"Priority-driven-budgeting is a common sense, strategic
alternative to budgeting." - South Jordan City Mayor David Alvord
ELGL and CPBB are proud to partner in an innovative webinar
training series, "I Want to be Your Analyst." This series,
consisting of a monthly blog and training webinar, is intended to provide case
studies, introductions to unique analytic tools, and expertise into the hands
of all local government (emerging) leaders.
This ten part series will pair proven CPBB concepts and tools with one of our
partner local government communities who are actively implementing (or have
implemented) our innovative trends. This will provide key insights into how
communities actually utilize these tools.
The January Training Webinar
With I Want to be Your Analyst, local government professionals will gain an
introduction and key insights into the CPBB war chest of cutting-edge
online tools. On January 13th at noon PST, join ELGL, CPBB and South Jordan City Executive Leadership, including City Manager Gary Whatcott, CFO Sunil Naidu and Budget Director Don Tingey as we explore and
discuss Priority Based Budgeting (PBB). In this training webinar, we'll specifically discuss:
What is Priority Based Budgeting
How to implement PBB
Advanced implementation (Online Priority Based Budgeting)
Successes and challenges in how South Jordan City implemented PBB
Some of you may know that in
preparing for the 2015-2016 fiscal year budget the City Council, City
Manager, senior staff and I engaged in a new priorities based budgeting
format. Priority-driven-budgeting is a common sense, strategic
alternative to budgeting. The philosophy of priority driven budgeting is
that resources should be allocated according to how effectively a
program or service achieves the goals and objectives that are of
greatest value to the community. As those needs are identified and
prioritized through discussion, a very clear picture of where to
allocate resources emerges. As a result the City will once again have a
balanced budget in 2015-2016.
One of the budget
priorities for me since I became interested in local government has
been seeing that taxes reflect our actual needs. I am pleased to
announce that after working with our City Council and city staff, that
the 2015-2016 budget will include further reductions in tax revenue,
meaning that the City will be taking less taxes. This accomplishment
could not have happened without the cooperation of our excellent staff
and employees.
Priority-based budgeting also
requires elected officials to make fiscal decisions which benefit the
long term financial health of the City. To that end, the City will be
paying off $4,000,000 in debt from the bond used to purchase the
Mulligan’s property. Reducing our debts improves our already well
regarded credit ratings and improves the overall fiscal health of South
Jordan.
Purpose of Priority Based Budgeting
South
Jordan’s residents and elected officials disagree about a wide variety
of political positions. That’s part of the political freedoms we share
in the United States. Our shared commitment to efficient governance,
however, will focus all of us on working together to find solutions that
benefit our common good. Thank you for the privilege of serving as your
Mayor. It’s great to live in South Jordan!
Webinar Training Prep
Priority
Based Budgeting is a unique and innovative approach being used by local
governments across the Country to match available resources with community
priorities, provide information to elected officials that lead to better
informed decisions, meaningfully engage citizens in the budgeting process and,
finally, escape the traditional routine of basing "new" budgets on
revisions to the "old" budget. This holistic approach helps to
provide elected officials and other decision-makers with a "new lens"
through which to frame better-informed financial and budgeting decisions and
helps ensure that a community is able to identify and preserve those programs
and services that are most highly valued.
The underlying philosophy of priority based budgeting is
about how a government entity should invest resources to meet its stated
objectives. It helps us to better articulate why the services we offer exist,
what price we pay for them, and, consequently, what value they offer citizens.
The principles associated with this philosophy of priority based budgeting
are:
• Prioritize Services. Priority based
budgeting evaluates the relative importance of individual programs and services
rather than entire departments. It is distinguished by prioritizing the
services a government provides, one versus another.
• Do the Important Things Well.Cut Back
on the Rest. In a time of revenue decline, a traditional budget
process often attempts to continue funding all the same programs it funded last
year, albeit at a reduced level (e.g. across-the-board budget cuts).
Priority based budgeting identifies the services that offer the highest value
and continues to provide funding for them, while reducing service levels,
divesting, or potentially eliminating lower value services.
• Question Past Patterns of Spending. An
incremental budget process doesn’t seriously question the spending decisions
made in years past. Priority based budgeting puts all the money on the table
to encourage more creative conversations about services.
• Spend Within the Organization’s Means. Priority based
budgeting starts with the revenue available to the government, rather than last
year’s expenditures, as the basis for decision making.
• Know the True Cost of Doing Business. Focusing
on the full costs of programs ensures that funding decisions are based on the
true cost of providing a service.
• Provide Transparency of Community Priorities. When
budget decisions are based on a well-defined set of community priorities, the
government’s aims are not left open to interpretation.
• Provide Transparency of Service Impact. In
traditional budgets, it is often not entirely clear how funded services make a
real difference in the lives of citizens. Under priority based budgeting, the
focus is on the results the service produces for achieving community
priorities.
• Demand Accountability for Results. Traditional
budgets focus on accountability for staying within spending limits. Beyond
this, priority based budgeting demands accountability for results that were
the basis for a service’s budget allocation.
Priority Based Budgeting has now been successfully implemented in over 100 local government
communities coast-to-coast.
We take pride in our partnership with these CPBB communities in an
effort to improve a community's fiscal health for the benefit of the
entire community.
