A budget is a forecast about the future. It is only as good as its creator wants it. A budget has two lists – one for revenue and one for expenditures. If revenue and expenditures are equal, it is a balanced budget. If revenue is greater the expenditures, it is a surplus budget. If revenue is less than expenditures, it is a deficit budget.
There are three versions of the budget:
- The proposed budget
- The adopted budget
- The actual results
The proposed budget is almost always a large deficit budget and is basically a lie. It is manipulated and massaged to scare the hell out of the city council, the public and employees. This gives the mayor or city manager total control of the budget process, limited only by his dependence on the finance director. If the mayor or city manager is weak in governmental finance, the finance director can exert substantial influence. If the mayor or city manager is well versed in finance, the finance director has to keep his mouth shut or risk being fired by his boss – the mayor or city manager.
The adopted budget is a balanced budget. Most states have laws that prohibit cities from adopting deficit budgets. The adopted budget is a document with some lies. The most important thing is that the city council, the public, and employees believe it to be an honest, bare bones budget. It isn't.
The actual results are almost always a surplus. Most states have a law against over spending the adopted budget, but not under spending. About the only way the actual results can be a deficit is if revenue does not meet the projections. However, there is an exception. State laws normally allow cities to spend the amount of revenue received during the year, plus any money in the bank at the start of the year.
Theoretically, a city could legally spend down to zero dollars in the bank. That would be foolish, but legal. How could a city do that without knowing what the exact revenue will be when preparing the budget? Good question, but easily answered. Cities are allowed to amend their budget during the year as many times as they want – even after the year has ended in some states.
The budget is prepared in stages each year. The starting point is the department heads submitting proposed budgets for their individual departments. The departmental proposals are usually Santa Claus lists asking for large increases for their departments.
Meanwhile, the finance director is preparing the revenue part of the budget, using his personal values and bean counter mentality – shoot low. His revenue forecast is worst case scenario – little or no growth in revenue, maybe even a decline in revenue.
It is at this point that the mayor or city manager gets all of this data and then behind closed doors creates the proposed budget that has a huge “structural” deficit. He then rolls out this doomsday
harbinger of financial ruin at a much heralded press conference, where he calls for sacrifice from everyone. The local press buys it – hook, line, and sinker. The city council is in a state of shock and pledge their support to fix the problem. The “union thugs” begin tamping down the expectations of
Next, there are committee meetings by the city council to address this disaster, without first reading the 750 page proposed budget. The meetings are mostly finger pointing. This is followed by public hearings where the city council roll out the goal line stance, while quoting the mayor or city manager – verbatim.
Meanwhile, the mayor or city manager, disguised as Clark Kent, is on the speaking circuit (chamber of commerce, civic clubs, talk radio, etc) scaring the hell out of the faithful. At the same time, the city's shyster is beating the hell out of the union thugs at the negotiating table. Due to unrealistic expectations going into negotiations, it takes a while to reign in employees.
Finally, with the union thugs, bludgeoned and bleeding, raise the white flag and the public and the city council cry out for a savior, the mayor or city manager rips off his suit, shirt, and tie, revealing his true identity – Superman. In his hand is a balanced budget, which is immediately approved just prior to the statutory deadline.
Well, it looks like the end of another budget season. I am sad to see it end. I going to miss the scent of cheap aftershave coming from sweating union thugs and the wide eyed look of panic on the faces of the city council. There is always next year.
“Push'em Back! Push'em Back! Waaay Back!”