The city's budget process does not focus our government on providing efficient operations, effective operations, or excellent services, nor does it engage the public in any meaningful way. To understand the system's flaws, and how it can be improved, read on for advanced advice...
What’s wrong with the city budget and the budget process? -- The budget should be about more than numbers on a ledger, it should be about our collective aspirations for our city and it should reflect the public's priorities. But, today, the Philadelphia budget is focused on inputs, not results, and the public is not engaged or involved with the process that creates the budget.
The budget is focused on inputs (how much we will spend on police next year) instead of outcomes (how much crime will decrease next year). The public cares about results and when crime increases it is not consolation that we spend more on police. The city budget does not link agency performance to agency spending and there is no sense that we receive value for spending city tax dollars. We have little ability to judge or question what would happen to services if we increase or decrease agency spending. Could we reduce response time if we increase funding for the Fire Department? Would crime increase if we reduce funding for the Police Department? Without a focus on results, our budget is about dollars instead of what makes sense for the city -- BUDGETWATCHERS will look to the new administration to make change here. The budget doesn't really tell us what we are spending our money for. Because the budget is organized by agency and by lump sum (Police Department salaries, Fire Department materials and supplies), we never know how much we spend to do anything (fill a pothole, run a baseball league). Fringe benefit costs for city employees are budgeted centrally and not assigned to agencies where those employees, work so the true costs of running our agencies is not presented. Similarly, costs for support functions in the government like legal services, personnel administration, and purchasing supplies are budgeted in the Law Department, Personnel Department, and Procurement Department (respectively), and not assigned to the agencies that use those services. Vehicle maintenance, debt service on construction costs, payments resulting from law suits are all budgeted centrally. By not allocating all costs to the agencies responsible for those costs it is as if most city spending is not associated with any agency -- BUDGETWATCHERS will look to the new administration to make change here. The budget process does not include any meaningful public participation. The budget is prepared by the city administration and then presented to City Council where it is debated for weeks before the citizens ever get to comment on what we, the people, want. When the public finally does get to comment, it is long past time to have a productive discussion about what we want for our city, what we ask our government to accomplish, and what we would prioritize with scarce resources. Other cities include meaningful public participation in the budget process -- polling, focus groups, deliberative discussions with thousands of residents -- as a fundamental starting point for budget discussions. In Philadelphia, public participation is a tacked-on afterthought that has almost no influence on the final budget -- BUDGETWATCHERS will look to the new administration to make change here.
What’s wrong with the Five-Year Financial Plan? -- Given the seriousness of its purpose, the Five-Year Plan should represent the most honest and comprehensive view of the city's fiscal future to demonstrate that the city will not lapse back toward bankruptcy. But, today, the Five-Year Plan too often includes serious omissions and dubious assumptions that call into question the Plan's usefulness.
- The Five-Year Plan doesn't add up -- it does not account for all the money we know the city will receive or spend in the next five years. Because the city routinely underestimates tax revenues in future years, the Plan fails to include hundreds of millions in future tax revenues. It is good to estimate revenues conservatively, but it is also good to be realistic and not counting those future hundreds of millions is unrealistic. On the expenditure side, the Plan routinely fails to include hundreds of millions of dollars that we know will be spent in the future. For example, the Plan never sets aside money for future contracts with the city's unionized workforce. When a contract is set to expire, the Plan fails to set aside money for any salary increases even though it is inconceivable that there will be no salary increases in the future. It is not much of a plan if it fails to plan for hundreds of millions of dollars in costs and revenues -- BUDGETWATCHERS will look to the new administration to make change here.
We have a Five-Year Plan, but all our budgetary spending never seems to make a difference and we never plan to solve any of our problems. The city spends billions of dollars each year -- in theory trying to make Philadelphia a better place. But at the end of every Five-Year Plan, we are always faced with the same problems as a city and, even worse, we are usually spending more on all our problems despite the fact that we have been working (apparently unsuccessfully) to solve them. If we are spending our scarce resources to make a difference, then after five years we should have made a difference. Or, we should be evaluating how we are spending our money so it does make a difference. A Plan that suggests we will work to solve our problems for the next five years must create results or we should seriously question what we are doing -- BUDGETWATCHERS will look to the new administration to make change here.
The Five-Year Plan includes assumptions that are hard to defend and should be rejected. The city counts on receiving some revenues in the future that it has routinely failed to collect in the past. The Philadelphia Eagles have owed the city more than $8 million since 2001 as part of the deal to create luxury boxes at Veterans Stadium. We continue to include the money as revenue we count on to balance the Plan (each year putting off when we will receive the money), but much like a Super Bowl victory, receiving the money seems to always be something that will have to wait until next year. In a city that could resume its flirt with bankruptcy at any time, unspecified savings and paybacks have no place in the Five-Year Plan -- BUDGETWATCHERS will look to the new administration to make change here.
How can we make the budget work for Philadelphia and for Philadelphians? -- Other jurisdictions do much more to use the budget process as a way to involve the citizenry in a conversation to set the city's priorities and the budget as a tool to focus the government on delivering high performance. In the future, the city can use its budget process to engage citizens and use the budget to create positive results for the citizenry.
- The city budget process should include a formal priority-setting process that would stress public involvement at the beginning of the budget process.
- The budget should track agency outcomes and link performance to operations to enable the city to create incentives for improvements and accountability for poor performance.
- The budget should present the true cost of government activities and include activity-based costing so the public can judge the true, total costs of government activities.
- The city should use a consensus revenue forecast to improve the accuracy of tax-collection projections and reduce politicization of the revenue forecast.
- The city should create a Rainy-Day Fund to set money aside in times of plenty to create reserves for use during economic downturns.
- The city should require fiscal impact statements for legislation so that the legislation's merits can be debated with an understanding of its costs.
Resources for further study:
That's advanced advice...by working together, we can make the budget process work for the citizenry and move Philadelphia forward.