6 Budget Strategy
BUDGET STRATEGY: GETTING THE DEAL DONE
With a more sophisticated understanding of budget-making processes, public managers can answer a variety of questions and management concerns:
- How is “managing costs” different from “managing a budget”?
- What’s the best way – financially and politically – to respond to a potential budget cut? To respond to a possible budget increase or expansion?
- How can we structure budget processes to minimize conflict and maximize employee engagement?
- How does the budget timeline, namely when new information is introduced to budget decision-makers, affect how the budget is made?
- What are decision-makers’ key concerns throughout the budget process? How do loss aversion, incrementalism, and parochialism affect budget-making?
- How does the format and presentation of a budget document affect how staff, clients, and other stakeholders perceive it?
- Why do governments’ actual budget processes regularly deviate from their statutory or legal budget processes?
- What are the most and least effective ways to engage citizens and other stakeholders in the budget-making process?
In the late 1990s, several dozen people died in major house fires throughout the City of Seattle. Critics blamed the Seattle Fire Department for its slow and insufficient response to those fires. The Fire Chief accepted that criticism and urged the City’s leaders to invest in significantly upgrading the Fire Department’s facilities, equipment, and training. Then-Mayor Greg Nickels proposed a new, 10-year, $197 million property tax levy to pay for that upgrade, and voters approved that levy in 2003. The centerpiece of that levy was a plan to rebuild or refurbish 33 fire stations.
In 2015, the City announced it had spent $306 million on those fire station projects. Of the 33 projects included in the plan, 32 had exceeded their original budgets. Many had cost twice their initial estimate. And the program is not yet complete. The City expected to spend at least $50 million more from other resources to complete those projects over the next five years.
How did this happen? How can a major city program staffed with many sophisticated budget and finance staff over-run its budget by more than 50 percent?
The problem is best captured by the late, great Yogi Berra’s adage that “Predictions are hard, especially about the future.” Costs of basic materials and labor change all the time, so it’s difficult to forecast those costs seven to 10 years into the future. Indeed, basic construction costs increased by around one-third from early 2005 until late 2007. Moreover, during the ten years of the program, professional standards for firefighters changed. Under the new standards, fire stations must now have better training and fitness facilities, better information technology, and other upgrades that added costs to the project.
To others, the problem is politics. According to some accounts, Mayor Nickels’ staff estimated the fire station program woul