Risk Assessment, Budgeting and Forecasting

Budgetary Risk Pooling

Page from GFR

When Kirsten Decker assumed her role as the manager of strategy and evaluation for the Denver Public Library in 2019, she encountered a challenge she hadn’t faced before: a persistent and substantial budgetary surplus. Until recently, the Denver Public Library’s per-capita funding was among the lowest of its peer institutions. This underinvestment had led to a risk-averse culture and a scarcity mindset among library employees. As a result, of the 54-million-dollar general fund budget annually allocated to Denver’s library system, an average of $1 million was left unspent year after year. While many financial officers might gladly trade their organization’s deficit for the library system’s surplus, this situation concerned Decker.

First, because funds were tied up in the wrong places, the library was not maximizing the level of service its budget could provide for Denver’s residents. Second, Decker and other members of the budget leadership team were becoming increasingly concerned that end-of-year surpluses and unplanned fourth-quarter spending spikes were allowing room for skepticism about the library’s budget planning and management. This dynamic made it challenging for the library to ask elected officials for continued funding at the same level, let alone to request increased investment to expand services. As Decker considered options for improving this situation, she stumbled upon an unexpected solution while reading an article titled “Don’t Go It Alone: Pooling Budgetary Risk to Save Money in Your Budget” in the June 2021 issue of GFR.