nlc pbb presentation

PRIORITY BASED BUDGETING (Part II)

Looking at the Budgetthrough a

“NEW LENS”

Kathie Novak, Jon Johnson & Chris Fabian

November 14, 20131

A Brief Introduction

JON JOHNSON CHRIS FABIAN

2

4

The BUDGET ….From an Elected

Officials Perspective

9

What are your Elected Officials really thinking?

• What does all this financial information really tell me?

o Are you saying everything is fine ?

o Are you saying we need to make cuts ?

o Are you saying we need to raise taxes ?

o Are you saying we have more money to spend ?

• What are you asking me to decide ?

OR

• Are you just wanting my “rubber stamp” of approval ?

10

The Beginnings …. Fiscal Health & Priority Based Budgeting

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DOES THIS LOOK FAMILIAR ?????

$(150,000,000)

$(100,000,000)

$(50,000,000)

$-

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Fund BalanceUses of FundingSources of Funding

2009

-201

0 Pr

oje

cted

Bu

dge

t

2010

-201

1 B

ud

get

Fore

cast

“Over the Counter” Treatments

Treatment Options:• Fees for Service = Cost of

Delivery• Freeze Vacant Positions

(Temporaries?)• Across the Board “Cuts”• Defer/Delay Capital Projects• “Sharpen” Revenue

Billing/Collection• Consolidated

Purchasing/Contracting• Sell Underutilized Assets• Cost Allocation/Overhead

Transfers• Freeze Salaries/Overtime

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Treatment Considerations:• Only a Short-Term “Fix” to

Relieve Pain• Safe to apply with minimal

diagnosis• Must have follow up

diagnosis

“Emergency-Room” Treatments

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Treatment Options:• Across the Board Budget

“Amputation”• Hiring Freeze/Furloughs• Reduction in Workforce• 4-Day work weeks• Reduce Services• Spend “Savings”

Reserves • Early Retirement

Incentives• Outsourcing/Shared

Services• Resize or Restructure

Treatment Considerations:• Don’t apply without

diagnosis• Don’t be guilty of

malpractice• Only to “Stop the Bleeding”

“Cosmetic” Treatments(Not a Solution!!!)

Accounting GimmicksShifting Operational Costs to Capital BudgetsDeferring CompensationUnderfund Accrued LiabilitiesShort –term borrowing“Distort” estimates or projections

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Achieving Fiscal Health & Wellness

2 Strategic Initiatives

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Fiscal Health Long-term Fiscal Wellness

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BRINGING VISION INTO FOCUSWITH A NEW “LENS”

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CPBB Publications on Fiscal Health & Wellness

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Across the Board Cuts Address $14.5 Billion Shortfall

California Governor’s Office: “Across-the-board approach spreads reductions as evenly as possible so no single program gets singled out.”

Reaction: “the governor’s approach would be like a family deciding to cuts its monthly mortgage payment, dining-out tab and Netflix subscription each by 10%, rather than eliminating the restaurant and DVD spending in order to keep up the house payments.”

From 2007

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According to Moody’s:Across-the-Board versus Targeted Budget Cuts

“Across-the-board cuts can be a way to avoid tough decisions”

“Targeted cuts require a serious discussion of community values, relative benefits of different services, and long-term implications”

Moody's wants to see how local governments plan for and respond to financial challenges over the long term“Making targeted cuts can demonstrate a more

strategic approach to managing the fiscal crisis”

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“Across the board cuts spreads the pain evenly and also evenly spreads the mediocrity”- Budget Director for the State of Louisiana

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Achieving Long-Term Fiscal Wellness

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STEPS to SUCCESS – Priority Based Budgeting

1. Determine Results Accurate prioritization of programs, reflecting the organization’s stated

objectives, depends on the comprehensive identification of the Results it is in business to achieve

2. Clarify Result Definitions Precision in prioritization depends on the articulation of the cause and

effect relationship between a program and a Result Using clearly defined “Result Maps”, detailing the factors that

influence the way Results are achieved, the organization can minimize subjectivity in the process of linking programs with its Results

3. Identify Programs and Services Comparing individual programs and services as opposed to comparing

departments that provide those services allows for better prioritization

4. Value Programs Based on Results With the right Results that are clearly defined, the organization can

more accurately “value” a program relative to its influence on achieving Results

5. Allocate Resources Based on Priorities Using “Resource Alignment Diagnostic Tool”

25

Strategic Questions 1. What are we in “business” to

do?

