Linking Strategic Plans with Budgets
Canary, Hal W., Jr., Government Finance Review
Through a strategic planning process, effective administration, on-going evaluation and regular internal communications, a government can relate its most basic budgeting operations to the highest level of policy formation.
Strategic planning can be very simple. Defining it is not as easy as demonstrating it. A vivid demonstration of some interesting municipal planning concepts can be found, for example, in "Sim City," an inexpensive computer game. The game starts with a screen that has some water areas and some forest areas. The rest of it is green, open land. The player zones areas as commercial, industrial or residential land and establishes the location for a power plant, a power grid and a transportation network - both rail and streets. At some point later in the game, the citizens will demand a football stadium, airport and seaport. The player either meets those demands or population and property values decrease.
The game begins with a certain fund balance and the player establishes a tax rate. Revenues thus depend on the property zoning. If extensive roads are built before sufficient population growth takes place, maintenance costs on the roads will be greater than the tax base can support. It is a fascinating game, but one can't play it without a strategy. The player must decide what the city will become, make plans in advance and stick to those plans. If the player just sits there, the fund balance disappears.
Real municipal governments are in a similar situation. If local governments address the future with only a one-year budget, they will not get ahead or achieve long-range goals. Establishing clear policy and using the budget to implement it provides a link between strategic planning and budgeting.
Budget Criteria and Relationships
The Government Finance Officers Association's Distinguished Budget Presentation Award program emphasizes strategic planning. The budget award criteria have four main components. The first stipulates that the budget be a policy document that provides a rationale for policies along with a description of the effect of changes on those policies. Such a policy document is closely related to a strategic plan. The budget also must be a financial plan. The operating budget is generally thought of as a financial plan, but the budget also entails capital planning, debt strategy and other considerations. As a financial plan, there should be a comprehensive budget structure. Projected year-end balances and an explanation of the capital program should be included. A communications device, another component of the budget award criteria, is important as a public relations tool and a means of gathering support for the government's strategic plans. Thus, the presence of strategic plans in an outstanding budget presentation is almost a given. Finally, the budget as an operations guide represents an effort to control operations within the legal spending limits and to measure performance. In each of the major areas of the budget award criteria, there is an emphasis on strategic planning elements. An outstanding budget presentation demonstrates and communicates strategic plans of the community.
There are a number of important relationships among the various documents and people involved in the process of linking strategic planning with budgeting. Strategic or comprehensive plans often are a compendium of plans relating to land use, roads, recreation and education. Most communities have plans of this sort, and often they are on a shelf somewhere. If those plans are to be linked to the budget process, it is essential to get them off the shelf and into action. The programs and projects in the operating budget must be related to the goals and objectives stated in comprehensive strategic plans in order to accomplish the goals outlined in those plans.
Apart from comprehensive plans, strategic planning comprises a number of interrelated plans - one of which is the operating budget. …