Today’s Morning Buzz is cooked up by Andrew Kleine, Managing Director, Government & Public Sector at EY-Parthenon, Ernst & Young LLP. He is the author of “City on the Line: How Baltimore Transformed Its Budget to Beat the Great Recession and Deliver Outcomes” (Rowman & Littlefield, 2018) and has served as a county administrator and city budget director. Contact Andrew by email at andrew.kleine@parthenon.ey.com or on X.
In the city budgeteer’s lexicon, a budget is considered “baked” when the mayor has made final decisions and the budget document is in production. As Baltimore’s budget director, when department heads would appeal for last-minute changes to the budget, my stock response was, “Sorry, it’s baked.” That was usually enough to make them go away.
Baking brings to mind memories of Grandma’s warm cheese rolls, Mom’s chewy chocolate chip cookies, and Thanksgiving apple cobbler with a perfect lattice crust. In contrast, budgeting evokes the bad taste of spending cuts, the fishy smell of padded line items, and pie charts that are not edible. But what if we really could bake a budget? What would be the recipe for a moist, tender spending plan that looks beautiful and pleases the palate? Here goes nothing:
Balanced Budget Bread
Try making this good bread to nourish your city.
Start by cooking:
1½ cups ground truth
Form a base(line), projecting the rise and fall of revenues and expenses.
in:
3 cups boiling water
Pressure-test your budget projections by considering alternative economic and operational scenarios. Remove from heat by educating the council and public about the fiscal outlook and seeking agreement on goals for the budget bread, then stir in:
3 teaspoons dry powder
The budget must prepare your city for uncertainty by using conservative estimates, fully funding pension and health liabilities, containing debt service and providing pay-as-you go capital funding.
3 tablespoons sugar or honey
The budget is a political document. To win the blue ribbon, it must please the judges. Sweeten the pot with efficiency savings and non-tax revenue. When the budget needs to be sliced, look for ways to re-purpose dollars for popular programs that get results. Sometimes even a few crumbs can make a big difference.
½ teaspoon salt of the earth
Sprinkle in feedback gathered from community members. The best kind of community engagement puts residents in the shoes of the mayor and city council and asks them what trade-offs they would make. While this mixture is cooling, prepare:
2 packages active yeast
The budget is a serious document, but it must be leavened with compelling data and stories about how the city’s investments will impact people and neighborhoods. Colorful charts and graphs will really make it rise! Combine the ingredients, then beat in gradually:
6 cups all-purpose flour
Your budget must include details about every purpose, or program, your city funds. Programs are the units of analysis for budget decisions. The budget should show their full costs, including for employee benefits, fleet, space usage, and IT.
Sift the flour through clear criteria that separate the wheat from the chaff, helping decision-makers understand how programs are performing, how they support the city’s priority goals, how they promote equity, etc.
Knead the dough by rigorously reviewing budget proposals, comparing them with historical spending patterns, checking for data and evidence to support claims, examining legal mandates and making sure one-time costs from last year are removed.
After the dough rises, place in a pan greased by good communication with stakeholders about how their input was used, why tough choices were made and how the budget optimizes available resources in service of the city’s priorities and goals.
Bake until all questions are answered and issues resolved. For the same reason ovens have windows, so should your budget process. The more council members and others can see the baking process, the happier they will be with the end result. Also, be willing to compromise: Sometimes half a loaf is better than none at all.
Baking relies on precise measurements and methods to achieve the desired outcome. Budgeting is messier, but if you follow this recipe carefully, what you put on the table will satisfy.
The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.