Four years ago I felt our budgeting process was highly inefficient. Meeting after meeting lasted hours upon hours reviewing a wide range of disparate financial reports. These served as the basis for the development of the budget.
Communication was poor as a result – between the Board and the administration and ultimately to the public. This is why so many Board meetings were marked by torches and pitchforks.
We have made huge strides in our financial reporting and modeling tools. We have precise vision on our current condition and can manipulate that condition by projecting variables beyond our control.
Another major change was requiring that the Board be explicit with the administration of budget elements. What areas did the Board want the administration to particularly avoid or focus on in their development of the budget. I wrote this policy that was adopted by the Board to actually document these preferences and approve the document by majority vote. This essentially launches the ensuing year’s budget development process.
At our last Board meeting I delivered the presentation below to inform all parties – including the public – on issues that would affect those parameters and the budget itself. I took special care to review the decisions made last year to really highlight a few things:
- Decisions made early on in a budget process are often amended, frequently for the better, due to conservative assumptions. We added dozens of employees back, for example, when assumptions we made came in better than forecast.
- As we look into next year, if we used the same budget parameters as last year – and assuming no increase in the retirement rate – our budget is already balanced if we rolled everything forward. We haven’t been able to say that for a long time.
- If the retirement rate DOES increase, by virtue of the new contract, we don’t have any incentive to cut programs or services to make up for it. Over the course of time, if we need to rely on fund equity to balance the budget, if and when it were to go below 10% then all employees’ compensation would be adjusted downward to maintain the 10% level. This is the unique aspect of our contracts.
So here’s the presentation. Please share thoughts or questions.
GPPSS 2011-12 Budget Dev Parameters Presentation