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A more transparent, collaborative and data-driven budget process can help municipalities implement real change.
Municipal budgeting processes have remained largely unchanged for decades, but that’s not because local government officials think the process works perfectly. Many suspect their budget process could be improved, but revamping long-established practices is never simple.
With the public’s satisfaction with government waning, it’s time to consider how budgeting can improve the public’s trust in municipalities, said Shayne Kavanagh, director of research for the Government Finance Officers Association. GFOA and its partners are working to better understand the municipal budgeting landscape and identify ways local governments can leverage best practices to build a modern, transparent and efficient budget process.
GFOA’s Rethinking Budgeting initiative “is responsive to what I would call this pervasive sense that our institutions need updating,” Kavanagh said.
For example, municipal budgeting processes traditionally use incremental budgeting, in which line items are adjusted, often based on the previous year’s spending.
“If historical precedent is your primary determinant of how much money is going to be spent on what, then that is backward-looking and not forward-looking, which I would submit to you is the antithesis of a strategic budget,” Kavanagh said. He added that focusing on line items related to day-to-day operations—like travel and supplies—can obscure big-picture missions and broader goals like improving public safety or affordable housing.
Traditional budgeting is often a “zero-sum” game, Kavanagh said, where for one department to receive more money, another would lose funding. This can create a competitive dynamic within governments and “encourages self-interested decision-making.”
To explore these weaknesses in the current system, GFOA worked with the community engagement and civic analytics company Polco to survey more than 200 government employees involved in the budget process—including city managers, county managers, budget directors and chief information officers—about their sentiments around current practices and what they considered barriers to change.
When asked about the quality of their current budget approaches, many respondents said they believe their processes do not successfully involve residents, incorporate their priorities or make it easy for them to understand the budget process.
Fewer than half of respondents said they believed residents were satisfied with the current budget process.
On the flip side, respondents said their budgeting processes effectively incorporate elected officials’ opinions and values, provide good value on municipal services and facilitate day-to-day operations management.
About one in four respondents rated their overall budget process as “excellent,” while most—63%—rated theirs as “good.”
There were a few common threads among those that ranked their budget process highly, said Polco Principal Research Strategist Michelle Kobayashi. Respondents who said that their processes focused on collaboration between departments and community engagement were more likely to report more positive feelings about their current methodologies. Data plays an important role too, Kobayashi said.
“The people who are more data driven, who included more data in their plans, [reported having] better budget processes,” she said, as did those whose organizations dedicated more resources to staff training and skills development.
The survey measured three characteristics of budget change readiness: culture, people and tools. When it comes to culture, more than 80% of respondents rated their organization's transparency with the public and internal stakeholders as “excellent” or “good.” The qualities ranking lowest included welcoming resident involvement in decision-making, being results focused and using a strategic plan to guide the work.
But cultural challenges remain. A quarter of respondents cited “entrenched thinking by long-time employees” as a major challenge, and just under half said the budget staff’s limited ability to influence organizational decision-making was another obstacle to change.
There are tech challenges, too. While many respondents felt there was interest in adopting new tools to improve budgeting practices, they thought their current systems were too inflexible to accommodate new technology. They also cited difficulties finding the resources needed to train staff on new applications.
Of the software that budget offices currently use, fewer than 20% of respondents reported using software specifically designed for strategic planning, performance measurement or resident engagement on the community priorities or the budget itself. More commonly, budget offices used a product to communicate budget information to residents, according to the survey.
While there are many challenges to revamping local budget processes, there are also opportunities to make these systems work better for everybody, Kavanagh said.
“Rather than looking at it as a win-lose game, we'll look at it as a shared resource environment and think about how we make savvy and wise decisions,” he said.
Editor's note: This article was changed Oct. 19 to clarify the nature of Polco's business.
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