Program Budgeting has been hot on our minds lately. Program budgeting has long been a cornerstone of best practices in public budgeting. Simply put, a program budget organizes a budget into service areas, rather than just, departments, objects-of-expenditure, and line items. A program budget is more meaningful to the governing board and the public because programs are directly relevant to how they experience public services – budget discussions about police patrols and tree services are more meaningful than discussions about salaries, benefit, commodity, and contractual service costs. Program budgets also make trade-offs between different spending options clear. If the budget for police patrols is to be increased, then a trade-off discussion about resource reallocation could be approached (ie the budget of another program, like tree services, could be proposed to offset the costs). Service goals and performance measures can also be associated with programs, making for a much richer conversation about the costs and benefits of different resource allocation strategies.
Program Budgeting 101: A "How to Guide"
Financial constraints have forced many local governments to take a hard look at the services they offer. A fundamental step is to develop an inventory of all programs in order to clarify the breadth of services it provides and, ideally, inform all stakeholders (i.e. staff, elected officials, constituents) exactly what the organization “does”. How often do we engage in long and stressful conversations about “line-items” or about a total department budget? Are these conversations as meaningful as they could be if we were focused on individual programs? When we prioritize or when we have to “cut”, discussions about which department is a priority or which line item to reduce are sometimes subjective and circular (i.e. they just go “round and round”). It is hard to gain agreement or even consensus at these levels. When confronted with the question “Is Police more important that Parks?” or “Is Public Works more important than the Library?” are those conversations productive? Do we all really know what “Public Works” is? The inventory provides the basis for better, more meaningful, discussions about what services are more of a priority and how to understand the budget at a “programmatic” level than just viewing it from the line item or “org chart” perspective.
But what is a program? Programs are a set of related activities or tasks intended to produce a desired result. The objective is to identify something that is in between the “department or division” level and the “line item or task” level. Think of a program inventory as a menu of services. If you went to a restaurant and the menu offered only “Entrees, Side Dishes and Beverages”, it would be impossible to order a meal (like at the department or division level). Similarly if the menu listed the full recipes for everything (ingredients and all), it would be difficult to order as well (perhaps like line items or tasks!) Is the Police Department or the Public Works department “one thing”? Of course not! Each offers a large variety of programs and services that we don’t articulate very clearly at all. While the staff in the department know what they do, staff in other departments, elected officials and especially citizens do not know or understand the number of things each department provides.
Case Study - Program Budgeting in the City of Shawnee, Kansas
The City of Shawnee, Kansas has taken Program Budgeting to a whole new level. Not only have they thoroughly inventoried every program the city delivers, and associated all costs involved to successfully deliver programs, but they have assembled this information in an easy to understand, organized fashion to the benefit of their citizens.
A comprehensive review of existing services, or ‘programs’, was conducted in the City of Shawnee, Kansas, including allocating costs to each Program (based on the 2014 Budget). The City launched into this effort (in conjunction with a Priority Based Budgeting process) to reassess spending, and ensure sound, long-term funding decisions – to view a list and description of each city program, please visit the City’s Program Inventory page. City leaders were intent on extending information to citizens to open up a dialogue about the full breadth and scope of services offered, and the cost of these services, and built an interactive online tool to allow citizens to drill-down into each of the City’s departments to a division level, and ultimately down to a program level to see every program offered.
It has been demonstrated again and again – the way to diffuse politics, to temper emotionally driven decision making in favor of data-focused decision making, can come about with great, accurate data. Program Budgeting is a centerpiece to data-driven decision making. Many of you have spent your careers delving into the kinds of controversial discussions that have, until now, polarized decision-makers – whether to outsource, to insource, to raise fees, to lower taxes, to privatize or partner or divest the organization of a service.
In your field, we’re attracted to these contentious debates NOT because we’re crazy, but because the answers to these questions are so important to get RIGHT! Or, to put it another way, the authors of this article present methodology and tools specifically to resolve these kinds of debates, because throughout our careers, like so many of you, we experienced the emotional struggles and misunderstandings that accompany data-less debate!
The development of a program inventory and program costs is the foundational data-set to bring clarity and understanding, data-focused decision-making in a time when it’s never been so crucial.
There are some clear objectives in undertaking the development of a program inventory which always should be communicated clearly to the departments as they develop these listings. The major reasons for creating a comprehensive listing of all services (both externally and internally focused) is that it:
- Offers a better understanding of “what we do” for staff, administration, elected officials, citizens and other community stakeholders;
- Offers a framework to better understand the types of resources needed to support the things that we do
- Offers a valuable tool to use when faced with budgetary choices about how limited funds are to be allocated to provide services
- And ultimately, program budgeting offers a way to discuss the budget at a “programmatic” rather than a “line item” level.
- Offers a better way to evaluate the fees, rates and charges that you assess on a program-by-program basis,
- Offers a more reliable way to make ready comparisons to other public-sector, or private sector service providers, to the extent that you want to evaluate the efficiency or the appropriate sourcing of your programs,
- Offers a tool that allows you to see more clearly how your workforce is associated with programs and integrate succession planning more specifically in the budget process
The GFOA Best Practice for "Measuring the Full Cost of Government Service" was created over a decade ago. At a time when this data-driven practice, this "evolution" from line-item budgeting is so valuable, so vital to our community's success, let program budgeting be the way to drive better resource allocation decisions in your organization.
Chris Fabian has provided consulting and advisory services to numerous local governments across the country. His consulting experience has focused on public entities at all levels, advising top municipal managers, department heads and program directors from over 60 organizations concerning the fundamental business issues of local government.
The Center for Priority Based Budgeting transforms the way local government(s) define success in their communities, and marshal the resources to bring about its achievement. The CPBB enables communities to reassess their priorities, leading to a fundamental change in how organizations allocate fiscal, physical and human resources. Through Priority Based Budgeting, the CPBB has now partnered with over 100 organizations across North America to bring focused results and fiscal sustainability to communities.