The traditional city budget process results in frustration, dissatisfaction, and cynicism.
The process typically begins with the council setting goals for the coming year. Staff estimates revenues and develops a spending plan. Council members deliberate over the proposal, hear from residents, and direct changes. Finally, they adopt the budget, authorizing spending for the new fiscal year.
But how is it that a city can follow that sequence faithfully and still face recurring budget deficits, service reductions, hiring freezes, and deferred maintenance? Why does next year’s budget promise another round of the same struggle?
Professional guidance is not lacking. The National Advisory Council on State and Local Budgeting’s 1998 framework, developed by eight national organizations, spells out four principles:
Establish broad goals to guide government decision making.
Develop approaches to achieve goals.
Develop a budget consistent with approaches to achieve goals.
Evaluate performance and make adjustments.
This guidance is clearly reasonable. Let’s assume our officials follow it conscientiously, with accurate figures, public deliberations, and the budget adopted on schedule. Now consider two hypothetical cities with comparable resources, inherited commitments, and equally capable employees.
Setting the goals
City A sees its purpose as improving the community’s quality of life. The City of San José, California, provides an example: its mission calls for services that “create, sustain and enhance a safe, livable and vibrant community.” Meanwhile, City B limits its purpose to activities requiring legislative and enforcement powers to protect residents, businesses, and their property.
Apprehending and detaining a burglar requires the city’s authority to enforce laws protecting people and property. Organizing a neighborhood festival does not; residents and merchants can arrange an event without requiring everyone else to pay for it.
At City A’s goal-setting retreat, improving theft investigations and expanding the festival both qualify. The mission gives officials no reason to exclude either from the city’s responsibilities. Officials rank their priorities, but postponing a proposal leaves it on the list of things the city ought to do when money becomes available.
City B leaves the festival to its sponsors. Its council can still set a broad goal of improving theft investigations throughout every neighborhood.
Making the numbers work
During budget development, City A’s staff tries to fit both proposals into the revenue forecast alongside existing programs and commitments.
Several years ago, I was working as finance director for a city similar to City A. The revenue forecast for the upcoming year allowed for new programs. Two programs were added, not because they were judged more important than the work the city was already doing, but because funding was available. In the middle of budget deliberations, the revenue forecast came down. The city council decided to keep those new programs in place and directed staff to find other places to reduce spending. The result: facility maintenance and vehicle purchases were delayed to make room for the new programs.
Somehow, these programs were given priority over the existing commitments of maintaining facilities and replacing vehicles. Deferring these expenses added to the problems of the subsequent budget cycle.
In City B, maintaining facilities and replacing vehicles are part of the cost of fulfilling its continuing responsibilities. For theft investigations, staff examines caseloads, staffing, training, equipment, and continuing costs. It can plan replacements and reserves around that work. Existing activities outside the mission can be terminated as commitments and practical considerations allow.
When City A’s budget reaches the council, members hear why each proposed reduction will hurt someone. Cutting back the festival expansion undermines neighborhood vitality; postponing improvements to investigations compromises safety. Both arguments invoke the mission. The council is asked to prioritize again. But what are the priorities based on — citizen surveys, lobbying, the path of least political resistance, the mayor’s favorite?
City B’s officials debate the proposed staffing and case assignments. They have to judge what would improve investigations and what the city can afford. They can also decline requests outside the city’s purpose even when money is available.
Will next year be any easier?
City A adopts its budget with relief, but its council is concerned that the budget will need to be reopened during the year. Officials are already thinking about what they would do with more money. There is always another way to make a community more livable or vibrant. Neither this budget nor a larger one can ever fulfill that open-ended purpose. Better technology and greater productivity will not prevent pressure to raise taxes and fees to fund other activities that also fit the mission.
City B’s adopted budget includes maintenance, replacement costs, and reserves for its continuing responsibilities. Staff can identify remaining shortfalls and the changes needed to close them. Productivity gains can help close those gaps or reduce future spending. If better case management saves investigators time, the council can reconsider planned overtime or additional positions. It need not find new activities to use up the savings. Inherited commitments still have to be met, and a recession can disrupt the plan. But the council can plan for financial stability because it knows what work it has to fund.
As the year proceeds, both councils evaluate performance, following the framework’s final principle. City A counts festival attendance, surveys participants, and reports nearby business sales. Those measures can help improve the festival. They cannot establish whether the city should run it. Higher attendance can support expansion; disappointing attendance can support more promotion. The council ends up judging whether to continue the program by measures that already assume the city should be running it.
City B first asks which activities belong within its responsibilities, then examines their results and methods. A program can meet every target and still be something the city should stop doing. For theft investigations, the council has further questions. Are investigations protecting residents and their property? Would different staffing, schedules, or assignments improve that work?
In my three decades in municipal government, I never had a conversation about what a city government is. I never avoided such a discussion. The topic never arose. How were we supposed to evaluate our work without discussing what the organization was for?
What would an earlier start change?
In my earlier article, I urged officials to start work before the conventional budget season. But it needs to be the right work. City A could start six months earlier and remain in the same predicament, with more time to debate requests that all fit its mission.
City B needs time to change how it does the work it keeps. If its review of theft investigations calls for different schedules, those changes may require renegotiating a labor agreement, which can govern work methods as well as compensation. Such labor-related changes can take more than one negotiating cycle. By budget deliberation time, it is usually too late to make those changes for the coming year.
Changing accumulated commitments takes time. If your city has recently adopted its budget, start the discussion now: what should the city be doing?
