Friday, August 12, 2011

Priority-based budgeting demands results : Municipal Association of SC

Priority-based budgeting demands results : Municipal Association of SC

The Municipal Association of South Carolina has published a great summary of Priority Based Budgeting, drawing from our White Paper with GFOA ("Anatomy of a Priority Based Budgeting Process, and the observations of City Administrator of Greer.

As local governments across the nation adapt to the economy’s “new normal,” they have begun to turn away from traditional budgeting techniques and adopt a new budgeting philosophy: priority-based budgeting. Instead of incrementally raising revenue and expenditure estimates every year, priority-based budgeting advocates deciding upon then funding those services that are most valuable to the community. This process recognizes that there may not be funding resources available for everything the city or town would like to do, or even to fund everything they have previously done.

Priority-based budgeting departs from traditional budgeting in several ways. First, it requires a great deal of community involvement to identify and evaluate the city services that are most important to residents.

“Through community surveys, personal interaction, public hearings, town hall meetings, website information, cable channel information, newsletters, Facebook, Twitter, etc., you actively solicit the public’s opinion and participation in the budgeting process,” explained Ed Driggers, city administrator of Greer. “If your community sees firsthand or learns through internal and external media that the elected officials and staff are prioritizing local services, they are more likely to support the ultimate decisions made.”

Second, priority-based budgeting requires cities to first identify revenues that will be available in the new budget, rather than the amount of money needed to fund a particular service. Traditionally, expenditures for a service are calculated and a request for that amount of funding is made by a department for the coming budget year. Priority-based budgeting calculates the revenues a city can expect, then adapts spending to within that amount. This “live within your means” approach encourages a deeper evaluation of the costs and importance of a particular service.

Finally, priority-based budgeting demands results. Successful, traditional budgeting means a department stayed within its budget regardless of whether the service it delivered actually provided positive outcomes. Priority-based budgeting not only requires fiscal accountability, it requires a service demonstrate the measurable, successful outcomes it promised when it was funded. Without demonstrating success, a service may not be funded at the same level in future years.

Priority-based budgeting may be a departure from the traditional way cities and towns have crafted budgets over the years. But as revenues shrink and expenditures rise, many cities have embraced priority-based budgeting as a good way to provide their services at the affordable levels residents expect and desire.

“If you choose to use priority based budgeting, be prepared to actively solicit your community’s opinions and involvement and then listen to them,” cautioned Driggers. “You will not gain trust within your city or town if you allow your residents to establish priorities then you establish different priorities within your budget. It can be very time consuming, but if done correctly it can have great rewards by creating support and buy-in.”City Administrator Ed Driggers of Greer, City Manager Richard Pearce of Aiken and Senior Field Services Manager Scott Slatton of the Municipal Association discussed priority-based budgeting during a breakout session at the 2011 Annual Meeting.

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