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

Browse Search

INFORMATIONAL MEMO Page 5 • Difficulty in getting every ethnic group represented. Zero -base Zero -base budgeting (ZBB) first rose to prominence in the 1970's during the Carter Administration. ZBB is a budgeting process that asks departments to build a budget from the ground up, starting at zero. To implement ZBB, the City would be divided into "decision units" — the lowest level at which budget decisions are made. Decision units are formed along functional or organizational lines but programs can be used as well. Managers in each division unit prepare a detailed description and evaluation of all activities it performs, including alternatives to current service delivery methods and spending plans necessary to achieve the decision unit's goals. This information is used to create "decision packages" which show marginal spending level differences that represent varying levels of effort and cost. At least three decision packages for each decision unit are presented: base package (meets only the most fundamental service needs), current service package (continues the current level of service), and enhanced package (addresses resources required to enhance service). Decision packages are then ranked and the rankings are used as the basis for making resource allocations. Pros: • Sends a powerful message to all stakeholders that the lines will be held on spending and that nothing will be taken for granted. • Moves the entity away from incremental budgeting because the starting point is zero. • Offers a rational and comprehensive means to reduce the budget. • Gives top management better insights into the detailed workings of departments. Cons: • Labor intensive to produce decision packages, review, and rank. • Conceivably, the City could generate hundreds of decision packages requiring substantial time commitments from every level of the City to develop, review, and rank the packages. • ZBB does not provide a structured method for considering the community's or City Council's views and long -term priorities. • Because of the time involved to develop the decision packages, participants tend to focus on the current service model rather than proposing innovative alternatives to meet the same underlying demand from the public. Priority -based The philosophy of priority based budgeting (PB) is that results should be allocated according to how effectively a program or service achieves goals and objectives that are of the greatest value to the community. In a priority driven approach, the City identifies the most important strategic priorities, and then, through a collaborative, evidence -based process, ranks programs or services according to how well they align with the priorities. The City then allocates funding in accordance with the ranking. Priority based budgeting aims to align the budget with citizen priorities, measure progress toward the priorities, attain the best value for each tax dollar, and foster continuous learning in the City. Pros: • Identifies the services that offer the highest value and continues to provide funding for them while reducing or eliminating lower value service levels. H: \Temp - Ana 1 \00.docx 89