Priority-based budgeting comes to Oxnard- and not a moment too soon

By George Miller

Advocates say it is an advanced methodology/concepts for better budgeting

Mayor Tim Flynn, City Manager Greg Nyhoff and Assistant City Manager Maria Hurtado have all seen information about Priority-Based Budgeting (PBB) at various symposia and in print material, liked the concept and have been working to introduce its concepts to the city. At the 12-9-15 special city council meeting, they unveiled a presentation by Chris Fabian, of the Center for Priority-Based Budgeting in Colorado.

Chris Fabian of CPBB presents Priority-Base Budgeting vision/concepts. Photo: Dan Pinedo/CitizensJournal.us

Given Oxnard’s many problems with deficits, scarce resources and contention over these, a better methodology would be welcomed. Assistant City Manager Maria Hurtado (photo below) has been handling this project and not only brought Mr. Fabian in to present, but is already applying some of the concepts in managing city priorities. She gave us a quick overview on how the City got to this point and then introduced Chris to make a presentation.

Mr. Fabian pointed out that traditional budgeting methods (and metrics) may be based on old budgets, or utilize arbitrary across-the-board cuts, or not be tied directly to actual needs, or be incapable of properly allocating limited resources appropriately to many program goals, or be excessively politicized. He also said that they often suffer from a “line item” orientation which focuses on detail rather than activities.

He offered an effective, down-to-earth analogy to explain the shortcomings of government across-the-board budget cuts…. likening it to a family attempting to impose across-the-board spending cuts to its monthly mortgage payment, dining out tab and Netflix subscription. Not feasible.

PBB helps align community expectations priorities better via budget allocations related directly to subsequent delivery of services.

He also said PBB is better than traditional methods at depicting and communicating an organization’s financial/budget information to inform decision-making.

Overly complex systems and presentations are hard to understand. Source: CPBB

Unfortunately, the presentation attempted to convey far too much content, in too little time, with too little explanation and was also rather redundant. Fabian flipped the pages so fast that there wasn’t even time to read many of them, let alone assimilate their content. It might have been better in a three hour time slot– or for a city council meeting, boiled down to just the essential concepts and a couple of examples. He also attempted an online demo, encountered some difficulty logging on, screen image was too small to read and did not really get the desired point across. But in spite of this, some good ideas were transmitted.

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The PBB approach also involves exercises to determine what services are provided, how and WHY they are delivered, including what resources are required (people, cost), priorities and evaluation of results- then explaining this all to interested stakeholders. Rather than doing this at a high level (departments) or a low level (tasks or budget line items), this would be done at a program or services level. We’ll show a few highlights here, but read the meeting agenda package presentation if you want to get more info. Examples:

An example of service-level budgeting, from CPBB.

High level organizational (City) goals are set, such as:

Community

• Stewardship of the environment
• Safe community  (Example in exhibit below)
• Strategic, sustainable maintained development
• Mobility options

Quality

• Efficient services
• Transparent services

Governance results

• Financial stewardship
• High quality workforce
• Regulatory compliance

These are in turn broken down into result maps that define what wold constitute success

Example: Safe Community:

Actual results are scored.

One drawback of this approach is that it could get extremely complex, data-intensive and require a lot of maintenance and manpower to operate, unless scope and detail are carefully managed.

The average municipal administrator is relatively financially illiterate, so there is great potential for improvement via education, for not only formulating budgets, but working with them and actual financial and operational performance results to interpret/evaluate them.

CPBB claims to have served about 100 clients,including thirteen in California.  They are six years into the Boulder, CO municipal project and claim to have gotten to the point where the methodology is mature and embedded there. So this is not an overnight program, but requires, time, discipline and persistence. However, it looks as though there can be payback along the way.

Council’s reception: Councilman Perello warned against adopting the latest management fad/panacea of the moment and also told us an amusing story about when he had a job driving imported cars off ships at the port. He was petrified when he was tasked to drive a $300,000 Lamborghini. But by the time he got to $450,000 Aston-Martins, he had achieved a level of confidence. His inference was clear.  He admitted he didn’t understand PBB, but liked  a couple of key points he had grasped. Councilman MacDonald did not seem at all sold, while Mayor ProTem Ramirez and Councilwoman Padilla were mildly receptive. All seemed to want and need more education on this. Mayor Flynn has been watching and absorbing this for a while and is quite enthusiastic, even ecstatic, about the concept.

Asst. City Manager Maria Hurtado. Photo: George Miller/CitizensJournal.us

City Manager Greg  Nyhoff and CFO Joseph Lillio put out a letter on the City’s PBB exploration, emphasizing these points:

Some of the key benefits that utilizing a priority based budgeting approach brings include:

• The ability for organizations to better depict and communicate financial information resulting in informed decision-making;
• Avoids traditional “across the board” approach;
• The ability for an organization to be “fiscally prepared” for future;
• Ensuring resource allocation is aligned with community expectations, and
• Assisting municipalities to allocate financial resources based on prioritization.

An attempt by PBB advocates to show budgeting methodology evolution. Source: Idaho ICMA

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George Miller is Publisher of CitizensJournal.us and a “retired” operations management consultant residing in Oxnard

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