A recent Hood River News article may have created the impression we already have a budget for 2007-2008, but that's not quite right. I'll describe the steps we use to produce a budget. They are mandated pretty explicitly by state law. All these steps are public, so you're welcome to watch us at work-- if my sausage metaphor hasn't scared you off.
Budget season starts in January, when the city council meets with the city staff to discuss the priorities for the year. Staff translates this into concrete plans. Our city manager then prepares a budget document, which includes not only the budget but a letter describing it. This document is presented to the budget committee (the 7 members of the city council plus seven other citizens appointed by the council).
That presentation kicks of the more formal part of the budget process. The budget committee meets to discuss and modify the budget. Our budget committee has met three times so far, and will meet weekly until it has a budget which gets at least 8 votes.
The budget committee sends its budget to the city council for approval. The city council can make changes-- within limits. Generally they cannot increase expenditures by more than 10% in any category, though they can cut. They must complete the process before July 1, when the new fiscal year begins.
When the city council approves the budget there are a few final steps, such as notifying the county about our property tax levy and sending copies to the state for their records.
Our budget committee will meet periodically after the budget is adopted to review progress. One of our budget committee members prepares a great monthly report so we can track income and expenditures all year long-- until the cycle starts again for the next fiscal year.
Friday, May 11, 2007
Tuesday, May 1, 2007
Budgeting 201, Part 1
One of the most important things the City Council does is oversee the collection and spending of our money. I'll discuss details in later posts, but first let's talk philosophy. In my book there are three fundamental principles: balance, transparency, and sustainability.
Balance: State law requires the city to have a balanced budget. Revenues (taxes, fees, etc.) must equal expenses (payroll, materials, etc.). Since the city is in deficit in three of its funds (a very bad thing) it is operating under a deficit reduction plan. Instead of just balancing our budget, we need to spend $250,000 less than we take in.
Transparency: The budget describes how the city plans to raise money and how it plans to spend it. It is easy for a 50+ page spreadsheet to obscure the path the dollars take between collection and expense. I'm not talking about fraud, but the fog of accounting. The City Council or any citizen need to be able to see that funds are being allocated as directed, and then spent as allocated. Do building permits cover the cost of inspections? What will happen if we don't get the expected federal timber money? Does the new storm water fee really go toward storm water treatment? Policy decisions, oversight and accountability all require that the city's accounts be set up so we can follow the money.
Sustainability: Ongoing city expenses, such as payroll, need to be met by ongoing revenues, such as taxes. This is a hard one, especially since we see our federal and state government set a bad example. Any budget will have some reserves-- cash squirreled away for emergencies or to pay for future big ticket items-- but if you start using that cash to meet payroll you can quickly get in trouble. When those reserves are sucked dry you will no longer have cash left for emergencies or big ticket items, but you will still have a payroll to meet. That's when you have to take more drastic actions, such as abruptly cutting services to reduce payroll.
I plan to carefully review our city budget for all three of these principles. We must stick to our deficit reduction plan because it will only be harder to reduce the deficit next year. We must make sure "the money trail" is easy to follow. We must structure our city government to operate sustainably, or every year we will be battling over which services we can afford that year.
In "Part 2" (or maybe "Part 3"?) I'll review how our budget is doing with respect to balance, transparency, and sustainability. Discussing lofty principles is all well and good, but we will have to plow through a pile of numbers to see how the words match the deeds.
Balance: State law requires the city to have a balanced budget. Revenues (taxes, fees, etc.) must equal expenses (payroll, materials, etc.). Since the city is in deficit in three of its funds (a very bad thing) it is operating under a deficit reduction plan. Instead of just balancing our budget, we need to spend $250,000 less than we take in.
Transparency: The budget describes how the city plans to raise money and how it plans to spend it. It is easy for a 50+ page spreadsheet to obscure the path the dollars take between collection and expense. I'm not talking about fraud, but the fog of accounting. The City Council or any citizen need to be able to see that funds are being allocated as directed, and then spent as allocated. Do building permits cover the cost of inspections? What will happen if we don't get the expected federal timber money? Does the new storm water fee really go toward storm water treatment? Policy decisions, oversight and accountability all require that the city's accounts be set up so we can follow the money.
Sustainability: Ongoing city expenses, such as payroll, need to be met by ongoing revenues, such as taxes. This is a hard one, especially since we see our federal and state government set a bad example. Any budget will have some reserves-- cash squirreled away for emergencies or to pay for future big ticket items-- but if you start using that cash to meet payroll you can quickly get in trouble. When those reserves are sucked dry you will no longer have cash left for emergencies or big ticket items, but you will still have a payroll to meet. That's when you have to take more drastic actions, such as abruptly cutting services to reduce payroll.
I plan to carefully review our city budget for all three of these principles. We must stick to our deficit reduction plan because it will only be harder to reduce the deficit next year. We must make sure "the money trail" is easy to follow. We must structure our city government to operate sustainably, or every year we will be battling over which services we can afford that year.
In "Part 2" (or maybe "Part 3"?) I'll review how our budget is doing with respect to balance, transparency, and sustainability. Discussing lofty principles is all well and good, but we will have to plow through a pile of numbers to see how the words match the deeds.
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