Priority Driven Budgeting Joseph Tramontana

Priority Driven Budgeting Joseph Tramontana

Joseph Tramontana discusses the Priority Driven Budget Process

This post discusses the value of a priority driven budget process. Most local governments use a budget known as incremental budgeting. This is where current year’s spending dictates the following years budget. In most cases the government’s budget process is based on previous year’s revenue. The incremental budgeting approach is widespread and can be effective during stable times.The problem with incremental budgeting is that it is not effective when revenues are flat or declining. What is also problematic are rising health care and pension expenses. State Assistance has also been limited or declining over the last decade, sometimes unexpectedly. States have their own revenue crisis which causes detrimental effects at the local level. Local government also have spending caps and property tax caps they have to contend with as well. This is why we need to be open to budgeting alternatives.

Priority-driven budgeting is a strategic alternative to incremental budgeting. Priority budgeting is a philosophical method of how to use limited resources. Priority-driven budgeting means resources are allocated according to how effective a program achieves its objectives. These items are based on the perceived value to the community. The priority-driven approach identifies its most important goals and priorities and ranks them. Feedback from the community, staff and governing body is vital to success. Funding is allocated based on how important and effective the program actually is. Local Governments have the flexibility to customize budgeting and adapt it to the community’s needs. Elected officials represent the community and their input is essential to the budget making process. There are essential concepts and steps, including examples, of how to customize Budgets to meet Local Government needs. Priority based budgeting does not have to be adopted full scale even adopting certain elements can be beneficial. The collaboration with elected officials and the community is a process that offers significant benefits. The first step in developing a priority driven budget is to focus on the revenue side. Generally, with incremental budgeting, government looks at how much funding is required to support existing programs. A priority driven budget is different because its main focus is available revenue. Then you prioritize the available funds and direct it to the existing programs that actually work. The key takeaway is to spend within your means and direct the funding to what is actually effective.

Joseph Tramontana Priority Driven Budgeting

Joseph Tramontana discusses priority driven budgeting – Revenue

The organization needs to identify both ongoing revenues and one-time revenues. Examples of ongoing revenues include local property taxes and State Assistance. Local property taxes are pretty easy to estimate. They are either going to be flat or increase by a pre-determined number. For example, in New Jersey, you cannot raise property taxes by more than 2% over last year, which is known as a property tax “cap”. In this example if you collected $100,000 in local property taxes last year, then you can expect to collect a maximum of $102,000 next year. State Aid is another ongoing revenue, but is not as predictable because you are at the whim of State Government. Many government organizations assume at least flat state assistance, but this is becoming a dangerous assumption. A detailed look at the state’s economy and discussions with the State Treasurer’s office are both prudent moves. An example of a one-time revenue is a federal grant that clearly spells out that the grant will not be ongoing. Therefore, you would consider purchases in your budget that do not have ongoing expenses such as technology. Spending one-time revenue source on additional employees would not be advisable, because this is an ongoing expense. Always remember that revenue is the public’s money, not the governments. David Osborne coined a phrase called the Price of Government. The government takes resources from the citizens, and provides services to the community. The total revenue received by the government is called the “price of government” because it is the community’s money. Priority driven budgets are developed around the organization’s and public’s priorities. These priorities explain the purpose of the organization and should be timeless lasting for many years. Different than normal mission statements, these priorities are discussed in terms of results or outcomes that are valuable to the public.

Joseph Tramontana Priority Driven Budgeting

Joseph Tramontana discusses priority driven budgeting.

The outcomes should be measurable, but do not have to state how they will be achieved. If you have an existing strategic plan, it can be adjusted to reflect the priorities that are valuable to the public. If you do not have one, it can be an excellent starting point. Involving elected officials and citizens are essential for the success of priority-driven budgets. Elected officials will have to approve budgets during difficult fiscal times. If they are part of the process, they will be more amenable to approving future budgets. The same can be said for citizen input. If they are involved in setting priorities, then they will be more sympathetic to increased expenditures. The process of citizen involvement should be extensive. Some methods of seeking input should include online surveys and setting up survey booths for high traffic areas. A consultant can be employed to write the survey to make sure the questions are deep and meaningful. Questions need to be asked like; “What services does the Town need to provide and which ones take priority? Superior government services at a reasonable cost is a good place to start the process.
Here are some examples:

• Provide all residents with an excellent public works program that keeps our community clean and vibrant.
• Provide a cost effective Public Safety program that assures residents are safe and protected.
• Continually seek and support technological innovation that can provide routine government processes in a cost effective manner.

The key concepts to keep in mind are feedback, priorities, and results. The feedback from elected officials and citizens determine the priorities, and then you tie results into the agreed upon priorities. The component missing from most budget processes are results and isn’t that the main goal? Budget results need to be defined precisely. The budget process cannot be effective if it is not relevant to the citizens. Providing programs that achieve defined outcomes is the ultimate goal. The problem with analyzing results is that defining them can be broad. What results mean for each town may be ambiguous.

For example, every town has a goal of providing a safe community. Most leaders will tell you that the term is obvious and specific. But it may not be as obvious as you think. Let us look at this a bit deeper. A community near San Francisco may define public safety by dealing with earthquakes. A town in the middle of Florida or Oklahoma would have different priorities. The identity of your community and specific results are what is important. A powerful method for defining results is called Strategy Mapping. Visual mapping is a tool that takes a complicated objective and creates a visual map on how to achieve your goal. Mapping is a highly effective way to gain clarity about what it is you’re attempting to accomplish by seeing the results visually. These strategy maps should be developed with input from all levels of staff and a citizen’s committee. Citizens or shareholders have a great expectation about programs and services. Strategy maps can give residents an accurate account of how these programs and results are meeting objectives. Mapping establishes a shared foundation for prioritizing programs and services. Priorities need to be defined by the community. The best way to achieve this is to reach out to local groups, the town’s web page, and to hold town hall meetings.

Finally, when analyzing results consider the most important ones. Evaluating results will impact how programs are funded and valued. One way is to have elected officials, citizens, or staff participate in ranking results. This ranking exercise can be useful during the budget planning process as a tool to see what programs are working and which ones are not. A local government can use priority based budgeting as their main budgeting tool or use elements of it to decide what is working and what is not. It can help regain focus on what it is we need to achieve and frankly everyone can benefit from that.

Joseph J Tramontana