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What are “Results”

• High-level and over-arching reasons the organization exists in the eyes of the community

• Remain consistent and unchanged over time

• Comprehensive

• Distinguished from (i.e. “Results” are not…)o Vision or Mission Statementso Organizational Values

• How we want to achieve our resultso “Marketing” statements

• Look and feel of the communityo Specific short-term, projects, goals or initiatives

27

Step 1: Determine Results

City of Grand Island, Nebraska

Community Results• Used to Differentiate Programs Offered to the Community• Not All Programs Achieve these Results• Programs that Achieve Many Results, with a High Degree of Influence, Achieve Highly in Prioritization (demonstrate high degree of relevance)

Quality Service Results• Every Program Should Achieve these Results (though potentially, not every program does)• Not Used to Differentiate the Relevance of Programs in Prioritization

Governance Results• Used to Differentiate Programs Designed to Support Governance

Stewardship of the Environment

Safe Community

Strategic, Sustainable and Maintained Development

Mobility Options

Efficient Services

Transparent Services

Financial Stewardship

High-quality Workforce

Regulatory Compliance

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Validating Results

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Step 2: Clarify Result Definitions (Result Maps)

City of Boulder, CO Results

Accessible & Connected Community

Economically Vital Community

Healthy Environment & Community

Inclusive & Socially Thriving Community

Safe Community

32

Defining ResultsResult Mapping Exercise

33

Creating Result Maps

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Identify and Define Results

STEWARDSHIP of the

ENVIRONMENT


Encourages energy conservation and efficiency through

education, incentives and the provision of alternative

solutions

Provides for the renewal of the

environment through recycling and reuse

Manages and mitigates factors that impact environmental quality and sustainability

Promotes and regulates a clean, orderly and

ecologically balanced community

Controls and abates threats to the

environment caused by nature

City of Grand Island, Nebraska

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The City of Chandler, Arizona

SAFE COMMU

NITY

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The City of Wheat Ridge, Colorado

SAFE COMMUNITY

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The Town of Christiansburg, Virginia

GOOD GOVERN

ANCE (Sound

Financial Entity)

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Role of the Council/Board• Have transparent access to listing of all programs

offered along with associated costs and FTE• Educate themselves on the variety and diversity

of programs offered

Role of the Citizens• Have transparent access to listing of all programs

offered along with associated costs and FTE• Be informed about the nature of the programs

offered to residents businesses and visitors

39

Strategic Questions

1. What are we in “business” to do?2. What exactly do we do?

40

Identify “Programs” within Departments/ Divisions

Departments develop their own “program” inventories

Comprehensive list of “what we do”

Comparing relative value of programs, not relative value of departments

Goldilocks & the Three Bears: Not too big, not too small, just right! TOO BIG = Departments/Divisions TOO SMALL = Tasks JUST RIGHT = Measure relative

size based on costs/people associated with program to more discretely demonstrate how resources are used

CITY OF BOULDER, COLORADODepartment Program Inventory

Fund No.