The core CPBB concepts of Fiscal Health and Wellness through Priority Based Budgeting
are truly inspiring a new wave of municipal fiscal stewardship. A
complete revolution in how local governments utilize their limited
resources to the benefit of the communities they serve.
This "New Wave," the fundamental paradigm shift in municipal financial stewardship,
must be accepted if local governments are to be financially viable and
able to create the types of communities their citizens are proud to call
home.
Local government communities must consider a completely different perspective.
In order to achieve success and accept the challenges that are ahead, we
must see more clearly how to manage, use, and optimize resources in a
much different way than has been done in the past.
This new environment
demands a new (economic) vision of the future. And that vision is created through priority based budgeting.
Register here!January 13that noon PST, join ELGL, CPBB
and South Jordan City Executive Leadership
as we explore and discuss priority based budgeting, the power of the online priority based budgeting tools and a case study of PBB implementation from South Jordan City, Utah!
"The Priority Based Budgeting process is the tool which injects and integrates our strategic planning into our everyday activities." - Kalamazoo City Manager James Ritsema
In March of this year, we wrote about two organizations who were empowering citizens with civic engagement through priority based budgeting. One of these organizations we wrote about was the City of Kalamazoo, Michigan.
We wrote, At the Center for Priority Based Budgeting (CPBB),
we're constantly impressed and amazed at just how innovative local
government communities can be. Through our concepts of Fiscal Health and
Wellness through Priority Based Budgeting, we've partnered with
communities to define exactly what the community is in business to
achieve and then prioritize scarce resources (tax dollars) to meet those
community results. This work has allowed nearly 100 cities, counties,
school districts and special districts to completely redefine their
community.
When implementing the priority based budgeting (PBB) process, civic
leaders have the option of engaging residents in an effort to define the
results the community wishes to achieve.... or not. The citizen
engagement component to this process can be time consuming and
challenging, but often lead to a more robust set of community results
that are fully supported by the community residents.
The City of Kalamazoo, Michigan,
is deep in the process of implementing priority based budgeting while
engaging with citizens in an effort to collaboratively define the future
of the community. This program, Imagine Kalamazoo, is the city's citizen engagement platform where citizens can weigh in and help define the future of Kalamazoo.
Priority Based Budgeting in Kalamazoo 2.0
Just last week, the City of Kalamazoo released their proposed budget for fiscal year 2016-2017. This is the first budget for the city since implementing priority based budgeting (Kalamazoo implemented PBB in 2015 after their budget was developed and approved).
In the Fiscal Year 2016 - 2017 Proposed Budget Transmittal Letter, City Manager James Ritsema
writes: "Priority-Based Budgeting (PBB): the administration has instituted
Priority-Based Budgeting for the first time in the Proposed Fiscal Year
2016 - 17 Budget. This will evolve the way that we see, think and “touch” the City’s
budget. Instead of abstract line items, compartmentalized, bureau-centric thinking, and
incremental budget cuts, PBB provides a tool that refocuses decision-making around
well-defined programs, which are prioritized to maximize scarce resources towards achieving
the Community’s desired and required results, including a safe community, effective
transportation systems, environmental stewardship, and so on.
PBB also involves continuous improvement in efficiencies by
way of new technologies, better organization, and leveraging partnerships or handing
off functions to other overlapping entities, in order to lower costs and improve
outcomes. In 2016, the City will be identifying meaningful and accurate measurements to ensure that high-priority programs are achieving results. The City is retasking an
analyst position in the Management Services Department to serve as our new Budget
Manager, a position which will provide transformational leadership to fully
realize the promise of Priority Based Budgeting, as well as promoting best
practices in citywide budgeting."
City Manager Ritsema also discusses how to bring "visions and values of our organizational leadership and community into focus in the form of strategic plans." The following is quoted from the "From a "Priority-Driven" to "Vision-Driven" Trajectory" section of his Proposed Budget Transmittal Letter.
From a “Priorities-Driven” to “Vision-Driven” Trajectory
Our budget is the natural result of continued negotiation
between the expected role that the City plays in promoting and preserving the
quality of life that our citizens desire and deserve, in the context of the
realities presented by our economic and cultural environment. In order that our
activities remain fresh and relevant, and our budgeting process propels
continuous improvement in our outcomes, we need to constantly reground
ourselves in the vision and values of our organizational leadership and the
community at large. The City utilizes a number of collaborative bodies and
processes to bring these visions into focus in the form of strategic plans.
In 2016, the City will be engaging all of its planning
resources to “reset” the City’s vision under the auspices of the Imagine
Kalamazoo 2025 project. As the name suggests, the result of this process will
be a new shared community vision, expressed through the many strategic plans
that the above graphic depicts.
This upcoming year presents us with an opportunity to move
beyond transitional management tactics and fully engage the organization and
the environment with our new strategic tools. This includes identifying
sustainable revenue for ongoing operations and programs, building on the high-performance organization model that is sparked with innovation and fueled
by an ethos of continuous improvement. The Priority Based Budgeting process is
the tool which injects and integrates our strategic planning into our everyday
activities, by aligning the allocation of resources with the vision and values of the Imagine Kalamazoo 2025 initiative.
One of the things that stands out to us about Kalamazoo's implementation is their complete dedication to infusing PBB into the culture of the City, and the fabric of the community. When we first met their implementation team, City Manager Jim Ritsema brought his senior leadership team along with City Council members in a passenger van, traveling all the way to Ann Arbor for a Michigan Municipal League day-long training. From that moment, it was clear that their dedication level was extremely high, and so were there expectations for how this process could help transform the community.
