FIN 2017-05-16 Item 2C - Discussion - Plan for Budget Process Improvements

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INFORMATIONAL MEMO Page 4 ATTACHMENT B Below is a more comprehensive discussion of common budget models used in municipal budgeting. Incentive Current research shows that higher educational institutions are who typically utilize an incentive budget model. However, Columbia, Missouri, has successfully implemented an incentive system where departments that have unspent budget don't necessarily lose those funds to fund balance at the end of a fiscal year. Rather, departments can `save up' all or part of unspent funds for several years to pay for a high -cost project that might not ordinarily be funded through the regular budget process. Pros: • Encourages departments to find cost effective ways to fund existing programs and services to fund higher -cost items. • Has the potential of removing unexpected spikes in spending because high -cost programs and services are planned for in advance. Cons: • Projects that departments save for may not be tied to strategic goals. • Departments could lose saved funds due to an economic downturn. • Could create fluctuations in fund balance over the years causing rating agencies to down grade bond ratings. Participatory This budgeting model was first developed in Brazil in 1989. The concept of this model is that residents brainstorm spending ideas, volunteer budget delegates develop proposals based on their ideas, residents vote on proposals, and the government implements the top projects. Some portion of the City's resources would need to be allocated to the participatory process. For example, if community members identify recreation spaces as a priority, their delegates might develop a proposal for park renovations. Residents then vote on this and other proposals and if they approve the park renovations, the City pays to renovate that park. Pros: • Promotes deeper democracy; ordinary people have a real say, and they get to make political decisions. • Tends to engage residents who are otherwise cynical about government. • Builds greater trust with community members. • Participants become more active and informed citizens. • Builds community through regular meetings. People get to know their neighbors and feel more connected to their city. Cons: • Could be difficult to get a broad range of community involvement. • It could be difficult to identify discretionary funds that can be allocated to this program. In Tukwila, funds not currently used for general fund purposes are allocated to capital projects. • It typically takes months of planning to design a sound process and build community buy - in. • Extensive outreach and communications are required to engage the broader community. H: \Temp - Ana 1 \00.docx