Prioritizing Your Budget

As the State concludes its annual kabuki dance over the budget, it reminds me of the fact that no one in State government is setting priorities for the budget. Instead they are demanding across the board cuts for every area or producing a series of inadequate stopgap measures. But the State is looking at the budget process exactly backwards.

Instead of doing everything poorly, the State should decide what it has the political will and the money (at whatever revenue level) to provide well. The State of Washington has gone through this process, as well as a number of cities.

The point is to use the budget as a conscious prioritization tool. Of course, any budget reflects what that agency spends money on, but does not always really reflect what is important to that agency.

The only way to effectively prioritize your budget is to cost out all of the services that your agency provides and put them in order of priority. (And if everything is number one then you or your elected officials are not taking the process seriously.) As you go down the priority list, the point when you run out of money means that everything below that spot does not get funded, barring any new revenue source.

Now, of course, some deserving programs will get cut. But it is much better to do that and provide other more deserving programs full funding than providing all programs half a loaf.

Obviously setting priorities are political decisions, but these decisions cannot be made until the data exists as to what every service costs. This is where the Costing Process comes in. What does the Police Helicopter program cost versus the Police DARE program? Where in the priority list should each program lie? These are separate steps in the process, but equally important. If you try to make prioritization decisions without the costing data then the decisions are being made in a vacuum, and more importantly, you will not know when you have crossed the line in which you have run out of money.

The first step in the Costing Process is to define what level of detail that you want to provide for the various services. Costing out Police Patrol services is not that meaningful, but costing out the various components of Police Patrol will allow for real budget decisions to be made.

The prioritization step is the harder and more time consuming part, because value decisions need to be made as to what services are more important than others. There will be different voices that will have different ideas about what is important. The community, either through the City Council or through a larger Budget Task Force, should be the ones making this determination because they will be the ones that will be most affected by these decisions.

But after the priorities are set, the community will have bought into the City’s budget and its priorities. And if some programs require a revenue increase, you will be able to tell the community exactly what they are getting for that extra revenue.

Every budget involves trade-offs, but they should at least be based on full information and be conscious decisions. Maybe if enough local agencies prioritize their budgets the State will someday follow suit.

Another issue is that all services are not created equal. If a program has its own separate funding source, such as fees or grants, should it be treated differently? We will discuss that in next month’s newsletter.