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HomeMy WebLinkAboutFIN 2017-09-06 Item 2B - Update - Proposed 2019-2020 Budget Process ChangesCity of Tukwila Allan Ekberg, Mayor INFORMATIONAL MEMORANDUM TO: Finance Council Committee FROM: Peggy McCarthy, Finance Director BY: Vicky Carlsen, Deputy Finance Director CC: Mayor Ekberg DATE: August 30, 2017 SUBJECT: Update on Budget Process for 2019-2020 ISSUE As part of the City's 2017 work plan, staff is reviewing the current budget process and recommending enhancements to the 2019-2020 process. These enhancements will allow the City to meet its current biennial priority of "Ensuring organizational effectiveness and responsible fiscal stewardship," while also directly aligning with the Strategic Plan goal of maintaining "A high performing and effective organization." BACKGROUND A City budget serves several functions. Based on GFOA's "Best Budgeting" practices, a budget is a policy document, a communications device, a financial plan, and an operations guide. The City receives the GFOA budget award every two years for this document, representing the City's ongoing commitment to conforming to these guidelines. To keep current with these best practices, it is important for the City's budget process to evolve over time. In planning for the next biennium, we have reviewed the various budgeting methods available. At the May 16, 2017 Finance Committee meeting, various budgeting methods were presented along with the pros and cons of each model. The Committee gave approval for staff to proceed with research and analysis of potential enhancements toward a recommendation to Council. DISCUSSION Goal of Budget Process The central goal of the budget process is to help Council make informed decisions about what services should be funded, and how to promote stakeholder participation in the process. A good budget process: • Incorporates a long-term perspective, • Establishes links to broad organizational goals, • Focuses budget decisions on results and outcomes, • Involves and promotes effective communication with all stakeholders, and • Provides incentives to management and staff. A good budget process should also be able to answer the following five questions: 1. What are we in business to do? These are the high-level and over -arching reasons the City exists in the eyes of our community. 2. What exactly do we do? This is a comprehensive listing of all programs offered by the City along with the associated costs and staff count. 3. How do we prioritize programs? Programs are scored against established attributes to determine degree of relevance. Attributes could include the following: 1 1 INFORMATIONAL MEMO Page 2 a. Level of mandate to provide program b. Reliance on City to provide program c. Cost recovery of program d. Change in demand for program e. Size of population served f. Community support for program 4. How do we know if we are successful? Performance measures can be used to determine if we are going in the right direction. 5. How do we ask better questions that lead to better decisions about what we do and why we do it? Resources can be allocated based on the prioritization of programs. The following elements of budgeting can be utilized to help answer these questions: Community Involvement In order to determine the answer to `what are we in business to do?', it is imperative to get community members involved in the budgeting process. Public participation can help government be more accountable and responsive, and can improve the perception of the value the public receives from government. The Government Finance Officers Association (GFOA) recommends that governments incorporate public participation efforts in planning, budgeting, and performance management results processes. Although the City has consistently provided opportunities for public input through public hearings and budget workshops, there are always ways to improve accessibility. Program Budgeting Program budgeting answers the question `what exactly do we do?'. Program -based budgeting is a tool where all budgetary information is organized around the City's programs and services, instead of by department and division. The result is a budget that shows costs of the program, revenues generated by the program, and how the program ties to citywide goals. Departments and divisions typically include several individual programs. Budgeting by programs increases transparency and accountability within departments by breaking down budgets into smaller, easy to understand units. Programs are also easier to manage and help hold staff accountable. Rather than incrementally increasing or decreasing the budget each cycle, program budgeting requires that the entire budget is reviewed during each budget process. When economic downturns force difficult budget decisions, it's easier to trim the budget when you know how programs stack up against the priorities of the City. Conversely, when new revenue sources are identified, policy can ensure that the additional revenue sources are applied to priorities. Prioritizing Programs and Aligninq Programs to Strategic Goals and priorities This next step in the process helps answer the question `how do we prioritize programs?'. Once programs are identified and budgets are allocated to programs, each program is then evaluated against established attributes. These attributes can include whether the program is mandated, or how much of the population is served by the program. The higher the program scores on the rating scale for each attribute, the higher the priority to the City and the community. Once the programs are scored, then each program is linked to strategic goals and priorities to demonstrate how much the City invests in each. Performance Measures Measuring performance provides a quantifiable way to recognize successes and identify areas needing improvement, and allows policy makers, managers, and residents to evaluate the quality and effectiveness of government services. In other words, it answers the question `how do we 12 WA2017 Info Memos\Info Memo - PBB Update 8.31.17.docx INFORMATIONAL MEMO Page 3 know if we are successful?' Performance measures quantitatively evaluate the return from resources spent on programs and services. Generating information about program results and outcomes and should be an integral part of any budget process. Performance measure data can bring rationality to planning and budget discussions by demonstrating how the use of resources over time have met strategic goals. Benefits of proposed enhancements The proposed enhancements together are primary elements of priority -based budgeting, a model reviewed at the May 16, 2017 Finance Committee meeting. By implementing these budget enhancements outlined above, the City can move toward a more transparent budget process with increased stakeholder participation. Priority -based budgeting provides a comprehensive review of the entire City. Resources can be reallocated to make positive change without laying off staff and without making significant changes to programs and services the City offers. Staff time is reallocated from low priority programs to high priority program staffing needs before additional staffing is considered. Center for Priority Based Budgeting The Center for Priority Based Budgeting is a leader in assisting organizations in implementing priority -based budgeting. The Center provides technical and advisory services and will tailor the scope of work to meet our specific needs. Due to the staff time necessary to lay the groundwork ensure a successful implementation we would contract with the Center for specific services including informing the full Council on the benefits of priority -based budgeting, assisting departments in identifying programs, and improving community involvement in the budget process. Cost for services would come from existing budget. RECOMMENDATION Based on available research, staff recommends incorporating these enhancements in the 2019- 2020 budget. Since these enhancements are long-term in nature, this transition will stretch over multiple budget cycles. The Committee is asked for consensus to move forward with a presentation from The Center for Priority Based Budgeting to the full Council. The presentation is tentatively scheduled for September 18, 2017. WOW Info Memos\Info Memo - PBB Update 8.31.17.docx 13