Transcript The Benefits and “How-To” of Multiple Year Budgeting

The Benefits and “How-To”
of Multiple Year Budgeting
Laurie Van Pelt, Director
Department of Management and Budget
&
Tim Soave, Manager
Fiscal Services Division
Multiple Year Budgeting
Presentation Overview
•
•
•
•
Benefits of a Multiple Year Budget
Benefits from Working as a Team
Incentives With Early Reductions
Communication and Transparency
Multiple Year Budgeting
Background Information
• Oakland County’s first Biennial Budget was
developed in 1987 for the 1988/89 period.
• Just this year, the line-item budget was
expanded to a Triennial Budget for FY 2010
through FY 2012.
– The budget message also includes a summarized
long-term financial projection through FY 2015.
Benefits of Multiple Year Budgeting
• Ability to Identify Long-term Trends
• Ability to Develop Long-term Financial Goals
and Strategies
• Major Long-term Issues are Addressed
– Goals and strategies for the next several years
drive the resulting line item details.
– As opposed to traditional incremental line item
budgets that simply build on the prior year’s
annual budget.
Benefits of Multiple Year Budgeting
• A Multiple Year “Rolling” Budget Ensures
Current, Relevant Long-term Outlook
– Timely and frequent budget amendments
…Adjusts current and subsequent years’ budget.
−Rather than being an annual event, a rolling
multiple-year budget evolves year-round, is a more
dynamic process, and helps to avoid last-minute
discovery of a financial crisis.
Developing Budget Strategies through
a Team Effort
• A Budget Task Force provides input to the
County Executive for development of the
Recommended Budget.
– The Budget Task Force is comprised of the Deputy
County Executives.
– Support to the Budget Task Force is provided by
the Departments of Management & Budget and
Human Resources.
Incentives for Early Reductions
• Elected Officials and Department Heads are
“credited” for early reductions.
• Credits are one-time in nature and can be used to
offset future years’ tasks if needed.
• This approach has resulted in implementing structural
reductions sooner rather than later.
• An appropriate approach considering that the current
downturn and its effects will impact local
governments for many years to come.
Implementing Multi-Year Budgeting
• Focus on long-term Financial Stability
• Three steps
– Understanding financial position
• Revenue and cost drivers
• Hidden liabilities
• Political and economic realities
– Developing a strategic response to financial reality
– Implementing the multi-year budget process to reflect
strategic response
• On-going activities
• Monitoring, evaluation, adjustments
• Specific Options
Foundation of Stability
Financial Stability
2. Budget Practices
3. Liabilities
4. Political & Economic Environment
1. Financial Position
& Parameters
Financial Position
• Realistic beginning point
– Fund balance
– Sustainable revenue considerations
• Economic realities (property taxes)
• Legal/Political realities (Bolt decision)
– Cost drivers
• Personnel (largest cost, all forms of compensation)
• Hidden liabilities (retiree health care)
Develop Strategic Response
• Focus on goals and priorities of organization;
• Consider current organizational capacity and
necessary steps to increase capacity;
• Define vision for short- and long-term;
• Concentrate on “how we do business” rather than
“how to change the size of how we have always
done it”;
• Define options in terms of revenues and
expenditures as well as efficiencies and cuts.
Developing a Strategic Response
• Ask questions to learn more about every aspect:
scope, basis, process…. Look at little things as
well as big ticket items. WHY!!!
• Communicate goals, plans, and changes from
status quo.
• MANAGE EXPECTATIONS!
• Think long-term, at least 3 years.
• Take action now!
Responsive Budget Process
• On – going activities
• Monitoring, evaluation, adjustments
–
–
–
–
–
Monthly reports
Transparency
Multi-Year Amendments
Quarterly Forecasting
Beyond the Budget
• Specific Options
– Program Reductions
– Use of Credits
Budget/Finance Timetable
Receive Actuary Report
Governor’s Budget
Proposal
Prelim. Property
Tax estimates
Nov.
Dec.
2nd State Revenue
Conference
Revenue
Projections and
Budget Parameters
1st State Revenue
Conference
Oct.
Board Budget
Hearings
Jan.
Feb.
Mar.
Submit Budget
Recommendation
Rebase Property
Taxes
Apr.
May
June
Adopt Triennial
Budget
July
Aug.
Sept.
