Zeroing in on a budget system

Residents, businesses and officials from city councils to the federal government must face the daunting task of finding the funds to support needs when creating a budget. And for some, starting from zero and expecting no funding is the way to handle it.

This is a process that the budget department at the city of Plano is exploring. After facing a budget shortfall for 2010-11 of $11 million and another shortfall for 2011-12 of $15 million, the city council had requested the department look into zero-based budgeting as a way to establish priorities on a budget.

At Monday evening’s city council meeting, Karen Rhodes-Whitley, the budget director, described what it would take to transfer to the new financial system. While there was support for the system from some council members, they decided to revisit the system once the new city manger is selected after current City Manager Tom Muehlenbeck leaves in January.

“I like the new process and believe it will help us have a better view of what is in the budget,” Councilwoman Lissa Smith said. “What we are looking for is the justification of the expenditures that we see in the budget.”

For now, the budget department will continue with its current financial system, which is a combination of target-based and priority-based budgeting.

Zero-based budgeting is a system that begins every budget cycle at zero, rejecting any assumption that the activities that were funded in the last budget cycle will continue in the coming cycle, Rhodes-Whitley said during her presentation. It requires a rationale for each activity that will be funded for the new budget.

“[We would] start from zero for every single department,” she said. “An example would be next year, the police department will start from zero and not assume funding for any of their current projects.”

According to the budget department’s report, each department would then develop decision packages for each program, service and business that is offered by the government. The decision packages usually represent various tiers of funding and/or service levels ranging from increasing or decreasing service levels or maintaining the same service level. Rhodes-Whitley said the council and city staff would determine what the tiers are; the raising and lowering of service levels represent what most zero-based budgets focus on.

In that example, a department would have to create a budget that focused on each tier; so there would be three budgets, or decision packages, per program within a department. The budget department has identified 23 departments within the city. Those departments have identified 449 programs or core businesses through the city’s Core Business Matrix process.

Under the zero-based budget process, three different decision packages per program translates to a total of 1,347 decision packages that would be required to be analyzed at the city of Plano, Rhodes-Whitley said.

“For my department, we have five programs. For each program I would have to submit three different budgets,” she said. “But for departments like police, fire and city service, they have hundreds of programs that will have to have three forms for budget options.”

Wherein lies the issue with zero-based budgeting, Rhodes-Whitley said: it generates more paperwork and time investment for departments.

“The major change would be in our financial system,” she said.

The process to change the system would take two years to complete and would require either a million-dollar restructure or going by what is recommended and buying another financial system at an estimated cost of $2 million. The budget preparation time would need to be extended and budget documents may have to be tripled in size in order to accommodate the zero-based presentations.

It would be a literal starting-from-zero process as, according to Rhodes-Whitley, there is no way to convert historical financial data from the current cost-center program to the zero-based programs.

Rhodes-Whitley said the problem lies in the fact that there is no way to tie back in and figure out how much the city was spending on some of these programs, as they were not tracked the way zero-based budgeting tracks programs.

Plano’s current system is a combination of target-based budget and priority-based budget. Like the decision packages in zero-based budgets, the city’s departments have what are referred to as supplements. They entail the funding needs of the department but do not ask for all programs to submit individually like they would under zero-based budgeting.

During times of expansion and economic stability, if a department needed more funding, the supplements would indicate so. But now, as the economy has been down for a few years, those supplements have to represent cuts as set forth by the city council.

The weakness of the current process is the priority system within it, Rhodes-Whitley said. While each department prioritized the importance of programs within the department to determine which ones received funding, that prioritizing did not compare across the entire system with other departments. As it moves into the next budget cycle, the city is building a template that will bring in the strategic plan of the council.

“We will go in and instead of them having numbers we will have a core-based matrix system and have the programs which will all be related to each other,” Rhodes-Whitley said. “This is a part of a bigger process where we can get more information to the council.”

Current Rating: 0 of 0 votes!

Rate File: Select Rating: * ** *** ****

 Plano Apartments
 Plano Attorneys
 Plano Auto Dealers
 Plano Auto Parts
 Plano Auto Repair
 Plano Beauty Salons
 Plano Car Rental
 Plano Dentists
 Plano Doctors
 Plano Flowers
 Plano Hotels
 Plano Insurance
 Plano Loans
 Plano Mortgages
 Plano Movers
 Plano Pizza
 Plano Realtors
 Plano Restaurants
 Plano Storage
 Plano Tax Preparation
 Plano Travel
 Featured
 More...