Department Providing Program Program Name

010 Community Planning & Sustainability General Business Assistance010 Community Planning & Sustainability Business Retention and Expansion010 Community Planning & Sustainability Business Incentive Programs

010 Community Planning & SustainabilityBusiness Partnerships and Sponsorships

140 Community Planning & Sustainability Energy Decarbonization140 Community Planning & Sustainability Green Job Creation140 Community Planning & Sustainability Climate Adaptation Planning

112 Community Planning & Sustainability Comprehensive Planning112 Community Planning & Sustainability Intergovernmental Relations112 Community Planning & Sustainability Historic Preservation112 Community Planning & Sustainability Ecological Planning

Directions: For all of the programs and services in your department, identify the program name. When completed, please e-mail the Program Inventory back to Jim Reasor

Monday, July 26, 2010

City of Boulder, Colorado

41

OBJECTIVES for Developing Program Inventories

Create a comprehensive listing of all services offered by each operating division (to both “external” and “internal” users)

Provide a better understanding of “what we do” to staff, administration, elected officials and citizens

Provide a framework to better understand how resources are used to support “what we do”

Provide a valuable tool for staff, management and elected officials to use when faced with budgetary “choices” about how funds are distributed.

Allow for the preparation and discussion of a “program budget” rather than a “line-item budget”

42

To determine “just right”, look for “differences” that might help determine if an activity can be defined as a “stand-alone” program

“Who” are you doing the activity for? Does it benefit a specific demographic group or population?

“What” are you doing the service to? Does it affect a specific property or asset (infrastructure, facility,

etc.)

“How” is it funded? – Is there someone paying for it? Are there revenue sources associated directly with the program

(“Program Revenues”)

What “type” of service are you providing? Preventative, Replacement; Repair/Maintenance; Instruction;

Protection; Informative; etc.

Defining Programs

43

Defining Programs

Has someone told us we “have to do it?” Are there statutes, ordinances, resolutions, or other

legislative documents that require us to provide the service?

Is there an “End Product” as a result of doing it? Does the external or internal user get something tangible

when the service is delivered?

“Is there someone outside the organization that “does the same thing”?

Does a private business offer a similar service (“Yellow Pages test”)

Do we “advertise” that we do it? Is there a separate phone directory or website reference to

the service?

44

How to Identify Program Costs

1) Associate Salary & Benefit Costs with your Personnel

2) Assign Personnel to the Programs they Provide

3) Associate Non-Personnel Costs with Programs

4) Line item Budget is now expressed as a Program Budget!

45

1) Associate Salary & Benefit Costs

with your Personnel

• Key is understanding how personnel line items are distributed (per FTE, on a percentage of salary basis, etc.)

46

2) Assign Personnel to the Programs they Provide

• Estimate for a given year (this is not a time study!)• Accuracy, not precision, is the goal • Can’t allocate an FTE over 100% (no matter how overworked they think

they are)

47

3) Associate Non-Personnel Costs

with Programs

• Choose a reasonable allocation methodology:• Divide costs by FTE (i.e. supplies line item)• Assign costs directly to program (i.e. annual audit)

48



of programs offered




49

Strategic Questions 1. What are we in “business” to do?2. What exactly do we do?

3. How do we figure out what is “core” OR What is of the highest importance?

50

Step 4: Score Programs against Results & Attributes

City of Boulder’s ResultsBasic Program Attributes

Accessible & Connected Community

Economically Vital Community

Healthy Environment & Community

Inclusive & Socially Thriving Community

Safe Community

Mandated to Provide the Program

Reliance on the City to Provide the Program

Cost Recovery of the Program

Change in Demand for the Program

Size of Population ServedAnd/or any other criteria

that is relevant to your community

51

Simple Scoring Scale – “Degree” of Relevance to a

Result

4 = Program has an essential or critical role in achieving Result

3 = Program has a strong influence on achieving Result

2 = Program has some degree of influence on achieving Result

1 = Program has minimal (but some) influence on achieving Result

0 = Program has no influence on achieving Result

“High Degree” of Relevance

“Lower Degree” of Relevance (still a clear connection)No Clear Connection

52

Basic Program Attributes:Mandated to Provide Program

• Programs that are mandated by another level of government (i.e. federal, state or county) will receive a higher score for this attribute compared to programs that are mandated solely by the City or have no mandate whatsoever.