Equalization Report
2nd Qrt. Forecast and Amendments
Year –End Report and Amendments
1st Qrt. Forecast and
Amendments
Amendments to all three years – as required (typically every two weeks)
3rd Ort.. Forecast and
Amendments
Budgeting Timetable
(10/1 – 9/30 Fiscal Year)
• REVENUE ESTIMATES
– November (11 months before FY begins)– Preliminary
Property Tax revenue estimates
• Based upon sales data as of September 30
• Includes estimates for next three years
– January / February (9 months before FY begins)
• Estimates of State revenues
– January Revenue Estimating Conference
– Governor’s Budget Proposal
– Analyze any statutory changes
– Estimate of Charges for Services and other Revenues
• Historical analysis
• Economic analysis
• Statutory analysis
Budgeting Timetable (continued)
• January – First Quarter Financial Forecast
– Verify estimated revenues and expenditures
– Amend the budget as appropriate
– Add new information to estimates for the next three fiscal
years
• March (6 months before FY begins)
– Finalize all revenue estimates
– Issue budget parameters based upon revenue projections
• April (5 months before FY begins)
– Obtain actuary report for pension and OPEB
– Submit Equalization report
Budgeting Timetable (continued)
• May (4 months before FY begins)
– Revise revenue estimates
• 2nd State revenue estimating conference
• Rebase property tax estimates
– Off new Equalization report
– Six (6) months of sales data
• June (3 months before FY begins)
– Finalize budget recommendation
• Based upon revised revenue estimates
• Second quarter financial forecast
• Department input
Control System – Monthly Monitoring
• Monthly monitoring of budgeted revenues and
expenditures
– Financial system distributes monthly reports
automatically
– Managers and financial staff talk monthly
regarding issues and concerns
– Key administrative team reviews specific
“problem” areas on a monthly basis
• Reports automatically posted on website:
http://www.oakgov.com/fiscal/info_pub/monthlyreports.html
• Managers expected to Manage
Multi-year Amendments
• Multi-Year “Rolling” Budget AND Amendments
– At least biennial
– Budget amended when required, not limited to
specific time period (e.g. quarterly)
– Budget amendments cover current fiscal year AND
the remaining years of the plan
– Allows us to maintain a clear picture of the planned use of
resources for a multi-year period
Quarterly Forecasting
– Includes YTD results + estimated projections for
remainder of year, by control objective
– Operating results shared with department directors,
corrections addressed quarterly, including budget
amendments
– This allows for advance notice of potential problem
areas with enough time for the administration and
policy board to make adjustments
Focus Beyond the Budget
• To obtain more effective control over the
unit’s true fiscal condition, the balance sheet
should also be monitored
– Simply meeting budget to actual goals will
not help staying off fiscal disaster if the
balance sheet is a mess to begin with
• Cash flow forecasting
• Inadequate cash flow will lead to reduced
investment income, but could lead to higher cost
should a unit be required to issue debt to meet
daily demands
Summary – Shortfall/Action Steps (in thousands)
FY 2010
Shortfall Estimates
September 2008
January 2009
June 2009
Total
Actions Steps
Eliminate Planned 2.0% Raise
FY 2010 2.5% Salary Reduction
FY 2011 2.5% Salary Reduction
Sub-Total Personnel
CCIRF Appropriation
Property Tax Forfeiture Payment
Suspend Tri-Party Allocation
Reduce Capital Improve. Transfer
Reduce Building/Liability Charges
Jail Population Fund Appropriation
Sub-Total County-Wide Reductions
FY2012
$(34,200)
( 17 100)
( 14,300)
$(65,600)
$( 7,500)
(33,800)
(29,900)
$(71,200)
$(
(
(
$(
$ 4,500
5,823
0
$ 10,323
$ 4,500
5,823
5,713
$ 16,036
$ 4,500
5,823
5,713
$ 16,036
$ 7,600
2,800
2,250
2,000
1,000
645
$ 11,500
0
2,250
2,000
1,000
645
$ 13,000
0
2,250
2,000
1,000
645
$16,295
Budget Tasks
Task accomplished with ’09/’10 budget
Structural Reductions – FY 2011*
Structural Reductions – FY 2012*
Sub-Total Elected Officials Efforts
DTRF Equity
CCIRF Equity
Delinquent Persn. Prop. Equity
Jail Population Fund Equity
Property Tax Forfeit. Equity
Sub-Total Non-GF Equity
FY 2011
$ 17,395
$10,000
34,200
.
Short Fall Before Transfers
On-time Accelerations from 2010
On-time Accelerations from 2011
On-time Accelerations from 2012
Remaining Shortfall
* Specific budget tasks and action steps yet to be determined
15,100)
43,600)
26,900)
85,600)
$ 18,895
$ 20,000
0
$ 30,000
0
0
0
$44,200
5,000*
0
$ 25,000
5,000*
5,000*
$ 40,000
$ 7,300
7,100
1,766
1,300
1,000
$18,466
$ 7,300
7,100
1,766
1,300
1,000
$ 18,466
$ 7,200
7,100
1,766
0
1,000
$ 17,066
$ 23,684
$ 5,697
$ 6,397
(23,684)
$
0
23,684
(29,381)
$
0
29,381
(35,778)
$
0
Oakland County Projected General Fund Balance
(with use of accelerated credits)
110.0
108.8
106.6
104.1
98.8
88.5
84.3
80.0
73.1
50.0
Balance 9/30/08
Balance 9/30/09
Balance 9/30/10
Balance 9/30/11
Balance 9/30/12
Balance 9/30/13
Balance 9/30/14
Oakland County Projected Fund Balance (without accelerated credits)
100.0
90.0
88.5
88.5
88.5
84.3
83.8
80.0
75.6
70.0
60.0
50.0
49.9
40.0
30.0
Balance 9/30/08
Balance 9/30/09
Balance 9/30/10
Balance 9/30/11
Balance 9/30/12
Balance 9/30/13
Balance 9/30/14
Laurie Van Pelt, Director
Department of Management and Budget
[email protected]
Tim Soave, Manager
Fiscal Services Division
[email protected]
Additional Resources
• Example of Fiscal Note
• Extraction from Quarterly Forecasting Report