Effective Spending Tactics for Your Municipality's Fiscal Year Budget

Lena Eisenstein

Municipal governments have many bases to cover as they prepare their fiscal year budgets and make decisions about how to adjust it as budgetary needs change and arise. Many situations may arise over the course of a year that create changes in the budget, but what won't change is that municipal governments will continue to be tightly and highly scrutinized. Citizens of today have greater expectations for transparency and accountability. One of the greatest challenges that public administrators have is finding an appropriate balance between basic operations and the expectations of their citizens.

Just as there have been significant changes in economics and populations, technology has kept up with ways to help municipal governments streamline and improve their processes.

Considering the Factors that Influence Local Government Spending

Elected officials and public administrators don't have the liberty of planning their fiscal year budgets in a vacuum. They have to consider the impact of political, economic, social, and legal environments. In addition, they have to keep their budgets flexible enough to account for expenses related to unexpected events and situations.

Local citizens are more involved in local government business than ever before. To respond better to the needs of their citizens, government workers are more regularly using their budgets to better understand how citizens see their governments. More and more, local governments are being asked to provide diversity in the type and quality of services citizens are asking for. Some communities have a reputation for being stronger in certain areas such as public schools, social services, or providing for the elderly. In the future, we may see further segmentation in communities along generational lines.

Public surveys, public forums, town hall meetings, and interactive websites all provide ways for local governments to check in with their citizens to better understand their needs and desires.

Spending tactics must also take environmental factors into consideration. Inflation, interest rates, economic cycles and competition from neighboring communities are all factors that local governments must consider before they spend funds from their fiscal year budgets.

It's wise to disallow local government departments from spending their allocations. In many cases, it's prudent to hold back on hiring additional staff. When making contractual commitments, local governments should be considering the strength of their reserves. Some communities find that a practical way to obtain the edge over neighboring jurisdiction is to shift the tax burden from the residents to the non-residents. This is a way to lower taxes for residents without sacrificing the current levels of services. These are strategies that help to build reserves with little or no impact on the permanent residents of the community.

Another area where local governments can toe the line on their spending habits is by anticipating social and demographic changes. Populations may increase or decrease drastically depending on job availability and other issues. As populations age, local governments have to consider the issue of age distribution and the number of their citizens in their community that live on fixed incomes. Another factor that plays a role in local government spending is the average household income and whether their community is primarily white collar or blue collar. Higher net worth communities expect to have higher quality local government services. These issues have lasting impact on local budgets.

Politics often come into play here as well. As communities revitalize and enjoy higher incomes, new residents may demand more and better services to help them uphold their statuses within the community. Local governments feel pressure to meet the needs of the up-and-coming elite populations.

Still another factor that affects how and when local governments spend their funds is the age distribution in their communities. Young families are primarily interested in such services as public education, recreational activities, and public safety. Communities that primarily consist of aging seniors may be more interested in social services for senior living.

Legal Matters and the Impact of Higher Levels of Government

While there's no disagreement that local governments have to keep their budgets balanced, there is disagreement about whether they balance their fiscal year budgets based on a cash basis or accrual basis.

Local governments that balance their budgets on a cash basis record funds when they receive the cash and expenditures at the time of disbursement. It's arguably easier for governments to manipulate cash balances to make the budget look as if it's balanced when, in reality, it isn't. This system allows governments to delay payments until the following fiscal year and work on collecting revenues for credit to the current year.

Other governments may use a modified accrual basis which means that they recognize liabilities at the time they're incurred and only release funds as they become available in the fiscal year budget.

Another important factor for local governments to consider is mandates from state and federal governments that limit their choices. Federal and state governments impose mandates on local governments that require them to provide certain services. At the same time, federal and state governments don't always fund mandates, which means that local governments have to find a way to provide them on their own. Unfunded mandates and financial cutbacks at the state level can create tough hardships at the local government level.

Technology as a Tool for Managing Local Government Budgets and Spending

Local citizens are being forced to use technology more than they're comfortable with in many areas of their personal lives. Many banks have replaced their services with automated processes and electronic conveniences such as depositing and withdrawing personal funds via a cell phone or computer. Most of the time, citizens don't even have to step foot in a bank. The changes that technology has created have helped people learn that a little investment in technology nearly always yields valuable savings in other places. Many citizens are also aware that technology provides benefits to them in the way of greater transparency and accountability.

Our iCompass survey showed that just under 40% of local governments were increasing their budgets to expand their technology capabilities.

Manual processes take longer to complete which eats up valuable labor hours. This is without mentioning that humans are prone to data entry errors, which costs municipal governments even more money. A software solution by iCompass, a Diligent brand, allows municipal governments the advantage of automating many of the interactions between citizens and their local government while saving the government time and money.
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Lena Eisenstein
Lena Eisenstein is a former Manager at Diligent. Her expertise in mission-driven organizations, including nonprofits, school boards and local governments, centers on how technology and modern governance best practices empower leaders at these organizations to serve their communities with efficiency and purpose.