Led by Laura Lam, Community Planning and Development Director, Patsy Moore, Deputy City Manager, and Jeff Chamberlain, Deputy City Manager, the City successfully implemented one of the most comprehensive and extensive citizen engagement initiatives associated with PBB. Chief Financial Officer Tom Skrobola led the City's Fiscal Health modeling initiative, and then turned around to lead the PBB process. And all throughout the process, the City's elected officials were involved and engaged, participating in the strategy and guidance of the process.
Hats off to Kalamazoo for all that they endeavored to achieve, and their dramatic success in executing such a comprehensive implementation in a single year. We at CPBB are proud to be associated with your tremendous leadership in local government!
Keep an eye on the CPBB blog for further updates. Sign-up for our social media pages so you stay connected with TEAM CPBB!
"Connecting costs
and outcomes associated with specific services is critical to communicating
value to citizens."
"Program Budgeting is
at the forefront of GFOA's priorities right now!"
ELGL and CPBB are proud to partner in an innovative webinar
training series, "I Want to be Your Analyst." This series,
consisting of a monthly blog and training webinar, is intended to provide case
studies, introductions to unique analytic tools, and expertise into the hands
of all local government (emerging) leaders.
This ten part series will pair proven CPBB concepts and tools with one of our
partner local government communities who are actively implementing (or have
implemented) our innovative trends. This will provide key insights into how
communities actually utilize these tools.
The November Training Webinar
With I Want to be Your Analyst, local government professionals will gain an
introduction and key
insights into the CPBB war chest of cutting-edge
online tools. On November 18th at noon PST, join ELGL, CPBB and Senior Manager of Research Shayne Kavanagh with the Government Finance Officers Association (GFOA) as we explore and
discuss the concept of Program Costing. Register here!
It goes without saying that the vast majority of local government's No. 1
priority is to establish a vibrant and productive community by establishing and delivering
great results to its citizens. This outcome is typically met by efficient
resource utilization and delivering high-quality services that exceed citizen
expectations.
Sounds simple, right? But how exactly do you connect
available resources, costs, and outcomes associated with specific services to
communicating value (results) to citizens?
Does your local government specifically know, for example, the true cost of
your curbside recycling program (including all fees, rates and charges)? With
what data would you work with, if you were tasked with analyzing outsourcing
(or in-sourcing) vehicle maintenance? What if your organization was
approached with a proposal to consolidate inspections services with
another jurisdiction - what program data would you have on hand to
evaluate and execute the right decision?
Assuming detailed program-by-program level cost data actually exists within
your organization, where would you find it? In the budget, on a separate
spreadsheet in the Budget Director's or Mayor's office? And again assuming this
data exists, what else could you do with it?
Could youmake ready comparisons to other public-sector, or
private sector service providers (to evaluate the efficiency or the appropriate
sourcing of your programs); could you bring departments into the process of
understanding and communicating better what they do, and how much it costs, on
a program level; could you see clearly how your workforce is associated with
programs (do you have retirement eligible staff serving a particular program,
and are you aware of how you'll address succession planning?, for example); and
will it allow you to transition your approach (or the department's approach)
from line-item budgeting to program budgeting?
Data-Focused Decisions
The truth is that very few governments are able to meet their No. 1
priority because they don't have the hard data required to make smart and
transparent decisions throughout their organization.
Nor do they have the internal structure, a fiscal
command center, where the critical data flows together and provides a visual
platform for intelligent, transparent, data-focused decisions to be made.
To make smart, proactive decisions, municipal leaders need a fiscal
command center for data-creation, data analytics and data-driven decision
making. This command center presents an intuitive user-interface to identify
the programs and services your organization provides, and translates your
line-item budget into a program budget. The development of a program inventory
and program costs is the foundational data-set to bring clarity and
understanding, data-focused decision-making, in a time when it’s never been so
crucial. And it’s never before been so easy to do…
As GFOA’s Shayne Kavanagh enthusiastically relayed to us, “program
costing is at the forefront of GFOA’s priorities right now” – and CPBB has
been doing Program Inventory and Program Costing in nearly 100 organizations
since 2009!
According to GFOA: “Program budgeting is an underlying assumption to many
of GFOA's budgeting best practices, and being able to connect costs and
outcomes associated with specific services is critical to communicating value
to citizens. However, very few governments actually do this fundamental piece
well for a number of reasons, including poor definition of programs and
technical challenges in accounting for programs.”
Make no mistake, program costing is not easy! As so many leaders know, engaging
in the exercise itself is often the result of controversial questions around
“sourcing”, assessing fees and charges as they measure against the “true cost
of doing business”, privatization, running government “like a business”,
public-private partnerships, efficiency analysis and financial transparency.
And yet, therein lay the most exciting realization! Just as GFOA has
identified: if you can measure Program Costs, you can answer these
questions, and so many more!
The only way to get to the answer of questions like "can we do this
program more efficiently," or "are we the best source to provide this
service," or "are we recovering the costs for providing this service,
both direct and indirect costs" requires a complete understanding of
what the program is, and how much it costs.
The key is a user-friendly, web-based Program Inventory & Program Costing
user-interface. It links directly with your line-item budget, translates your
line-item budget into a program budget, flows through your payroll data, and
generates easy to update Program Costs. Your worksheets are protected and
stored on the cloud, providing web accessibility to your organization!
