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Outcome-Sased Sudgeting Overview The concept of outcome-based budgeting is not new, but it has received added emphasis in the past few years in response to the numerous financial uncertainties facing governments, as well as the ever-increasing demand for services and accountability. While many versions of Outcome-based budgeting exist, they are all premised on the fundamental concept of allocating sufficient funds to achieve a desired outcome. For example, if we established a goal of having the Fire Department arrive at the scene of a fire within 3 minutes of the 911 call, then we would determine what that will cost and allocate an appropriate amount of budget dollars. This is in contrast to how we typically allocate new dollars, which is to take what we allocated last year, add some percentage increase, and make our best effort. In addition to aligning resources with outcomes, outcome-based budgeting can also ensure that those services that matter the most are properly funded. It is conceivable that the City is providing a high level of service for a program that creates nominal value, at the expense of another that creates greater value. An outcome-based budgeting approach would help demonstrate how the City can achieve the greatest value overall. Generally speaking, the steps under this new budgeting process are as follows: 1) Establish what the customer (taxpayer) is willing to pay overall for services 2) Establish the City's program priorities (outcomes) and rank them 3) Systematically allocate resources sufficient to achieve priority (outcome) #1, then outcome #2, etc. For Step #2, it is suggested that the City Council assign program priorities in the following general order: 1) Federal and state mandates 2) Adherence to the City's Financial Policies 3) Strengthening funding mechanisms for the replacement of City assets 4) Adequately funding non-discretionary services 5) Providing funding for higher-valued discretionary services It should be noted that the ranking process can go through many iterations and in most situations shouldn't be done in a vacuum. For example, we may establish an outcome of having a high quality and safe park system. To achieve this, we would likely need to assign a high funding priority for parks and police patrol. In addition, we may find after only one or two iterations that a program with strong intrinsic value isn't funded at an appropriate level. Through the next iteration, we can go back and assign a new budget amount to it and readjust other programs accordingly. The ranking process should remain fluid until a final consensus is reached. Sut once it's finished, it's important to move forward. Step #3 is repeated until we've exhausted all available funding. Under this process, we would expect to run out of money before we run out of priorities. When the funding is exhausted, we suspend all unfunded programs. For those programs that don't receive any funding, it's important to keep in mind that while they create value, they create less than those that were funded. Page 2 of 3