• The grading criterion established to score programs, on a 0 to 4 scale is as follows:o 4 = Required by Federal, State or County legislationo 3 = Required by Charter or incorporation documents OR to

comply with regulatory agency standardso 2 = Required by Code, ordinance, resolution or policy OR to

fulfill executed franchise or contractual agreemento 1 = Recommended by national professional organization to

meet published standards, other best practiceo 0 = No requirement or mandate exists

53

Basic Program Attributes:Reliance on City to Provide Program

• Programs for which residents, businesses and visitors can look only to the City to obtain the service will receive a higher score for this attribute compared to programs that may be similarly obtained from another intergovernmental agency or a private business.

• The grading criterion established to score programs, on a 0 to 4 scale is as follows:o 4 = City is the sole provider of the program and there are no other

public or private entities that provide this type of serviceo 3 = City is currently the sole provider of the program but there are

other public or private entities that could be contracted to provide a similar service

o 2 = Program is only offered by another governmental, non-profit or civic agency

o 1 = Program is offered by other private businesses but none are located within the City limits

o 0 = Program is offered by other private businesses located within the City limits

54

Basic Program Attributes:Change in Demand for Program

• Programs demonstrating an increase in demand or utilization will receive a higher score for this attribute compared to programs that show no growth in demand for the program. Programs demonstrating a decrease in demand or utilization will actually receive a negative score for this attribute.

• The grading criterion established to score programs, on a -4 to 4 scale is as follows:o 4 = Program experiencing a SUBSTANTIAL increase in demand of 25% or

moreo 3 = Program experiencing a SIGNIFICANT increase in demand of 15% to 24%o 2 = Program experiencing a MODEST increase in demand of 5% to 14% o 1 = Program experiencing a MINIMAL increase in demand of 1% to 4%o 0 = Program experiencing NO change in demand o -1 = Program experiencing a MINIMAL decrease in demand of 1% to 4%o -2 =Program experiencing a MODEST decrease in demand of 5% to 14% o -3 =Program experiencing a SIGNIFICANT decrease in demand of 15% to 24%o -4 =Program experiencing a SUBSTANTIAL decrease in demand of 25% or

more

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Basic Program Attributes:Cost Recovery of Program

• Programs that demonstrate the ability to “pay for themselves” through user fees, intergovernmental grants or other user-based charges for services will receive a higher score for this attribute compared to programs that generate limited or no funding to cover their cost.

• The grading criterion established to score programs, on a 0 to 4 scale is as follows:o 4 = Fees generated cover 75% to 100% of the cost to provide

the programo 3 = Fees generated cover 50% to 74% of the cost to provide the

programo 2 = Fees generated cover 25% to 49% of the cost to provide the

programo 1 = Fees generated cover 1% to 24% of the cost to provide the

programo 0 = No fees are generated that cover the cost to provide the

program

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Basic Program Attributes: Portion of Community Served by

Program• Programs that benefit or serve a larger segment of the City’s

residents, businesses and/or visitors will receive a higher score for this attribute compared to programs that benefit or serve only a small segment of these populations.

• The grading criterion established to score programs, on a 0 to 4 scale is as follows:o 4 = Program benefits/serves the ENTIRE community (100%)o 3 = Program benefits/serves a SUBSTANTIAL portion of

the community (at least 75%)o 2 = Program benefits/serves a SIGNIFICANT portion of the

community (at least 50%)o 1 = Program benefits/serves SOME portion of the

community (at least 10%)o 0 = Program benefits/serves only a SMALL portion of the

community (less than 10%)

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Identify “Value” of Program Based on their Influence on Results

Individual Department Program Scorecard

Mandated to Provide Program

Cost Recovery of Program

Change in Demand for

Service

Reliance on City to Provide

ServiceSafe City

Prosperous Economy

Green, Sustainable

City

Attractive, Vibrant

Community

Reliable, Well-

Maintained Infrastructur

e

0-4 Scale (4=State/Federal

Mandate; 2=Charter; 1=Ordinance/Resolution; 0=No Mandate)

0-4 Scale based on Percentage

(4=75-100%; 3=50-74%; 2=25-49%; 1=1-

24%)

-4 to 4 Scale ('-4=demand

significantly decreasing; 4=demand

significantly increasing)'