We at the CPBB have seen it again and again – the way to diffuse politics, to
temper emotionally-driven decision making in favor of data-focused decision
making, can come about with great data. And Program Costing is a
center-piece to data-driven decision making!
We at the CPBB have spent our careers delving into the kinds
of controversial discussions that have, until now, polarized politicians – whether
to outsource, to insource, to raise fees, to lower taxes, to privatize or
partner or divest the organization of a service.
We’ve been attracted to these contentious debates NOT because we’re crazy, but
because the answers to these questions are so important to get RIGHT! Or, to
put it another way, CPBB’s founders designed tools specifically to resolve
these kinds of debates, because throughout our careers, like so many of you, we
experienced the emotional struggles and misunderstandings that accompany
data-less debate!
“Painless program costing” presents an intuitive user-interface to identify
the programs and services your organization provides, and translate your
line-item budget into a program budget. The development of a program
inventory and program costs is the foundational data-set to bring clarity and
understanding, data-focused decision-making in a time when it’s never been so
crucial. And it’s never before been so easy to do…
Introducing CPBB’s web-based Program Inventory and
Program Costing Tool!
We created this innovative new web tool because our partner organizations
wanted an easy to use, web-based tool that would easily connect to your
financial system and give you:
a tool
that allows you to evaluate the fees, rates and charges that you have on a
program-by-program basis,
a tool
that allows you to make ready comparisons to other public-sector, or
private sector service providers, to the extent that you want to evaluate
the efficiency or the appropriate sourcing of your programs,
a tool
that brings departments into the process of understanding and
communicating better what they do, and how much it costs, on a program
level,
a tool
that can allow you to see clearly how your workforce is associated with
programs (do you have retirement eligible staff serving a particular
program, and are you aware of how you'll address succession planning?, for
example),
and
ultimately a tool that helps transition your approach (or the department's
approach) from line-item budgeting to program budgeting
The GFOA Best Practice for "Measuring the
the Full Cost of Government Service" was created over a decade ago...
At a time when this data-driven practice, this "evolution" from
line-item budgeting is so valuable, so vital to our community's success, we
wanted a Tool to make this far easier. We wanted to make it accessible. We
wanted it in everybody's hands!
Register here!November 18that noon PST, join ELGL, CPBB
and GFOA Senior Manager of Research Shayne Kavanagh
as we explore and discuss the concept of program costing and the program cost analyzer tool!
"There are many reasons to consider adopting program budgeting, but perhaps the most important is its ability to create a more transparent budget. A program budget shows exactly what the government does and how much it costs." This quote is from an article recently published in GFOA's October 2015 Government Finance Review authored by CPBB's Chris Fabian and Jon Johnson in addition to GFOA's Shayne Kavanagh.
Program budgeting has
long been a cornerstone of best practices in public budgeting.
Simply put, a program budget organizes a budget into service areas, rather than
just, departments, objects-of-expenditure, and line items. A program budget is
more meaningful to the governing board and the public because programs are
directly relevant to how they experience public services – budget discussions
about police patrols and tree services are more meaningful than discussions
about salaries, benefit, commodity, and contractual service costs. Program
budgets also make trade-offs between different spending options clear. If the
budget for police patrols is to be increased, than a trade-off discussion about
resource reallocation could be approached (ie the budget of another program,
like tree services, could be proposed to offset the costs).Service goals and performance measures can
also be associated with programs, making for a much richer conversation about
the costs and benefits of different resource allocation strategies.
Given these merits, it’s
surprising that program budgeting is still not as commonplace as it should be. As of a 2011 survey, only about one-third of the winners of GFOA’s
Distinguished Budget Presentation Award used program budgeting.
It is safe to assume that program budgeting is even less common among other
local governments (although becoming more common among high performing local
governments).
So, why is program
budgeting not a common practice even if it is a best practice? Certainly, part
of the reason is that the increased clarity brought about by program budgeting
can also bring about increased conflict. When the tree service program budget
is reduced in favor or increasing the police patrol budget, the community’s
tree-aficionados will come to out to public meetings to make their displeasure
known. However, if only the salary line item in the police budget goes up and
the salary line item in the public works budget goes down, it may not draw the
same level of public attention. However, as budgets tighten, public skepticism
of government’s motivations increases, and the need for higher quality public
services goes up, obscuring tough decisions behind a veil of line items is no
longer a tenable strategy. Program budgeting is as needed as it ever was – in
fact, program budgeting is more needed than ever.
Program Budgeting 101: A "How to Guide"
Financial constraints have
forced many local governments to take a hard look at the services they offer. A
fundamental step is to develop an inventory all programs in order to clarify
the breadth of services it provides and, ideally, inform all stakeholders (i.e.
staff, elected officials, constituents) exactly what the organization “does”.How often do we engage in long and stressful
conversations about “line-items” or about a total department budget?Are these conversations as meaningful as they
could be if we were focused on individual programs?When we prioritize or when we have to “cut”,
discussions about which department is a priority or which line item to reduce
are sometimes subjective and circular (i.e. they just go “round and
round”).It is hard to gain agreement or
even consensus at these levels. When confronted with the question “Is Police
more important that Parks?” or “Is Public Works more important than the
Library?”, are those conversations productive?Do we all really know what “Public Works” is?The inventory provides the basis for better,
more meaningful, discussions about what services are more of a priority and how
to understand the budget at a “programmatic” level than just viewing it from
the line item or “org chart” perspective.
