In
this article, Peter Nichols reviews some of the problems with
conventional municipal budgeting and discusses the movement toward
strategic budgeting.
It is clear
that budgeting constitutes a crucial function in municipal government.
Budgets provide expenditure and management controls and offer
an important tool in planning program and service delivery.
However, many
municipalities are expressing increasing dissatisfaction with
their budgeting systems and procedures, in particular:
- the considerable
time and resources absorbed in preparing and finalizing budgets
- the short-term
focus of annual budgets
- the fixation
of the budgeting process on tax rate impacts
- the emphasis
of budget documents on line-by-line "input" numbers,
with limited recognition of program "outputs" and
outcomes
- the challenge
of choosing among competing demands for additional funds
- an inadequate
alignment of municipal goals and strategies through the budget
and difficulties in interpreting council priorities
- unsatisfactory
approaches for obtaining public input into the budget-setting
process
A number of
municipal jurisdictions across North America are actively involved
in efforts to reform their budgeting systems. The "holy grail"
of these reforms is the development of "strategic budgeting"
systems that seamlessly integrate strategic plans, budgets, performance
measures, and service and program evaluations as conceptualized
below.
These strategic
budgeting systems guide resource allocation decisions that are
tied to strategic goals and to the results of regularized outcome
evaluations.
Some key features
of these systems are as follows:
- they include
well-defined service plans and objectives;
- they typically
involve multi-year plans and projections;
- they incorporate
two-way information communications with the public;
- they feature
comparisons between actual and planned financial and non-financial
performance; and,
- they involve
the comprehensive use of performance measures.
The cornerstone
of these systems is the municipality's strategic plan, which provides
an overall context and priorization guide for budget decisions
and protects the community's primary goals from being sidetracked
by the balancing decisions that form part of traditional budget
processes.
Strategic
budgeting represents a fundamental change from conventional budgeting.
Experience elsewhere has shown that the change to the new approach
is best carried out in stages over time and may take several years
to fully implement. The development of a strategic plan, the adoption
of departmental business plans, the selection and use of performance
measures, the design of appropriate internal and external communications
processes, the assessment of internal organizational implications
-- these and other parallel initiatives need to be well planned
and implemented within the context of available staffing and financial
resources. In addition, there appears to be no "one-size-fits-all"
strategic budgeting model that can be adopted universally: each
municipality will need to move only as far and as quickly as it
is comfortable with and will want to "tweak" the generalized
strategic budgeting model to meet its own circumstances and needs.
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