0 to 4 Scale (4=Only City can provide service; 2=Only public

entities can provide service; '0=other

entities can provide service)'

Department Program Enter Score Below Enter Score Below Enter Score Below Enter Score Below Enter Score Below Enter Score Below Enter Score Below Enter Score Below Enter Score BelowOffi ce of Economic

DevelopmentBusiness Attraction/ Expansion Assistance

4 2 4 4 2 4 3 2 0

Offi ce of Economic Development

International Business Relations/Sister City

0 1 2 2 0 2 1 1 0


Economic Strategy, Policy and Analysis

1 2 4 2 0 3 3 2 0


Downtown Management 1 2 4 4 3 2 0 3 4


Arts / Festival Grants and Assistance

1 1 3 0 1 3 1 4 1


K-12 Arts Education 0 0 2 0 1 2 0 4 0


Cultural Planning, Policy and Initiatives / Arts

Commission

1 0 2 4 1 3 1 4 1


Public Art Project Management

1 1 2 0 1 2 2 4 3


Public Art Master Plan Implementation and

Interagency Coordination

1 1 3 0 1 2 1 4 2

On a scale of 0 to 4 points, 0 = program has no influence on achieving the Result; 1 = program has some influence, though minimal; 2 = program

influences the Result; 3 = program has a strong influence on the Result; 4 = program is essential to achieving the Results

Directions: For all the programs in your department, please rate how these programs score in the four Basic Attributes and they influence the City’s ability to achieve its Priority Results. When completed, please email the Program Scorecard back to [email protected]

Thursday, January 28, 2010 Evaluation CriteriaBasic Program Attributes Priority Results

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Not all Results are of Equal Relevance:

Result “Weighting Factor”

*Result “Weighting Factor” applied to program scores for each Result

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Strategic Questions

1. What are we in “business” to do?2. What exactly do we do?3. How do we figure out what is “core” OR

What is of the highest importance?

4. How do we know we are successful?

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Peer Review (Quality Control) Process

61



of programs offered




62

Strategic Questions

1. What are we in “business” to do?

2. What exactly do we do?

3. How do we figure out what is “core” OR What is of the highest importance?

4. How do we know we are successful?

5. How do we ask “better” questions that lead to “better” decisions about “what we do” and “why we do it”?

63

Defining Quartile Groupings

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0

147

101316192225283134374043464952555861646770737679828588919497

100103

Total Score for Community Oriented Programs

Tota

l N

umbe

r of

Pro

gram

s

Quartile 1

Quartile 2

Quartile 3

Quartile 4

Q 1Q 2Q 3Q 4

Key:Programs are grouped into Quartiles (not ranked, one

versus the other)

Quartile 4:58 Programs





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Step 5: Allocate Resources Based on Prioritization

$85,915,772

$51,726,155

$21,505,297

$7,498,842

$- $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 $90,000,000 $100,000,000

1

2

3

4

Quarti

le Ra

nking

(Qua

rtile 1

: High

est Ra

ted Pr

ogram

s;Qu

artile

4: Low

est Ra

ted Pr

ogram

s)

Prioritization Array: Combined City-wide Programs

79 Programs

103 Programs

103 Programs

58 Programs


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“Resource Alignment Diagnostic Tool”City of Boulder, CO

Quartile Ranking Programs in ArrayQrt 1 88

Qrt 2 116

Qrt 3 1102-10%Qrt 4 54

TOTALS 368

October 30, 2012

Community-Oriented Programs

All Departments

Funding Source: (Est. Budget, Gen Gov Revenue,

Program Revenues)

Total Estimated BudgetCity-wide

Prioritization Perspective: (City-wide, Fund, Funds)

Choose Department: (All Departments, Specific)

Program Type: (All Programs, Governance,

Community-oriented)

$00.00%

0.00%

$0

$0

$85,915,772

$21,505,297

$51,726,155

0.00%

$0

$0

$0 $85,915,772

$51,726,155 0.00%

$0 $166,646,067 0.00% $0 $166,646,067

2012-13 Proposed Budget Increase (Reduce) % Impact 2012-13 Target Budget

$0

$0

2011 Budget

$7,498,842

$21,505,297

$7,498,842

$85,915,772

$51,726,155

$21,505,297

$7,498,842

$- $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 $90,000,000 $100,000,000