But
what is a program?Programs are a set of related activities or tasks intended
to produce a desired result. The objective is to identify something that is in
between the “department or division” level and the “line item or task”
level.Think of a program inventory as a
menu of services.If you went to a
restaurant and the menu offered only “Entrees, Side Dishes and Beverages”, it
would be impossible to order a meal (like at the department or division
level)Similarly if the menu listed the
full recipes for everything (ingredients and all), it would be difficult to
order as well (perhaps like line items or tasks!)Is the Police Department or the Public Works
department “one thing”.Of course
not!Each offers a large variety of
programs and services that we don’t articular very clearly at all.While the staff in the department know what
they do, staff in other departments, elected officials and especially citizens
do not know or understand the number of things each department provides.
Here
are some things to consider when identifying programs
·Do you “advertise” you provide a service?
-if your webpage, departmental
brochures, telephone directory or other published materials represent you offer
a program, then it needs to be included in your program inventory.This is the first place to look when
preparing a list of programs.If you say
you do something, then it’s clearly something that needs to be listed
·Does someone “tell you” to provide the
service? -if there is a
legislative requirement mandated by a level of government “above you” or if
there is a section of your own code, local ordinance or an officially adopted
policy that states you have to provide a specific service, then this also
represents a program to be included in your program inventory.
·Is someone willing to pay a fee or offer a
grant to provide the service? -if the ultimate end user of a service or a granting agency is willing to
cover all or part of the cost to provide a program, then this specific service
should be established as a “stand-alone” program in your program inventory.
·Are you offering the service to a particular
group or demographic?- if the
program is meant to serve or benefit or specific constituency (residents,
businesses, visitors, neighborhoods, etc.) or population (preschoolers; youth,
adults, seniors, non-residents, etc.) then it would be beneficial to list these
types of things as “stand-alone” programs
·Where to “to what” are you providing the
service?- does the service
directly impact a building or a vehicle; a park or a pool; a street or a storm
sewer; an outdoor trail or an indoor recreation center? For a better understanding of the variety and
complexity of the services offered, being specific about the type of asset (as
opposed to the generic term “infrastructure”) or the where the activity takes
place (air quality is above ground; sewer line repair is below ground; median
maintenance is on the ground; trail maintenance is outdoors; exercise classes
are indoors, etc.)
·What “type” of service is being provided? –
differentiated between activities that are “preventative” or “proactive” verses
“responsive” or “reactive” could be helpful in comprehended the nature of the
program.Fire Safety Education or
Community Policing are more “preventative” and are offered for a different
reason that “Fire Suppression” or “Patrol Response to Emergency Calls” which
are more about “reactive” and protective.
·Is there a public agency or a private sector
business that does something similar?-to respond to questions about partnerships, shared services, outsourcing
or privatization, it’s critical we can articulate where services are the same
and where we are not comparing “apples to apples”.Making sure programs are clearly identified
can better ensure these conversations are supported with objective data and not
subjective assumptions.
In order to translate your line item into an
effective program budget, the first tip is to characterize and categorize the
various types of line items in your budget, and decide which of these costs are
best expressed in terms of ongoing programs and services.
·Tip #1: Distinguish between “ongoing
(operational)” costs, and “one-time” costs – as you consider how you want to frame conversations using program
budgets rather than line-item budgets, it’s helpful to portray your
organization’s ongoing program costs based on your organization’s ongoing,
operational costs (salaries, benefits, insurance, office supplies, materials, etc.).
While programs absolutely incur one-time costs (capital improvements, unique projects,
contracted services), differentiating the one-time, more sporadic costs will
help you create program costs that have an ongoing, reliable base cost, with
the potential for fluctuations of a one-time nature. Especially as your
organization uses program budgeting for the purposes of discussing ongoing
efficiency, or sourcing comparisons, be clear what are the ongoing costs of a
program as distinct from the one-time costs.
With your line items categorized as either
ongoing or one-time in nature, the second tip is to organize your costs further
in terms of “personnel-related” versus “non-personnel related” costs. An easy
way to imagine this is to consider any cost that can be associated with a
person, or a position – these are “personnel-related” costs. Everything else
that can’t be associated with a person or a position is non-personnel.
·Tip #2: Distinguish between “personnel” and
“non-personnel” costs (and
associate personnel costs with the people and positions within your
organization)– the purpose of this step is to develop “fully-loaded personnel
costs” for each person or position within your organization. Sometimes
organizations have compiled this information within their Human Resources
department for the purposes of compensation studies, or to show employees how
they are valued in the organization beyond their salaries. As you associate
every personnel-related cost to an actual person or position, you have taken
the biggest step in program budgeting (as most public service organizations,
being service driven, are driven mostly by the costs of personnel).
With the program inventory that you’ve
created, the next task is simple: associate each person (or position) with the
programs they support. Recognizing that each person may support more than a
single program through the year, allow for an individual to be spread to
multiple programs.
·Tip 3: Associate people (positions) with the
programs they serve - How do
you allocate people to one or more programs? Some organizations support a
culture where employees track their working hours associated with the programs
they serve. In many organizations that do not track their time, consider
leading employees through a simple exercise in which, given the programs
identified in their program inventory, on a percentage basis, how would they
answer the following questions:
oHow much
of your time, during a given week do you spend on these programs?
oHow much
of your time, during a given month do you spend on these programs?
oOn
average, during a given year, how much of your time is spent on these programs?
oAre any
of the programs you serve impacted by seasonal, or other sporadic issues?
