Priority Based Budgeting = Strategically Balancing the Books

 

 In the sixth installment of the National League of Cities “State of the Cities 2013” (Strategically Balancing the Books), the findings from their survey have coincided directly with the entire focus of our work. We couldn’t be more pleased with the common chord we appear to be striking!

According to the report:

“The National League of Cities’ 2012 City Fiscal Conditions report  projected a sixth year in a row of declining revenues for cities, and a 25 percent decline in ending balances (reserves) over the last four years. It’s clear that the financial crisis has taken a mighty chomp out of city budgets. But America’s mayors aren’t just standing idle, letting their budgets go by the wayside. They remain remarkably optimistic, innovative, and resilient while making tough choices to balance their budgets.”

From Fort Wayne, Indiana to Henderson, Nevada, mayors are entirely immersed in finding ways to balance the budget, to remain dedicated to the priorities of their community, to weather continued economic uncertainty, and to strive for innovation and not hold tight to the status quo.  How did they do it?

Shifting the Conversation to Policy

Remarkably, NLC’s report highlights strategies that so many of our communities have identified through the “new lens” of Priority Based Budgeting.

Take for example, Douglas County, Nevada who most recently reported on their progress in the "Financial State of the County" presentation. Fresh off the County's recent bond rating upgrade (thanks in part to the implementation of Priority Based Budgeting), the County has also been successful in implementing significant cost saving changes. These Priority Based Budgeting Outcomes To Date include:

• Elimination of Home Occupation Permits
• Elimination of Notary Services
• Reorganization of Finance Department
• Evaluating other department reorganizations
• Review of DMV Services at Lake Tahoe
• Evaluating Utility Billing Improvements

Just as NLC’s communities focused on the “financial policy issues” that drive long-term financial sustainability, so did Douglas County in the context of the Priority Based Budgeting model. They organized this vision around four key policy areas that were particularly insightful to them:

1. Invest in priorities as established by Board and public            
2. Continually improve efficiency and cost-effective services
3. Recover costs within programs
4. Pursue alternative service providers/regional collaboration

Cincinnati, Ohio’s Policy Direction

The City of Cincinnati, Ohio has released their 2013 Recommended Budget, addressing a $34 million deficit through cuts and cost shifting, savings, new revenues, embedded growth, and one-time sources.

The City’s use of Priority Based Budgeting (through their Priority Driven Budgeting initiative) establishes one of the greatest advancements in the use of the process to guide policy direction. The City’s response to Council’s policy direction provides one of the most comprehensive evaluations of city services across the entire organization.

Many organizations have approached us with a strong desire to bring their elected officials into a constructive and transparent discussion about the budget – Cincinnati has set the bar high in this respect. In the most direct way possible, the City used Priority Based Budgeting to guide policy-oriented discussions.  One of the benefits of the process is that it creates specific roles for elected officials to participate and succeed. When elected officials can focus on key policy questions that impact resource allocation, when they’re provided input and transparency in the way their policy questions are answered, and when they can make decisions based on policy impacts, then they’ve played a successful role in budgeting.

(Click here to see the detailed policy direction from City Council, as well as staff’s response, using Priority Driven Budgeting)

In June, the City Council received the results of the Priority-Driven Budgeting initiative and provided this budget policy motion with direction for formulating the 2013/2014 Operating Budget: “That the Administration construct a budget based on the following factors:

Use the information from the Priority-Driven Budget process to:

1.     Recommend elimination or reduction of functions based upon whether other organizations or entities are serving the same populations or providing the same function. If this is the case, the administration should outline a method of transitioning individuals to the other services or programs.

2.     Recommend changes to mandated programs that exceed the minimum requirements of the mandate.

3.     Identify functions that can be shared with other political jurisdictions.

4.     Identify functions that, rather than eliminate them, can be made self sufficient through the establishment of a fee structure.”

The Diagnostic Tool provided data to start discussions about the programs and services we provide to help the City analyze programs and services for cost savings, revenue enhancements and budget reductions. All of the analysis conducted allowed the City to more strategically allocate resources, and provide citizens more transparency, as well as a clearer understanding of the budget decision as we move forward.

While it is the first year Cincinnati has engaged in priority-driven budgeting to this extent, it provides a foundation for examining the services and programs the City provides that are important to the people the City serves.

Click here to see a detailed program listing – the budget status of every City Program in PBB terms: the status of each program in terms of which are increased, decreased, receive no funding change, become reorganized, or are under review.

Thanks again to the work of the National League of Cities, and for giving us inspiration to share the findings in our work that coincide so perfectly with the keys from their research.