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.