It’s Always Budget Season in Local Government
The many California agencies that have placed new taxes on the November ballot owe it to their residents and businesses to wean their organizations from reliance on serial tax increases to remain afloat. It’s disconcerting that such a clearly unsustainable strategy has become the go-to solution for so many municipal leaders.
The problem is that most government agencies begin their budgeting process four to six months in advance of the upcoming fiscal year. By then, they’re already too late. The two major cost drivers – scope (or “mission”) creep and multi-year labor agreements – are locked in. Under pressure, a city council can make cut costs on the margins, implementing hiring freezes, perhaps, or across-the-board budget cuts.
But these do little to affect the agency’s financial trajectory. Soon, there’s talk of raising sales taxes or persuading voters to approve yet another bond. And soon after that, as revenue fails to keep pace with the agency’s expanded mission and residents complain about poor service delivery, officials will find themselves replicating the budget-balancing scramble that no one wants to experience again.
How can municipal leaders remedy the constant state of budget scarcity?
WHAT IS GOVERNMENT FOR?
First, the budget scarcity affecting municipalities throughout California (and the country) has been decades in the making. Organizational scope creep has become systemic as agencies have embraced missions without bounds. Breaking the cycle of budget scarcity will require asking, “What is government for?” – which types of activities are appropriate for a government agency to undertake?
Anything less than this – imposing rigorous limits on mission – will result in the organization’s relapse into the operational path of least resistance. And that will produce the familiar byproducts of intractable budget problems, scarcity as an organizational way of life, and betrayed residents and business owners.
Municipalities must understand that their foundational problem is broad scope creep – government missions so broad, so nearly limitless, that it’s hard to imagine disqualifying any spending proposal on the grounds that it is outside the organization’s purview. Each new proposal that is accepted increases the scope of the organization’s activities, thereby driving costs upward and ensuring budget scarcity. Likewise, every exhausted activity that cannot be retired – despite its obvious ineffectiveness – further binds the organization to scarcity.
An organization that cannot limit what it does creates and sustains its own scarcity. Such is the cause-and-effect relationship unacknowledged throughout most fiscal sustainability plans.
IT’S ALWAYS BUDGET SEASON
Second, treating the budget process as an annual process, rather than an ongoing one, impedes municipal leaders’ ability to affect the budget in the long term. Government union leaders understand this. That’s why they push for multi-year labor agreements that drive 70 to 80 percent of a city’s operating budget.
The impact of labor agreements is not limited to the fact that such agreements set the cost of personnel. Labor agreements also dictate how the organization will deliver services. For anyone who doubts this, try to introduce a cost-savings change to public employee work schedules or implement a technology that changes job duties and job descriptions without conducting a lengthy meet-and-confer process and/or reopening a labor contract.
Unfortunately, entrenched labor agreements with sacrosanct, untouchable terms (e.g., minimum staffing, traditional work schedules, etc.) are kryptonite to management’s ability to exercise its best judgment; such agreements preempt a municipal leader’s ability to call upon better and best practices in deciding how the organization will deliver services. Changing such entrenched conditions of work and work methods may require multiple negotiating cycles – not just multiple fiscal years – to achieve.
CONCLUSION
The Government Finance Officers Association bestows annual awards for municipal budgets and financial statements. Such awards are based on the organization’s successfully following a process rather than achieving any specific organizational or financial results. But defining a limited mission for the organization and successfully taking charge of how services are delivered requires a multi-year commitment. An award for that achievement – for officials’ ability to produce real change in the trajectory of the organization over the course of years – would be an award worth giving.
Mark Moses is a senior fellow with California Policy Center. He has thirty years of experience in local government administration and finance. His recent book, The Municipal Financial Crisis – A Framework for Understanding and Fixing Government Budgeting, was published by Palgrave Macmillan in 2022 and is available from major online booksellers.
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