Local governments are contracting with not-for-profit groups like the Denver-based Center for Priority Based Budgeting to help with the budget process. Christianburg, Va., (2009 population, 19,638) recently approved an agreement to use the center's services starting with fiscal year 2011-12.
"We have to find a new way to do our budget. The way we've been doing it is not going to work," said Christianburg's finance director, Val Tweedie when the deal was announced. Contracting with the company would allow for a "healthier" budget process, Tweedie said.
The Center for Priority Based Budgeting consults with governing bodies to assess departments, goals and needs in relation to spending, while helping establish a budget process that works best for the municipality. The firm uses a detailed scoring system for each department and prioritizes activities based on performance and need when considering the budget.
Local government spending and budgetsAs 2011 gets underway, city finance directors have a few concerns, according to the National League of Cities' (NLC) "2010 City Fiscal Conditions Survey," which is a national mail survey of finance officers in U.S. cities.
The finance directors are concerned about underperforming real estate markets, lackluster consumer spending and unemployment. They are also worried that states will respond to falling revenues by further cutting their aid to local governments. Underfunded pension plans for municipal workers are also keeping city finance officials awake at night.
"Confronted with these issues, 80 percent of city finance officers forecast that their cities will be less able to meet needs in 2011 than they were in 2010," the survey said.
How are cities dealing with prospective budget shortfalls in 2010? One of the most common ways, according to the finance directors surveyed, is to cut personnel (79 percent of responses to the NLC survey) or delay or cancel capital infrastructure projects (69 percent of responses). Over half (54 percent) of cities reported salary or wage reductions or freezes and one in three (35 percent) cities reported employee layoffs.
On the revenue side, the most common action taken to boost city revenues has been to increase the levels of fees for services. Two in five (40 percent) of the responding city finance officers reported that their community has taken this step. One in four cities increased the number of fees (23 percent) or increased the local property tax (23%).
The NLC 2010 fiscal survey questionnaire was mailed to a sample of 1,055 cities, including all cities with populations greater than 50,000, as well as a random sample of cities with populations between 10,000 and 50,000. The survey was conducted from April to June 2010. The 2010 survey drew responses from 338 responding cities, for a return rate of 32 percent.
Diminished property taxes are squeezing cities, says Elizabeth McNichol, a senior fellow at the Washington-based Center on Budget and Policy Priorities, a liberal-leaning think tank.
"The property tax is a really important revenue source to local governments, and the housing bubble has hit the base of the property tax very hard, so they are going to have a revenue problem," says McNichol. "There's a certain delay in the impact of the bubble on revenues, because local governments do their property tax assessments every year or two, so it takes a while for it to feed into the tax system. We'll be feeling the full impact of that into 2011."
McNichol told Govpro.com that it will be after 2012 before local governments see revenues approaching pre-recession levels.
Cities are working to maximize revenues. One example is the city of Alexandria, Va., which has partnered with the Silver Spring Md.-based Global Express firm to allow taxpayers to pay their personal property, real estate and other taxes in cash at the company's 50 locations across Northern Virginia. The city saw an increase in the percentage of people paying in cash, and the agreement with Global Express gives taxpayers more options and convenience in settling their tax bills. In the past, residents had to pay their bills at city hall.
Local governments are contracting with not-for-profit groups like the Denver-based Center for Priority Based Budgeting to help with the budget process. Christianburg, Va., (2009 population, 19,638) recently approved an agreement to use the center's services starting with fiscal year 2011-12.
"We have to find a new way to do our budget. The way we've been doing it is not going to work," said Christianburg's finance director, Val Tweedie when the deal was announced. Contracting with the company would allow for a "healthier" budget process, Tweedie said.
The Center for Priority Based Budgeting consults with governing bodies to assess departments, goals and needs in relation to spending, while helping establish a budget process that works best for the municipality.
The firm uses a detailed scoring system for each department and prioritizes activities based on performance and need when considering the budget.
Tweedie noted that in the past the Christianburg government had enough money to go around.
With money tighter the past few years, the city has had to take a number of measures to cut costs. Some of the measures included freezing positions, hiring and salary freezes, workforce reductions and early retirement incentives.
Key points, said Tweedie, that the Christianburg government should emphasize going forward include: spending within its means, incorporating long-term planning and economic analysis, transparency, and establishing and maintaining reserve funds.
A priority-based budgeting approach may help governments cope with the new normal, says Jon Johnson, one of the founders of the Center for Priority Based Budgeting. "Cities and counties have little choice but to become leaner and focus their resources on those programs and services that are of the highest importance to their constituency," Johnson told Govpro.com.
Empowering local governments might be the answer to reducing federal spending and chopping the federal deficit, according to Brian Riedl, who is a senior policy analyst at the Washington-based Heritage Foundation. "Congress should allow local governments, which are closer to the people, to creatively address local needs in areas such as transportation, justice, job training, and economic development," says Riedl.
The Heritage Foundation analyst counts a total of $343 billion in available spending cuts for the new Congress to consider when it takes up the federal budget for FY 2012. Many of the cuts fall into six areas, including empowering local governments. The Heritage Foundation is a research institute that formulates and promotes conservative public policies.
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