Magazine article Government Finance Review

Implementing Multi-Year Budgeting in the City of Moreno Valley, California

Magazine article Government Finance Review

Implementing Multi-Year Budgeting in the City of Moreno Valley, California

Article excerpt

In its search for ways to improve productivity, the City of Moreno Valley, California, recently experimented with its first two-year budget process. The results have been widely applauded by city staff, all levels of management, and the city council. While very little control of program spending is lost in implementing this new budgeting approach, there are significant benefits to be derived. In the second year, staff time required for preparing the budget can be reduced by as much as two-thirds, thus allowing for a reallocation of key staff to other critical projects.

Benefits

The two-year budget cycle is not new to the city of Moreno Valley. It was implemented several years ago but did not endure the fiscal turmoil that erupted in the early- to mid-1990s and resulted in rejustification of program expenditures each year. However, there's a growing number of municipalities that have discovered the rich rewards of this practice. The primary reason for adopting this approach is to save staff time in the budget-preparation process. It is simply a more efficient way to operate, and in a relatively stable fiscal environment, re-justifications do not result in significant changes to the bottom line. The concept also works well for municipalities that conduct elections every two years. The timing of the process could enable the same governing body that reviews the detailed budget justifications for Year One to be involved in the adoption of the streamlined Year Two budget.

Definition

The definition of a two-year budget may vary significantly among governments, but does not imply that at the conclusion of this process the legislative body adopts the budget for the next two years. A two-year budget, therefore, is the process whereby staff produces a detailed and expenditure-justified budget for the first or "base year." For the second year, the base-year budget is carried over along with the existing service levels, and if the budget represents a continuance of existing service levels, staff must only justify its personnel budget and internal service fund charges. Increases for extraordinary items or expenditures beyond a department's control, such as fixed contract increases, do not require justification. But in each year, fixed-asset and capital requests, and budget issues must be reviewed and receive preliminary approval before their submittal to the city council. For the city of Moreno Valley, the term "budget issue" refers to a specific city council policy decision that normally affects service levels and has a significant fiscal impact.

Process

Historically, the city's annual budgeting process begins mid-year with the distribution of informational packets. Departments submit their detailed line-item requests and justification along with specific requests for travel, additional personnel and fixed assets. During this four- to six-week process, the finance department works to develop salary and benefit projections. Several iterations of the budget are necessary as the city manager and finance director review requests and supporting documentation. Meetings are held with departmental staff, adjustments are made, support documents are amended, and finally a proposed budget emerges. The city council receives a preliminary line-item detail budget with justification work sheets. To assist them in their scrutiny of the detail, revenue, expenditure, and fund balance summaries are prepared in order that they may fully understand the relationship and impact of the components to the overall budget. The budget is eventually adopted and a formal document is produced.

Those involved in this traditional one-year budget cycle often view the process as a necessary and vital exercise that takes the form of a grueling, six-month or longer ordeal. It seems as though once it's finally put to rest following adoption by the council, another budget cycle is quickly approaching.

The first step in implementing the two-year budget process is to start with the premise that the responsibilities and required actions of all parties are different in each year. …

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