And finally, with all personnel costs now
associated with programs, the only costs you have remaining to allocate are
your non-personnel costs. With this final tip, you will have successfully
translated your line-item budget to a program budget!
·Tip #4: Associate (allocate) non-personnel
costs to programs – in many
organizations, since personnel related costs are often the highest percentage
of a program’s cost, it isn’t necessary to be overly laborious in the approach
to allocating non-personnel related costs. Be reasonable. Be accurate. Be as
precise as possible. But recognize there is a point of limiting return, and
less value in spending too much time considering how to cost-allocate a less
costly, non-personnel line item from your budget. And at the same time,
consider appropriate allocation methodologies for the line-item cost you are
considering. Is it appropriate to allocate evenly based on the number of FTE in
a program? Is it appropriate to directly allocate certain costs to certain
programs? These are important questions, and cost-allocation methodology is an
important consideration.
At this point, your organization will have
successfully, accurately translated your line-item budget into a program
budget. But don’t stop here. Up until this point, we’ve solely focused on the
costing side of the equation; it is here, with the “true cost of doing
business” established, that it is most interesting to explore revenues and how
programs recover their costs through fees, charges for service and grants. This
is what we refer to as Program Revenue.
·Tip #5: Associate “program revenues” with
programs – traditionally,
programs offered by the organization are funded through the general revenue
streams being collected from entire community that the agency serves.Property
Taxes, Sales Taxes Franchise Fees, Fines, and Investment Earnings are all examples of revenue sources that the
legislative body allocates to pay for the services being provided.There are instances, however, where there is
a revenue source that is specifically meant to offset the cost of offering a
particular program – these are considered to be “program revenues”.In an era where we are eager to seek more
diversified sources of revenue, Charges
and Fees for Service as well as Grants
are examples of ways we can have the specific user or beneficiary of the
service help defray the cost of provided it.It’s important that there is a clear understanding of those programs for
which general government revenues are not used to fund the program but that
there is a specific revenue stream that partially or fully offsets the cost to
provide it. When developing the budget, it needs to be clear that making
chances to programs that have a specially associated revenue stream will
warrant a different type of discussion.Reducing
the costs of a program with a fee or grant, won’t impact the total budget- if the program goes away so do the revenues.
When developing the costs of a program, it is essential that any revenue source
that is meant to recover the costs of that program is clearly identified
Applications
– With Program Budgeting, a Whole World of Opportunity Opens up
Program budgeting
is an underlying assumption to many of GFOA's budgeting best practices, and
being able to connect costs and outcomes associated with specific services is
critical to communicating value to citizens.
As
we’ve outlined in this article, while program budgeting methodology may not be
so entirely daunting, the kinds of conversations central to program budgeting,
can be! As so many leaders know, engaging in the exercise itself is often the
result of controversial questions around “sourcing”, assessing fees and charges
as they measure against the “true cost of doing business”, privatization,
running government “like a business”, public-private partnerships, efficiency
analysis and financial transparency.
And
yet, therein lay the most exciting realization! If you can measure Program
costs, you can answer these questions.
Case Study #1:Program
Budgeting in the City of Cincinnati: Confronted with the 'new normal' of
flat or declining revenues, spiraling health care and pension costs, persistent
structural imbalances, and a $34 million deficit, the City of Cincinnati
embarked upon Priority Based Budgeting an alternative to the traditional
incremental budgeting approach that automatically makes this year's budget the
basis for next year's spending plan. A primary goal of the process was to to
engage a large and diverse segment of the community, creating an open and
transparent window into every program and service offered by the City, a
thorough description of each service, and most interestingly, complete openness
as to the cost of each program. The City’s elected officials held to the belief
that the very legitimacy of their plan to identify $34 million worth of
savings, depended on an authentic attempt to offer citizens a completely clear
perspective on how resources were currently allocated. Ultimately, the City
identified over 500 individual programs, totaling $972million dollars. And to
achieve their objective of transparency, the City posted their Program
Inventory, complete with Program Costs on the City’s website and in their
budget document (the
complete program inventory is accessible here). The resounding response
from citizens was that they’d never been given such access to program-level
data, thus fulfilling the City’s objective of true transparency.
Case Study #2:Program Budgeting in
the City of Shawnee, Kansas: A comprehensive review of existing services,
or ‘programs’, was conducted in the City of Shawnee, Kansas, including
allocating costs to each Program (based on the 2014 Budget). The City launched
into this effort (in conjunction with a Priority Based Budgeting process) to
reassess spending, and ensure sound, long-term funding decisions – to view a
list and description of each city program, please visit the City’s Program
Inventory page. As in Cincinnati, city leaders were intent on extending
information to citizens to open up a dialogue about the full breadth and scope
of services offered, and the cost of these services, and built an interactive
online tool to allow citizens to drill-down into each of the City’s departments
to a division level, and ultimately down to a program level to see every
program offered.
Case Study #3:Program Budgeting in
Broward County, Florida: The largest full-service, fully accredited public
safety agency in the United States - the $700 million Broward County Sheriff’s
Office (BSO) in south Florida - provides full–time law enforcement services in
14 Broward County cities and towns.As
the local economy tightened, the leadership among several of the cities came together
to raise an important question: are we getting a fair deal for the services we
pay for from the County, or would we be better off forming our own local
law-enforcement agencies?
