Most jurisdictions are familiar with the concept of long-term financial planning, which looks at the budget over an extended period of time, rather than over the traditional single-year budget cycle. The approach is often reserved for areas of public-sector finance that lend themselves to long-term thinking, such as capital projects – but that may be changing. Concepts like priority- and performance-based budgeting have highlighted the need for communicating a jurisdiction’s broad goals in the operating budget.
Implementing long-term financial planning can be a challenge because the size and scope of some priorities make them difficult to address in one year. And sometimes, if funding is unreliable from year to year, opportunities can be difficult to take advantage of. Another issue is that standard operating expenditures don’t necessarily change much from year to year, making the exercise of reallocating these funds more about rubber-stamping than strategic prioritization. Perhaps most importantly, a wider or longer-term view of spending provides context that the narrow focus of a single year may lack. These and other factors led Oakland County, Michigan, to explore ways of infusing more long-term financial planning into their operating budget.
With the goals of improving program monitoring and evaluation, financial management, and strategic planning, Oakland County first moved to a two-year, and then a three-year operating budget cycle. The goal was to link the operating budget with the county’s strategic plan in a meaningful way. The multi-year budget allowed the county to connect operating and capital activities, exercise a greater degree of planning for reserve funds, and identify structural imbalances between revenues and expenditure trends.
While this approach is not without its challenges – forecasting perhaps foremost among them – it has been a success for Oakland County, leading to awards and recognition. And it looks like an important part of the county’s future as well. In the 2013-2015 operating budget document, county Executive L. Brooks Patterson said, “If I had to identify the primary factors responsible for our financial management successes, they would be our committed adherence to long-range planning and budgeting practices.”
You can learn more about Oakland County’s budgeting approach by clicking here.
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