The Benefits and “How-To” of Multiple Year Budgeting
description
Transcript of The Benefits and “How-To” of Multiple Year Budgeting
![Page 1: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/1.jpg)
The Benefits and “How-To” of Multiple Year Budgeting
Laurie Van Pelt, Director Department of Management and Budget
&Tim Soave, Manager
Fiscal Services Division
![Page 2: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/2.jpg)
Multiple Year Budgeting
Presentation Overview
• Benefits of a Multiple Year Budget
• Benefits from Working as a Team
• Incentives With Early Reductions
• Communication and Transparency
![Page 3: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/3.jpg)
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.
![Page 4: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/4.jpg)
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.
![Page 5: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/5.jpg)
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.
![Page 6: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/6.jpg)
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.
![Page 7: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/7.jpg)
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.
![Page 8: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/8.jpg)
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
![Page 9: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/9.jpg)
Foundation of Stability
4. Political & Economic Environment
1. Financial Position & Parameters
2. Budget Practices
3. Liabilities
Financial Stability
![Page 10: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/10.jpg)
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)
![Page 11: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/11.jpg)
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.
![Page 12: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/12.jpg)
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!
![Page 13: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/13.jpg)
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
![Page 14: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/14.jpg)
Budget/Finance Timetable
Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept.
Prelim. Property Tax estimates
Year –End Report and Amendments
1st Qrt. Forecast and Amendments
2nd Qrt. Forecast and Amendments
3rd Ort.. Forecast and Amendments
1st State Revenue Conference
2nd State Revenue Conference
Governor’s Budget Proposal
Equalization Report
Revenue Projections and Budget Parameters
Rebase Property Taxes
Submit Budget Recommendation
Adopt Triennial Budget
Amendments to all three years – as required (typically every two weeks)
Receive Actuary Report Board Budget Hearings
![Page 15: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/15.jpg)
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
![Page 16: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/16.jpg)
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
![Page 17: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/17.jpg)
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
![Page 18: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/18.jpg)
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
![Page 19: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/19.jpg)
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
![Page 20: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/20.jpg)
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
![Page 21: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/21.jpg)
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
![Page 22: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/22.jpg)
Summary – Shortfall/Action Steps (in thousands)
FY 2010 FY 2011 FY2012
Shortfall EstimatesSeptember 2008 $(34,200) $( 7,500) $( 15,100)January 2009 ( 17 100) (33,800) ( 43,600)June 2009 ( 14,300) (29,900) ( 26,900)Total $(65,600) $(71,200) $( 85,600)
Actions StepsEliminate Planned 2.0% Raise $ 4,500 $ 4,500 $ 4,500FY 2010 2.5% Salary Reduction 5,823 5,823 5,823FY 2011 2.5% Salary Reduction 0 5,713 5,713 Sub-Total Personnel $ 10,323 $ 16,036 $ 16,036
CCIRF Appropriation $ 7,600 $ 11,500 $ 13,000Property Tax Forfeiture Payment 2,800 0 0Suspend Tri-Party Allocation 2,250 2,250 2,250Reduce Capital Improve. Transfer 2,000 2,000 2,000 Reduce Building/Liability Charges 1,000 1,000 1,000Jail Population Fund Appropriation 645 645 645 Sub-Total County-Wide Reductions $16,295 $ 17,395 $ 18,895
Budget Tasks $10,000 $ 20,000 $ 30,000Task accomplished with ’09/’10 budget 34,200 0 0Structural Reductions – FY 2011* 0 5,000* 5,000*Structural Reductions – FY 2012* 0 0 5,000* Sub-Total Elected Officials Efforts $44,200 $ 25,000 $ 40,000
DTRF Equity $ 7,300 $ 7,300 $ 7,200CCIRF Equity 7,100 7,100 7,100Delinquent Persn. Prop. Equity 1,766 1,766 1,766Jail Population Fund Equity 1,300 1,300 0Property Tax Forfeit. Equity . 1,000 1,000 1,000 Sub-Total Non-GF Equity $18,466 $ 18,466 $ 17,066
Short Fall Before Transfers $ 23,684 $ 5,697 $ 6,397
On-time Accelerations from 2010 (23,684) 23,684 On-time Accelerations from 2011 (29,381) 29,381On-time Accelerations from 2012 (35,778)Remaining Shortfall $ 0 $ 0 $ 0
* Specific budget tasks and action steps yet to be determined
![Page 23: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/23.jpg)
Oakland County Projected General Fund Balance(with use of accelerated credits)
84.3
88.5
106.6108.8
104.1
98.8
73.1
50.0
80.0
110.0
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
![Page 24: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/24.jpg)
Oakland County Projected Fund Balance (without accelerated credits)
84.3
88.5 88.5 88.5
83.8
75.6
49.9
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
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
![Page 25: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/25.jpg)
Laurie Van Pelt, Director Department of Management and Budget
Tim Soave, Manager Fiscal Services Division
![Page 26: The Benefits and “How-To” of Multiple Year Budgeting](https://reader036.fdocuments.net/reader036/viewer/2022062314/5681493b550346895db682de/html5/thumbnails/26.jpg)
Additional Resources
• Example of Fiscal Note
• Extraction from Quarterly Forecasting Report