Thursday, April 18, 2013

Fiscal Health: Your Strategic Plan for Best-case (or worst-case) Budget Scenarios

Strategic planning and fiscal scenario planning has been at the core of our work in ICMA's Leading Practice of "Fiscal Health." That is, scenario planning local governments financial forecast(s) for worst-case (and best-case) scenarios.

In “Excelling in Times of Fiscal Distress,” an article Bob O'Neill wrote for Governing, in October 2008, he wrote “Most of us can articulate the early-warning signs that preceded the current economic downturn: Global forces that dramatically changed the local, state, and federal playing fields. Skyrocketing fuel costs. A failing housing market…property tax limitations. Yet, many of us failed to correctly interpret these early-warning signs in relation to their impact on our government organizations.”

Interpretation is the key. For example, interpreting the impact of a major employer closing down and what the true impact would be on your organization and community.

The major "tool" the Center for Priority Based Budgeting has been working on is a data-visualization tool that depicts real-time impacts of various scenarios with a financial impact. So if the major employer closes down, what impact would it have on your "ongoing" revenues and expenses, and what impacts would it have on your "one-time" sources and uses of funds. Furthermore, what actions or initiatives are being considered to deal with this situation that would also have an impact (for instance, if there are any incentives on the table that could serve as an economic development strategy; tax abatement; TIF, etc, or re-investing in development, urban renewal, or recruitment to address attracting new businesses).

For all of these related activities, you want to be able to model the situation, demonstrate the impacts, and appropriately weigh the impacts of various decisions. That's what Fiscal Health modeling is all about.

Fiscal Health modeling is a powerful scenario-planning tool, providing easy to understand visualization of data.
  • Elected officials have adopted Fiscal Health as their preferred means of communicating with staff regarding any decisions brought before them that potentially might have a fiscal impact – asking staff to “show us” those impacts using the principles of Fiscal Health as the primary communication device.
  • Organizations have entered into labor negotiations with their bargaining units using Fiscal Health as a way to quickly agree on the assumptions behind the City’s fiscal forecasts, therefore establishing a basis of trust in the discussion – then modeling the bargaining units’ requests to demonstrate impacts to the City’s fiscal position.
  • It has even been used to help a Water and Sewer District prioritize capital projects, understand the ongoing impacts of those projects, and effectively develop rate increases by better understanding their ongoing and one-time sources and uses of funding in their operation.
At CPBB we're motivated by the exact type of objectives the majority of communities often have in  strategic planning (and how to bring the financial picture into the discussion), and look forward to sharing experiences.

Contact us to schedule a free webinar and identify the best CPBB service option(s) to meet your organization's particular needs.

The 2013 CPBB Annual Conference
"A Summit of Leading Practices"
July 9 & 10, 2013     Arlington, VA     Hilton Crystal City Hotel



Brought to you by the Center for Priority Based Budgeting (CPBB) and the
International City/County Management Association (ICMA), in partnership with the Alliance for Innovation (AFI).


  1. Very cool that you're headed down this path with your strategic planning to draw out fundamental issues, and concluding with tests of your strategic choices.

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  2. Oh this so cool! Thanks for sharing information about health and wellness. Keep up the good work!