Is setting a budget guideline best practice?

There has been a lot of discussion lately about whether Council should have set a hard budget guideline for the development of the 2009 budget.

Some years, Council sets a budget guideline – an “acceptable” tax rate increase that Council wants each department, and external boards and agencies (e.g. Guelph Public Library, Guelph Civic Museum, Police Services Board, Public Health, Grand River Conservation Authority), to work towards.

The whole process starts with an early estimate in May by staff of what next year’s budget is shaping up to look like given current information, trends and Council’s policies and decisions.  A lot of assumptions must be made.  There can also be  lots of changes before Council actually considers the budget.  However, we need to start somewhere.

Last year, we set a guideline of 3.5% plus 1% for new services.  This was based on a slightly amended preliminary estimate from staff.  Staff brought in a budget that met this guideline.  However, Council ended up reducing the 3.5% and increasing the 1% to be able to fund 20 minute transit and enhanced ambulance service.  The budget still came in at 4.5%.

This all sounds good.  Budget guidelines certainly play well in the media and make nice headlines. It looks like Council is doing its job.

But is Council really doing its job or are we taking the easy way out? I personally think the latter.

This year we have not set a guideline.  We are working towards a new budget process that more actively involves members of Council earlier in the year.

The preliminary estimate for next year’s tax increase is 6.5%.  This raised many concerns on Council and in the community.  I describe what went into this estimate in an earlier post in May. 

The City’s Chief Administrative Officer has expressed Council’s concern in a message to all  departments and external agencies and boards – “It should be noted that discussions by City Council on the potential for a 6.5% increase raised many concerns.  Members of Council have requested that all Departments, Boards, and Agencies examine all services in an effort to reduce costs and create efficiences so that the tax rate increase can be minimized.”

So, why don’t I feel setting a budget guideline is sufficient and why should we be changing the way we set budgets?

First, not all departments, boards, and agencies should be planning for an automatic increase of 3.5% over the previous year as the 2008 guideline implied.  Things change from year to year.  To give you an example: in the Social Services budget for 2008, the Province uploaded some costs related to the Ontario Disability Support Program.  The base budget for this service should go down not automatically increase by 3.5%. 

Fortunately, our CAO and Senior Management Team did not interpret Council’s guideline this way.  Otherwise, we would have been in trouble at budget time.  Some departments were higher while others were lower than the guideline.

Second, I feel that Council should be taking a much stronger role in budget decision-making  — not just at budget time, which has been standard practice — but throughout the year. 

For instance, one way to reduce the budget is to stop providing a service all together or reduce the level of service being provided.  These are not popular decisions but should not be ignored.  City Hall delivers over 175 services.  Staff do not have the authority to make decisions about which services are provided.  This is the unequivocal responsibility of Council but budget guidelines give no hint to staff on this.

So when does this discussion happen?  Budget time is too late.  We need more time than a week to understand the full implications of removing or changing a service.  We should also provide time for public input before making such a decision.  

This is why we have launched a new Service Review Process.  Sidewalk snow plowing is our first real test of the process.  In future years, this process should help us work through all of our services to answer three questions.  Should we be providing the service?  If the answer is yes, then what level of service should we provide and what is the most effective way to provide it?

Third, the other way to reduce the budget is to find efficiencies in the way we deliver our services.  This is the responsibility of staff.  However, that does not absolve Council of its role in providing accountable oversight of management’s responsibilities for operational efficiency and effectiveness. 

Efficiencies found in waste management, legal services, and by-law enforcement assisted enormously during last year’s budget process.  This year, work on energy conservation in our facilities and fuel efficiency will be critical given rising fuel and energy costs.

In conclusion, setting budget guidelines may be helpful, but they are not sufficient.  Nor are they a substitute for doing our complete job.

Council is making the transition to what will hopefully be a more responsible and accountable role in budget setting.  There are some growing pains and misunderstanding which we need to address as we move forward. 

One thing doesn’t change in all of this.  At the end of the day, Council sets the final tax rate regardless of any preliminary estimates, guidelines, operational reviews, service reviews and the like.

About Karen Farbridge

An unwavering change maker seeking a just, democratic and sustainable world.

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One Comment on “Is setting a budget guideline best practice?”

  1. Chandan Says:

    Thanks to the Mayor to clearly state that Council approves the final tax rate and they can/should be involved in all steps of budget. This is accepting responsibility which politicians do rarely..

    If all the politicans in the world show such attitude it will help to make the world will be a much better place to live in a lot.

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