Program
Budgeting was key to this analysis. Both the County and the towns and cities
came to the table with a common objective to be fair, to transparently analyze
their service contract, and agreed to an approach to costing each program that
led to a decrease in the overall cost of service provided by the County, and
increased trust and satisfaction from the cities.
Conclusions
It’s
been demonstrated again and again – the way to diffuse politics, to temper emotionally
driven decision making in favor of data-focused decision making, can come about
with great, accurate data. Program
Budgeting is a centerpiece to data-driven decision making.Many of you have spent your careers delving
into the kinds of controversial discussions that have, until now, polarized decision-makers
– whether to
outsource, to insource, to raise fees, to lower taxes, to privatize or partner
or divest the organization of a service.
In
your field, we’re attracted to these contentious debates NOT because we’re
crazy, but because the answers to these questions are so important to get
RIGHT! Or, to put it another way, the authors of this article present
methodology and tools specifically to resolve these kinds of debates, because
throughout our careers, like so many of you, we experienced the emotional
struggles and misunderstandings that accompany data-less debate!
The
development of a program inventory and program costs is the foundational
data-set to bring clarity and understanding, data-focused decision-making in a
time when it’s never been so crucial.
There
are some clear objectives in undertaking the development of a program inventory
which always should be communicated clearly to the departments as develop these
listings. The major reasons for creating a comprehensive listing of all
services (both externally and internally focused) is that it:
·Offers a better understanding of“what we do” for staff, administration,
elected officials, citizens and other community stakeholders;
·Offers a
framework to better understand the types of resources needed to support the
things that we do
Offers a better way to evaluate the fees, rates
and charges that you assess on a program-by-program basis,
Offers a more reliable way to make ready
comparisons to other public-sector, or private sector service providers,
to the extent that you want to evaluate the efficiency or the appropriate
sourcing of your programs,
Offers a tool that allows you to see more clearly
how your workforce is associated with programs and integrate succession
planning more specifically in the budget process
·Offers a valuable tool to use when faced with
budgetary choices about how limited funds are to be allocated to provide
services
·And ultimately, program budgeting offers a way
to discuss the budget at a “programmatic” rather than a “line item” level.
The GFOA Best Practice for "Measuring the Full Cost of Government Service" was created over a decade ago... At a
time when this data-driven practice, this "evolution" from line-item
budgeting is so valuable, so vital to our community's success, let program
budgeting be the way to drive better resource allocation decisions in your
organization.
Keep an eye on the CPBB blog for further updates. Sign-up for our social media pages so you stay connected with TEAM CPBB!
Jon Johnson and Chris Fabian are pleased to share with you that the Center for Priority Based Budgeting officially opened its office on September 1, 2010, with its main objective being to “lead communities to Fiscal Health and Wellness.”
As most of you know, it was our desire from the very beginning of our partnership to create a not-for-profit environment that could support and sustain our work in not only providing advisory services to local governments across the country but also to find ways to continue our research efforts to better understand the fiscal conditions that are impacting local governments from coast to coast. Utilizing a business development technique found in the private sector, the Center was being “incubated” by another successful not-for-profit organization that also serves local governments. Graduating from the incubator in 2013, CPBB is now working with over 60 organizations who have implemented or are currently implementing the processes and tools of Fiscal Health and Priority Based Budgeting.
As before, we are striving to bring the principles of Fiscal Health and Wellness to all communities by teaching, coaching and guiding them in the development and implementation of our unique, creative and proven tools and techniques. We continue to improve upon our “Fiscal Health Diagnostic Tool”, which provides a quick assessment of any organization’s fiscal health status. We also continue to develop our “Resource Allocation Tool” which provides not only a mechanism to set target budgets based on our Priority Based Budgeting approach, but also serves as a way to depict how well any organization is aligning its resources with the programs and services that the community values. Our work has expanded to now include some interesting and successful citizen engagement opportunities with the communities we are partnering with in this work.
We have included our contact information below and hope that we can continue to reach out to those of you we have worked with in the past to further our research efforts as we continually strive to enhance the Priority Based Budgeting process as well as with the concepts of Fiscal Health and Wellness. We also hope to continue the conversation with those of you who have been following our work and share with you the stories of accomplishment and success from the organizations that have implemented Priority Based Budgeting. Please drop us a line anytime – we’re always glad to hear from you. In the meantime, please update your contact information and when you have the chance, check out our blog site to find out what we’ve been doing since our last conversation with you.
