It was called, Anatomy of a Priority-Driven Budget Process. This paper explains that governments typically use an “incremental” approach to government budgeting. “The current year’s budget becomes the basis for the next year’s spending plan.” It is based upon revenue growing and expenses being even.

A priority-based budget, however, takes into account large growing expenses and is a more business-like approach to budgeting. You can’t run government like a business, but you can apply business principles to government to make it more successful. This certainly is a business principle that is now largely absent from local government budgeting. 

The white paper explains, “The philosophy of priority-driven budgeting is that resources should be allocated according to how effectively a program or service achieves the goals and objectives that are of greatest value to the community.”

The white paper gives a step-by-step approach to budgeting with the following bullet point philosophy:

  • Prioritize Services
  • Do the Important Things Well
  • Question Past Patterns of Spending
  • Spend within the Organization’s Means- don’t use last year’s expenditures as a basis for decision-making
  • Know the True Cost of Doing Business
  • Provide Transparency of Community Priorities
  • Provide Transparency of Service Impact
  • Demand Accountability for Results

It makes sense to taxpayers to focus on results, but it is a government mindset shift to what is being done today as tax revenues continue to rise. This philosophy is uncomfortable for upper level government management as oversight kicks in and it shifts the power back to the people through their elected officials actually working on the budget themselves rather than just signing off on recommendations.  

The GFOA white paper concludes, “As your organization adapts to the new normal, the process will guide decision-makers in making resource allocations that fund the programs that are most highly valued by the organization and, more importantly, by the citizens who depend on those programs and services for their well being, comfort, and expected quality of life.”  The Argus Foundation hopes we see a shift back to funding articulated community priorities, with plans, within the current growing tax revenues.

Christine Robinson is Executive Director of The Argus Foundation.

To view the GFOA white paper go here.

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