The Municipal Budget Preparation Process: 5 Things To Consider

There are as many types of budgeting approaches as there are municipalities! And on top of that, every municipality knows the budgeting process is an inevitability and is necessary to keep your city up and running. But the truth is, the municipal budget preparation process can be downright difficult. So in order to succeed, it’s critical to make sure your process is smooth and well thought out.

What Is A Municipal Budget?

While municipal budgets vary - a small towns budget will likely differ from that of a large cities budget - the municipal budget will aim to outline how resources coming from many different sources will be allocated. Typically this will include a highlight of expected revenue as well as estimated expenditures across various departments and services.

The National Advisory Council of State and Local Budgeting neatly summarizes five municipal budgeting best practices:

“A good budget process:

• Incorporates a long-term perspective,
• Establishes linkages to broad organizational goals,
• Focuses budget decisions on results and outcomes,
• Involves and promotes effective communication with stakeholders, and
• Provide[s] incentives to government management and employees.”

To take this a step further, we’ve expounded on why each of these elements is critical. If you take these five things into account, you’ll have a solid mindset about your budgeting process.

The Municipal Budget Preparation Process: 5 Things To Consider

1. Your municipal budget guidelines should incorporate a long-term perspective.

Even if your budget only extends through the fiscal year, you’ll want to think into the future when creating it. That way, you’ll be considering how to budget for important projects that aren’t right in front of you but will eventually require funding.

2. Your municipal budget should establish linkages to broad organizational goals.

No municipality has an unlimited budget (or unlimited time to formulate that budget). This means every municipality has to carefully consider their limited resources and how to allocate them properly. The best way to do this is to start with your municipal objectives and back into your budget from there. By doing this, you’ll ensure that your strategic plan (which should have included input from constituents across your municipality) is taken into account during the budgeting process.

Show a visual comparison of projected budget to the real cost of implementing initiatives. Use a Budget vs Actual Dashboard.

3. You should focus municipal budget decisions on outcomes.

Because the majority of budgeting processes take information from previous years and the current year into advance—as well as projections for the next few years—you’ll need to have at least some of your municipality’s outcomes in mind while budgeting. If you have a clear set of goals (see step #2 above), then you should have key performance indicators or outcomes linked to those goals. Many high-performing municipalities will align their major budget items to outcomes to demonstrate why they are spending their funds in a certain way. This way, your constituents can better understand why there’s been an increase in taxes or why a program has been cut.

4. Your municipal budget should involve and promote effective communication with stakeholders.

If you’ve complied with suggestion #2 and #3 and focused your budgeting decisions on goals and outcomes, it’s then important to communicate this with anyone who has a stake in city government. This includes municipal employees, businesses, citizens, council members, the mayor, administrators, and more. One of the best ways to do this is to have a public-facing community dashboard on your website. This gives you a simple way to express to your community where tax dollars are going and whether or not you’re meeting your goals.

5. Your municipal budget should provide incentives to government management and employees.

When your strategic plan is aligned and incorporated into your municipal budget preparation process, you’ll see buy-in increase across your municipality. Both government management and employees will be able to see that what they’re doing on a day-to-day basis is contributing to yearly goals and that their contributions are important to the success of the municipality.

Incentive compensation is trickier—and sometimes not possible in government—but giving recognition is easy and doesn’t cost much. It also has a high payout in employee satisfaction. At a minimum, you should be consistently looking for ways to encourage the right employee behavior across the organization.

A Final Takeaway

Think of your budget less as an operational necessity and more of a leverageable tool. If used properly, you can ensure that you meet your goals (laid out in your strategic plan) by tying them directly to your budget (which informs what you’re able to do). These two elements should be symbiotic. If you follow the five suggestions above, you’ll be able to do just that!

FAQ:

How do you prepare a municipal budget?

Preparing a municipal budget is a complex process, but here's a simplified overview:

- Gather Information: Collect data on past revenues and expenses, economic forecasts, and community needs.
- Set Priorities: Determine which services and programs are most important to the community and prioritize those in the budget.
- Estimate Revenues: Forecast how much revenue the municipality will receive from taxes, fees, grants, and other sources.
- Allocate Expenses: Determine how much money will be spent on each service and program.
- Balance the Budget: Ensure that revenues and expenses are equal. If not, adjustments must be made.
- Review and Approval: The proposed budget is reviewed by the governing body and may be subject to public hearings before final approval.

How do you read a municipal budget?

Reading a municipal budget can be overwhelming, but it's essential to understand how your tax dollars are being spent. Here are some tips:

- Look for a summary: Most budgets start with a summary that provides an overview of revenues and expenses.
- Focus on the categories: Budgets are usually organized by categories, such as public safety, transportation, and parks and recreation. Focus on the categories that are most important to you.
- Look for changes: Compare the current budget to previous years' budgets to see where spending has increased or decreased.
- Ask questions: If you have questions about the budget, contact your local government officials.

What is a municipal budget?

A municipal budget is a financial plan that outlines how a city, town, or village will raise and spend money over a specific period, usually a fiscal year. It covers all aspects of local government operations, including public safety, infrastructure, education, and social services.

How does a municipal budget work?

A municipal budget works by allocating resources to different services and programs based on the community's priorities and available funding. It is a legal document that must be approved by the governing body. The budget also serves as a tool for accountability, allowing residents to see how their tax dollars are being spent.

What are the steps in the municipal budget preparation process?

- Budget Calendar: Establish a timeline for the budget preparation process.
- Departmental Budget Requests: Departments submit their budget requests to the budget office.
- Revenue Projections: Estimate the amount of revenue the municipality will receive from various sources.
- Budget Review: The budget office and governing body review the budget requests and make adjustments as needed.
- Public Hearings: The proposed budget is presented to the public for comment.
- Adoption: The governing body adopts the final budget.
- Implementation: The budget is implemented, and spending is monitored throughout the year.