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�� �� 1V.�.e�o To: Mayor and City Council Neal Beets, City Manager From: Chris Miller, Finance Director -�' Date: March 20,2006 Re: Discussion on the 2007 Budget Process Date: 03/20/0G Ite�: 8. Council Budgeting Process Introduction Historically, the City has approached the budgeting process by determining an acceptable percentage increase and then allocating that increase proportionally to existing programs and services. In other words, if a 5% budget increase was acceptable overall, then generally speaking each program received a 5% increase across the board (** note ** this was generally true for L, i x- suppoarCed programs). While this particular approach is somewhat customary in local government, it nonetheless is lacking in a number of important areas. Most noticeable perhaps is the lack of any deliberate attempt to align available resources to desired outcomes. For example, if our goal is to arrive at the scene of a fire within 10 minutes of the 911 call, then we would logically determine what that will cost and allocate an appropriate amount of budget dollars. But that's not the way we approach our budget process. Instead, we simply take what we allocated last year for the Fire Department, add 5% (or some similar percentage), and make our best effort. Also, under the current budget approach, we assume that the current budget is the "right" budget. But what if it's not? What if the way we allocate budget monies achieves poor results? Would we find it acceptable to continue allocating budget dollars for a program no one uses? Or, is it acceptable to allocate budget dollars to a program that creates little value to citizens, if it then prohibits funding for programs that create a lot of value? Without questioning "how" and "why" we currently spend money, we're likely destined to achieve less than optimal results. Finally, the historical budgeting approach also is lacking in that we make no attempt to determine what the acceptable price of government actually is. Again, we assume that the current level of taxation and charges for services is at the "right" amount. While there are mechanisms that provide us guidance on whether citizens are comfortable with their tax burden, it's almost never in the context of comparing that burden to the services received. Conceivably, we could be taxing too much, or not enough. The main advantage of the current budgeting approach is that it is a familiar process and won't require any additional effort than in previous years. However, it will remain lacking in all areas described above. The Council is asked whether they want to stay with the current budgeting approach or pursue an alternative(s). These approaches are discussed in detail below. � �