What are Alternative Budgeting Strategies?
Enhancing Local Government Budgeting in Montana: Program Performance and Capital Planning Innovations
A well‐tested improvement in the traditional line item, incremental budget strategy used by most of Montana’s local governments is some version of a program and performance budget model. Additionally, the practice of including a long-term capital improvement program (CIP) as an integral part of the local government budgeting process is, by no means, a common practice of Montana’s city and towns even though it should be. Both of these budgeting innovations are briefly described below. Program and Performance Budgeting The standard BARS budget format is typical of a governmental line item budget which is designed primarily as an accounting document rather than as a management tool. While the line item format details the personnel, operations and capital costs of each department and therefore helps account for and limit expenditures, it will not help the executive, the governing body or the attentive citizen-taxpayer understand what specific public service benefits will be provided and at what cost to the taxpayer. How many blocks of city streets will be graded and resurfaced for the $500,000 budget for the street department? How many kids will be taught to swim by the $50,000 property tax subsidy to the community swimming pool? Which expenditure will have the most beneficial impact on the community’s public safety, a new fire engine OR four new police cruisers? Performance budgeting and its precursor called “program budgeting” focus on the specific programs and measurable outcomes produced by governmental expenditures. For example, in preparing his annual departmental budget proposal the fire chief may be asked to estimate the number of fire inspections that will
be made as a service of the fire department’s fire prevention program, as distinct from the department’s firefighting program. All of the budgeted costs of the fire prevention program can then be linked to the number of fire prevention inspections that are planned and subsequently performed as measurable service delivery outcomes. As a result, a rational basis for resource allocation, planning and improved service delivery can be achieved during the annual budgeting process. (See ATTACHMENT 4.4 at the end of this chapter for an example of a department’s program budget with performance measures included.) Capital Improvement Program (CIP) Montana budget law provides that municipal governments may appropriate money to a capital improvement fund from any source, including funds that have been allocated in any year but have not been expended or encumbered by the end of the fiscal year, 7‐6‐616, MCA. The CIP must be formally adopted by resolution of the governing body and
should include a prioritized schedule for replacement of capital equipment or facilities with a minimum $5,000 value and a five-year life span, as well as the estimated cost of each item. The purpose of the CIP is to identify long-term capital replacement priorities of the local government and to earmark some portion of the annual operating budget to fund the replacement or acquisition of capital items on a systematic basis, as approved by the governing body. It is, in essence, a way for the local government to “pay as it goes” by building the costs of capital replacement into the annual operating budget and, therefore, into the annual property tax mill levy or utility rate structure.
be made as a service of the fire department’s fire prevention program, as distinct from the department’s firefighting program. All of the budgeted costs of the fire prevention program can then be linked to the number of fire prevention inspections that are planned and subsequently performed as measurable service delivery outcomes. As a result, a rational basis for resource allocation, planning and improved service delivery can be achieved during the annual budgeting process. (See ATTACHMENT 4.4 at the end of this chapter for an example of a department’s program budget with performance measures included.) Capital Improvement Program (CIP) Montana budget law provides that municipal governments may appropriate money to a capital improvement fund from any source, including funds that have been allocated in any year but have not been expended or encumbered by the end of the fiscal year, 7‐6‐616, MCA. The CIP must be formally adopted by resolution of the governing body and
should include a prioritized schedule for replacement of capital equipment or facilities with a minimum $5,000 value and a five-year life span, as well as the estimated cost of each item. The purpose of the CIP is to identify long-term capital replacement priorities of the local government and to earmark some portion of the annual operating budget to fund the replacement or acquisition of capital items on a systematic basis, as approved by the governing body. It is, in essence, a way for the local government to “pay as it goes” by building the costs of capital replacement into the annual operating budget and, therefore, into the annual property tax mill levy or utility rate structure.