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Municipal Budgeting in the Face of Emergencies

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Carl J. Gabrini
January 19, 2016


Municipal budgeting involves the allocation of limited financial resources through a very political process. The challenges faced by cities in preparing their budgets are intensified by the need to plan for periodic emergencies. These emergencies are characterized as unforeseen events such as tornadoes, hurricanes, floods, blizzards, earthquakes, fires and terrorist attacks that require an immediate response.

Citizens expect their governments to appropriately plan for and respond to these events, restoring the order that had been in place previously. Any one of these events is capable of producing widespread devastation affecting many municipalities. For example, Hurricane Katrina produced an estimated $108 billion of damage across the affected communities. Local officials faced with these circumstances must turn to state and federal agencies for help as the event often overwhelms the cities’ capabilities to deal with the aftermath.

Emergencies, while unforeseen, are not unforeseeable. This begs the question: how can cities plan and budget for them and remain fiscally sound?

In general, budgeting is a planning activity that translates organizational strategic plans into operating plans. Uniquely, municipal budgets are legal documents taking on additional importance over those in the private sector, making them more difficult to amend. It might be helpful to think about including emergencies in the budgeting process by examining certain rules guiding financial statements’ preparation.

Government accounting rules require that items classified as special or extraordinary be reported at the end of the statement of activities rather than included with normal expenses. Extraordinary items are defined as being beyond management’s control, infrequent and unusual in nature. Special items are within management’s control and are unusual or infrequent in nature. Finally, items that are outside management’s control and are either unusual or infrequent are reported as normal expenses within the functions or programs under which they are incurred.

Based on current accounting standards, most of the events defined as emergencies cannot be classified as extraordinary or special. Instead, they are accounted as part of the normal expenses incurred by functions and programs of the municipal government. Considering expenses incurred in responding to emergencies as normal expenses appears to characterize these expenses as anticipated, meaning they should be planned for and included in the city’s budget.

Federal and state governments have organizational units designated and funded to deal with emergencies. As a subdivision of the state, counties are often included in the emergency planning process at the state level and have integrated planning efforts themselves that align with the state’s plans. Municipalities, however, do not always have the resources to staff an organizational unit for emergency management or budget separately for these events. Large cities like Atlanta, Jacksonville or Seattle likely have the resources to fund an emergency management function but smaller cities like Brunswick, Ga., or Punta Gorda, Fla., may not.

State rules and laws dealing with emergency planning for municipalities differ. Chapter 266-1 of Georgia’s Administrative Code assigns the responsibility for organizing an emergency management function to local officials. The code requires that the local jurisdiction provide notification if they decide to form such a function. While the Code does not provide specific budgeting requirements, the Georgia Municipal Association guide on municipal budgeting recommends that cities consider a five percent rule-of-thumb for contingencies.

Florida’s statutes encourage but do not require local governments to adopt an emergency management function. Section 252.38 “authorizes and encourages” municipalities to adopt emergency management functions and requires that their efforts be aligned with the state program. No specific budgeting guidance is addressed except for a requirement that local requests for state and federal funding be coordinated with the county government.

Washington goes further in defining the responsibilities of local government for emergency management. The Revised Code of Washington (RCW), specifically section 38.52.070, “authorizes and directs” all political subdivisions to form an emergency management function that is required to follow state laws and rules and coordinate with the state office. Local governments are allowed to form joint functions and share in its funding. The code provides specific requirements in cases where local jurisdictions sharing the function disagree over funding options.

The guidance adopted by each of the above states illustrates the need to share and coordinate emergency management between the various levels of government and among local jurisdictions. It also highlights the degree of variation that exists in the guidance provided to local governments for managing and funding an emergency management function. The nature of budgeting as a planning tool and the nature of emergencies as unforeseen events make budgeting more difficult. Planning for and managing in the face of emergencies requires local governments to build in contingency funds and adequately allocate the costs over time. As evidenced from the response to Hurricane Katrina, recovery from these types of emergencies is painfully slow and the current system for responding to emergencies is not sufficient. Continued research on planning and budgeting for emergencies is required to help improve the system.

Author: Carl J. Gabrini, Ph.D., CPA, is an assistant professor at Columbus State University.

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2 Responses to Municipal Budgeting in the Face of Emergencies

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