The Budget as the Financial Plan

The two previous columns have discussed two of the criteria by which the Government Finance Officers Association critiques budgets for the Distinguished Budget Presentation Award – that of a policy document and as an operations plan. A third criterion is that the budget performs as a financial plan for the jurisdiction. During the past several years, as jurisdictions have experienced several effects of the recession, the financial plan aspect is critically important. For managers and finance officers, the financial plan is often the most interesting aspect as we can peruse a budget and get a sense of revenue options and revenue balance. As we look at local government budgets from other states, a task made easy through government websites, we can learn about revenue streams allowed through another state’s general statutes. Thus, we can obtain a sense of financial plans of other jurisdictions and states, and as public administrators, we can learn from that.

As an adjunct professor who teaches public budgeting at the graduate level, both online and in a classroom setting, I give students web assignments in which they are required to visit local government sites to access budget documents. They are required to study budgets within their home state as well as other states. Test questions are often asked about revenue streams, the predominant revenue or tax source (providing me with percentages) and the dependence on fees or permits. The entire purpose of assigning this to students is so that future public administrators will understand that, in addition to being about policy and an operations plan for the structure of the government, the budget is the financial plan for carrying out the programs and initiatives of a policymaking board.

For government employees not involved in the budget process and employees who do not have responsibility for pulling numbers together for the budget, there remains value in the employee understanding the financial plan aspect of the budget. If the employee can look at or read the budget document and understand the revenue side of it, that employee is better able to understand the role of government, the programs of the government and how they, as an employee/department, fit into the broader picture.

An example to make the above point: my finance officer prepares a “revenue” tab when putting together our budget workbooks that are used during our budget work sessions. Every revenue source is listed in that section, and as commissioners work through the budget document (through the workbook), they refer back to that section repeatedly to better understand if a fee or a permit is going to cover a certain expense recommended in the budget. Otherwise, are property or sales taxes going to cover the expenses or is there perhaps a grant that will cover expenses?

Elected boards might not have extensive financial experience in their professional or work backgrounds. One board with which I’m familiar has an industrial plant manager, a bookkeeper, a mediator, a builder and a detective as the five elected officials. Of the five, the latter three might have limited experience in multi-department budgets and multiple revenue streams for varied expenses. In a recent event with this board, a residential solid waste fee was recommended to go from $81 to $100, a considerable increase. However, when additional weather-related problems arose and it was recommended during budget negotiations that the fee go from $81 to $130 instead of $100, it was explained that the increase in the revenue would generate enough to cover the additional weather-related expenses that were occurring. No additional property taxes would be needed for this significant weather event. The board then saw this as a financial plan for how the department will carry out their work. With the board then viewing the budget as the financial plan for the next year, there was greater acceptance for the 60 percent increase in a fee. They then could better explain to constituents the need for the fee increase.

For those of us who enjoy reading budgets, who work with budgets on a regular basis or who refer to them frequently to answer some question and find them quite interesting, we tend to forget or ignore the fact that the majority of the public does not understand them. Neither are they interested in them nor are they going to read them. If as managers and finance officers we help to explain to our elected officials that budgets are a financial plan – using that terminology – and if we walk them through the budget demonstrating that financial plan, it might prove to be helpful as those elected officials talk with their constituents.

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Author: Patricia Mitchell is the county manager and economic developer for Ashe County NC, a small rural mountain county. She has served as economic developer since 2004 and was appointed county manager in 2012. She oversees the jurisdiction’s 40 million dollar budget and has considerable experience in grant writing, helping to secure more than 10 million in grant funds for various projects and initiatives. Pat has an MPA and DPA from the University of Georgia, and is an adjunct professor at Appalachian State and NC State University. Prior to her tenure in Ashe County, Pat was on the MPA faculty at East Carolina University.