Municipal budgeting: The dilemma of supply vs. demand;

              MUNICIPAL BUDGETING
The dilemma of
supply vs. demand
/
by JOHN V. FLYNN, JR. / Manager, Philadelphia
Government officials continually
face a dilemma in public manage­ment.
On the one hand is a demand
for increased services and great
social pressure to take care of those
who cannot take care of themselves.
On the other hand is the economic
reality faced by city and local gov­ernments—
a declining economic or
tax base, almost always a climate of
increased wage and salary demands,
and even unionization pressures
from the workforce.
In addition, local governments
face more stringent restraints
brought on by the "taxpayer revolt."
Many state legislatures have placed
expenditure or revenue "caps" on
local governments. Even where legal­ly
imposed spending ceilings or
referendum-imposed revenue limita­tions
are not in the offing, voters are
pressing to reduce waste and ineffi­ciency
in government and are de­manding
more accountability in the
use of their tax dollars.
Dr. Elsie Watters, Research Direc­tor
of the Non-Profit Tax Foundation,
recently commented: "People in
general are tired of higher taxes and
inflation. There is a trend r towards
limiting government spending, and
that trend is going to continue."
David Leininger, Development Di­rector
for the city of Dallas, Texas,
adds: "Cities must understand the
dynamics within the marketplace.
Cities are competing with the sur­rounding
suburbs, and must act
accordingly in these matters."
In order to meet these challenges,
many jurisdictions are reviewing
their financial management systems
to see how well their planning,
budgeting, and control processes
accomplish the following:
• Develop short and long range
plans.
• Translate plans and goals into
activities.
• Relate the output of activities to
the appropriate costs.
• Evaluate these activities in
terms of their original purpose.
The need for better control of
spending and better management of
operations has led to a renewed
interest in fiscal tools and a new
emphasis on productivity studies,
operations review, and labor rela­tions.
Central to meeting today's
requirements is a good management
and control process. The manage­ment
of any government unit usually
involves the following phases:
• Establishing plans, objectives.
• Controlling the budget process.
• Managing operations and eval­uating
results.
Plans and Objectives
Before the taxpayer revolt and the
slackening of federal aid, it was
assumed that current activities
would expand each year. Hence,
there was little need for a thorough
evaluation of existing operations,
and even less need to prioritize
services. Officials today have
therefore little or no experience in
responding to calls for revenue cuts
or spending ceilings. Indeed, recent
headlines indicate that some offi­cials,
faced with funding emergen­cies,
have had to make quick de­cisions
that may not be in their juris­diction's
best interest.
Clearly, expanding the scope and
quality of planning, plus defining ob­jectives,
is essential if governments
are to cope with resource shortages.
The jurisdiction's programming ob­jectives
must be defined, and these
objectives must be linked to their
potential impact on its citizens.
Recent improvements have occur­red,
of course. One new develop­ment
is contingency planning. This is
a form of long-range planning that
takes projected expenditures for cur­rent
and proposed activities, com­pares
them with projected revenues,
and then shows local officials and
citizens the impact of—and alterna­tives
to —the projected programs. A
strategy to deal with any shortfall is
then developed as part of this
process. A particularly good exam­ple
of contingency planning is de­scribed
in the following article.
The Budget Process
It is important to note how the
defining of objectives has been
increasingly integrated into the bud­get
process. Let's, therefore, take a
closer look at what constitutes a
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