- September, 2007: Colorado 10-County Budget Consortium Annual Conference, Breckenridge, CO - "Rx for Fiscal Health - Alignment with Priorities"
- June, 2008: GFOA (Government Finance Officers Association) Annual Conference, Ft. Lauderdale, FL - "Planning for Financial Sustainability"
- July, 2008: National Association of Counties Annual Conference, Kansas City, MO -"Achieving Sustainable Fiscal Health & Wellness"
- August, 2008: ICMA Audio Conference, Golden, CO - "Achieving Fiscal Health: Strategies for Dealing with Fiscal Distress in Today's Economic Downturn"
- August, 2008: Alliance for Innovations Workshop, San Mateo County, CA - "Budgeting for Priorities - Achieving Fiscal Health & Wellness"
- September, 2008: GFOA Training Workshop, Sacramento, CA - "Fiscal First Aid: Achieving Financial Sustainability"
- September, 2008: Kansas GFOA Fall Conference, Overland Park, KS - "Planning for a Sustainable Financial Future"
- September, 2008: Colorado 10-County Budget Consortium Annual Conference, Beaver Creek, CO - "Budgeting for Priorities - Achieving Fiscal Health & Wellness" - October, 2008: GFOA Training Workshop, Providence RI - "Best Practices in Budgeting"
- October, 2008: Alliance for Innovations Workshop, Charlottesville, VA - "Achieving Fiscal Health & Wellness - Budgeting for Priorities"
- December, 2008: ICMA Audio Conference, Golden, CO -"Fiscal Distress: How to Diagnose the Cause and Identify the Right Solutions"
- January, 2009: GFOA Training Workshop, Newport Beach, CA - "Advanced Tools for Finance Officers: Long Term Financial Planning"
- April, 2009: ICMA Workshop, Belton, TX - "Rightsizing to Realities: Achieving Fiscal Health & Wellness (Prioritization)"
- April, 2009: GFOA Training Workshop, Columbus, OH - "Best Practices in Budgeting"
- May, 2009: ICMA Workshop, Monterey, CA - "Rightsizing to Realities: Achieving Fiscal Health & Wellness (Prioritization)"
- May, 2009: ICMA Audio Conference, Washington, DC - "The Promise of Fiscal Health & Wellness (Prioritization)"
- June, 2009: North Carolina Association of CPA's Local Government Conference, Greensboro, NC - "The Promise of Fiscal Health & Wellness (Prioritization)"
- June, 2009: North Carolina Assoc of CPA's Local Government Conference, New Bern, NC - "The Promise of Fiscal Health & Wellness (Prioritization)"
- June, 2009: GFOA Pre-Conference Workshop, Seattle, WA - "Fiscal First Aid: Budgeting Tactics for Bad Economic Times"
- June, 2009: GFOA Annual Conference, Seattle, WA - "The What's, Why's and How's Of Your Government's Fiscal Condition"
- July, 2009: IL-ICMA/IL GFOA Workshop, Naperville, IL - "Rightsizing to Realities: Achieving Fiscal Health & Wellness (Prioritization)"
- July, 2009: GFOA Training Workshop, Denver, CO -"Fiscal First Aid: Achieving Financial Sustainability"
- September, 2009: ICMA Annual Conference, Montreal, Quebec - "Managing Your Budget in Turbulent Times: An In-Dept Review of Fiscal Health & Wellness (Prioritization)"
- February, 2010: ICMA Audio Conference – “Achieving Fiscal Health & Wellness in the NEW NORMAL”
- February, 2010: Virginia Local Government Association (VLGMA) / University of Virginia / Alliance for Innovation, VLGMA Conference, Charlottesville, VA – “The Principles of Fiscal Health & Wellness (Prioritization)”
- April, 2010: Alliance for Innovation Audio Conference – “The Nuts and Bolts of Implementing Fiscal Health & Wellness”
- April, 2010: Presentation to Boulder Tomorrow – “Achieving R.O.I. in Government: How the City of Boulder is Using Priority Based Budgeting to Demonstrate Return on Taxpayer Dollars”
- May, 2010: ICMA Webinar – “Budgeting in the New Normal: Managing Your Budget in Turbulent Times”
- June, 2010: North Carolina Association of CPA's Local Government Conference, Greensboro, NC - "The Promise of Fiscal Health & Wellness (Prioritization)"
- June, 2010: North Carolina Assoc of CPA's Local Government Conference, New Bern, NC - "The Promise of Fiscal Health & Wellness (Prioritization)"
- August, 2010: Virginia Beach, Virginia Workshop – “Implementing Fiscal Health & Wellness”
- October, 2010: GFOA Audio Conference – “GFOA Best Budgeting Practices – Implementing Fiscal Health & Wellness to Achieve Financial Resiliency”
- November, 2010: ICMA Annual Conference, San Jose, CA – “Surviving and Thriving in the New Normal: How Organizations Implementing Fiscal Health & Wellness (Prioritization) Are Surviving These Times”
- January, 2011: GFOA Training Workshop, San Diego, CA – “GFOA Best Budgeting Practices – Implementing Fiscal Health & Wellness to Achieve Long-Term Financial Health and Resiliency”
- January, 2011: GFOA Training Workshop, San Diego, CA – “Tools of Financial Resiliency: Working with Elected Officials; Analyzing Fiscal Health; Engaging Citizens in the Budgeting Process; Implementing Internal Service Funds”
(UPCOMING) March, 2011: ICMA Webinar – “Getting Ready for the Budgeting Process: How to Use Priority Based Budgeting”
(UPCOMING) April, 2011: IL-ICMA/WI-ICMA/Alliance for Innovations Workshop, - “Achieving Fiscal Health & Wellness (Prioritization)"
(UPCOMING) April, 2011: ICMA Webinar – “Getting Ready for the Budgeting Process: Using the Fiscal Health Model to Diagnose and Treat the Causes of Fiscal Distress”
(UPCOMIONG) December, 2011: Colorado Government Finance Officer’s Association (CGFOA) Winter Conference – “Achieving Fiscal Health & Wellness (Prioritization)”