1

2

3

4

Quar

tile R

anki

ng(Q

uarti

le 1:

Hig

hest

Rat

ed Pr

ogra

ms;

Quar

tile 4

: Low

est R

ated

Prog

ram

s)

Priority Based Budgeting: Spending Array Perspectives

66

Live Demonstration of

“Fiscal Health Diagnostic Tool”

67



of programs offered




68

“Looking Through the “New Lens”

• Which programs are of the highest priority in terms of achieving what is expected by the community? o And which are of lesser importance?

• Which programs are truly mandated for us to provideo And how much does it cost to provide them?

• Which programs are offered because they are “self-imposed” ?

• Which programs are offered for which there are no other service providers?

• Are there programs might lend themselves to public/private partnerships?

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“Looking Through the “New Lens”

• Who in the private sector is offering programs that are similar in nature?o And should we consider” getting out of that business”?

• Which programs are experiencing an increasing level of demand from the community? o And which are experiencing a decreasing need?

• Are there programs offered that are not helping us achieve our intended “Results”?

• What are we spending to achieve our “Results”?

70

Strategic Questions

1. What are we in “business” to do?2. What exactly do we do?3. How do we figure out what is “core” OR What is

of the highest importance?4. How do we know we are successful? 5. How do we ask “better” questions that lead to

“better” decisions about “what we do” and “why we do it”?

6. What do you want to “keep” (not “What do you want to cut”) – THE ROLE OF CITIZENS

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Keys to Public Engagement

1.) Determine objective for engaging the PublicIs it a “Means to an End” or an “End in and of

Itself”?

2.) Design the role of the Public so it will have a meaningful influence

3.) Ensure higher participation – GO TO THEMUse the WebMail enclosures with Newsletters or Utility BillsAttend Community Meetings (i.e. Chamber of

Commerce; Civic Groups; School Board; HOA Meetings)Set up kiosks at Library, Rec Center, Senior Center, etc.

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Level of discussion too “Big Picture”

Conversation is framed contentiously (and possibly with “fear”)

Unclear about “how” citizens will be able to participate

Many Challenges Inherent to Engaging Public

73

Engaging Public in New Discussion About “What They Want to Keep”

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Valuing the Results of GovernmentInvest $100 in Results, according to their relative

importanceValuing the Results of GovernmentGiving Emphasis to the Priorities of Government

Directions: The results that our Government strives to achieve are identified in the table below. As a citizen, your job is to help the City understand clearlythe results that you value most. For this exercise, you are to imagine having $100 to invest in achieving the City's results. Where would you invest yourmoney? You can distribute the funds evenly to all results, you can invest all of your money in one single result, or you can invest your money toward the achievement of various results emphasizing those which are most important to you. Spend the $100 until it's gone by typing the amount you intend to invest in a result into the empty box to the "right" of the Result Statement.

Money You Started With $100

Money You Have Invested $100

Money You Have Left $0 (When this box reads "$0" you have completed Step 1.)

Strong Neighborhoods and a Sense of Community

Economic Vitality

Culture, Recreation and Learning Opportunities


Effective Transportation and Mobility Options

Results of Government

5$

20$

20$

15$

10$

Thursday, February 04, 2010

Amount of Money Citizen Intends to Invest in Result

30$ A Safe Community

75

On-Line Town Forum

76

Thank You !

www.pbbcenter.org

Jon Johnson, Co-Founder Chris Fabian, Co-Founder303-909-9052 (cell) 303-520-1356 (cell)[email protected] [email protected]

Kathie Novak, Senior Advisor 720-339-5845 (cell) [email protected]

Copyright ©2009 by Chris Fabian and Jon Johnson d/b/a the Center for Priority Based Budgeting,

Denver, Colorado.

nlc pbb presentation

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