Prudent and Proven Options for Balancing Local Public Budgets
The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.
By Roger Kemp
February 14, 2017
Public officials in communities throughout the nation must balance their respective budgets, keeping tax increases to a minimum, while making every effort to maintain the existing level of public services. At this difficult time in America’s history, all local officials — both elected and appointed — must cope with these difficult economic realities.
Over the years, numerous budget development processes have been used to project, enhance and protect revenues; guide elected officials and department managers; and ensure public services were reduced only marginally, with the goal of balancing the annual budget in the most politically positive and financially responsible way possible.
Many past strategies, policies, programs, measures and tactics are useful for today’s public officials — both elected and appointed. The purpose of presenting these options is to ensure budget reduction practices and adoption processes are prudent, yet optimize the use of existing revenue sources, and make every effort to minimize the reduction of public services to the citizens served. Laying-off employees should always be a last resort when balancing public budgets. Elected officials should encourage their managers to work with employee unions to achieve this no lay-off goal.
The following three categories include budget-balancing options and practices broken down into those items you should do routinely during your annual budget development process, do immediately if you are facing a budget deficit for the coming fiscal year, as well things to do in the long run to ensure your community’s financial well-being in future years.
- Do not provide any new public services.
- Implement a hiring “freeze” to minimize employee layoffs.
- Form a Union-Management Cost-Savings Committee to explore both short range and long range savings options.
- Take measures to accommodate the truly needy in your user fee and charge structure.
- Provide timely budget and revenue information to everyone.
- Have energy conservation audits conducted at all major city facilities.
- Purchase four-cylinder vehicles for the city’s regular fleet of automobiles.
- Upload as many documents and publications as possible to your organization’s website to avoid printing and duplicating expenses.
- Make an inventory, and sell surplus municipal property at a public auction.
- Review discounted user fee rates, and the free use of public facilities and services, by local non-profit and community organizations,
Do During Your Budget Development Process:
- Update your organization’s existing user fees and charges.
- Encourage all existing contractors and vendors to hold down their costs for the coming fiscal year.
- Check existing enterprise funds to make sure they are revenue-covering, adjusting their user fees and charges accordingly.
- Consider work furloughs, early-retirement incentive options and possible reduced working hours for employees.
- Direct department heads to look for accrued savings in their respective operating budgets.
- Rank public services proposed for reduction based on their importance (e.g., essential, desirable, nice-but-not-necessary and first-to-go services).
- Develop criteria to help evaluate the public impact of proposed service reductions.
- Evaluate proposed budget reductions based on their operational impact on existing public service levels (e.g., maximum, medium, small and no service impact).
- Try to avoid employee layoffs by using other savings options and techniques.
- Prepare a Public Service Impact Statement for each proposed budget reduction under consideration.
- Elected officials should always know the operational impact of their fiscal decisions.
- Public Service Impact Statements should also be posted at impacted public facilities, since the public should also be aware of the possible service reductions under consideration.
- Negotiate increased employee contributions to existing public pension plans.
- Negotiate increased employee co-payments for healthcare costs, as well as existing medical, dental and prescription plans.
Do in the Long Run:
- Use one-time revenues wisely, and not to fund recurring operating expenses.
- Always seek, and apply for, available operational and infrastructure grants from higher levels of government, as well as the non-profit sector.
- Implement measures to enhance all existing tax collection rates to optimize existing revenue sources.
- Create new enterprise funds as appropriate for your community.
- Review the balances of all existing funds for their appropriateness, transferring their balances back to the general fund if they are no longer needed.
- Adopt and make sure you follow prudent bonding practices for capital projects.
- Consider early retirement programs for your employees, with the goal of filling them at the entry level and/or leaving them vacant for a definite period.
- Adopt prudent financial policies to avoid future budgetary and financial problems (e.g., use of one-time savings, periodic updates to existing user fees and charges, and responsible bonding practices).
- It’s better to have a “permanent” hiring-freeze now, then to have to layoff newly hired employees later in the fiscal year.
There is no doubt that these are difficult financial times for local public officials. These policy, financial, budgetary and operational choices are difficult to make, but they are a sign of the times. The sorting and prioritizing of public services, and the rational reduction of government spending, form the most pressing challenge facing public officials today. Following such rational options and processes as outlined above also takes some of the politics out of the efforts of a governing body to balance their organization’s annual budget.
Author: Roger L. Kemp, MPA, MBA, PhD, ASPA, has served as a city manager of cities in CA, CT, and NJ during his career. He has taught public budgeting and finance courses for ICMA, Golden Gate University, and the University of New Haven. He can be reached via email [email protected].
The American Society for Public Administration is the largest and most prominent professional association for public administration. It is dedicated to advancing the art, science, teaching and practice of public and non-profit administration.