Budgets reveal much about the county
By Eddie A. Jones, AAC Consultant
Mother had decided to trim the household budget wherever possible, so instead of having a dress dry-cleaned she carefully washed it by hand. Proud of her savings, she boasted to my father.
“Just think, Alden, we are seven dollars richer because I washed this dress by hand.”
“Good,” my dad quickly replied. “Wash it again.”
That’s funny but not very deep when it comes to household budgeting. Some county budgeting is not very deep either — but it should be. A county budget reflects the county’s vision, strategy, and priorities — or the lack thereof.
The process used to develop and communicate the budget reflects how county leaders operate. Good and effective budget processes are inclusive, transparent, and efficient. A good budget process builds trust through involvement and buy-in from elected officials, department heads, and yes — even county citizens.
It is all too common for the county budget to be developed “in secret” and then presented at a public quorum court meeting for passage. Without it actually being said, what is heard is, “Here’s the budget we’ve put together behind closed doors without your input. Trust us. It’s a good budget.”
Is it? Does it actually reflect the vision, strategy and priorities of the county? I’m afraid, all too often, the county does not really have a vision, strategy or priorities. Some counties operate haphazardly just letting “things” happen rather than operating with a plan. The plan starts with a good budget and when done right, key budget processes and information are communicated frequently and communicated with simplicity and clarity. That is the process that builds trust.
I have said often, and continue to say, the budget is the most important document enacted by the quorum court each year. It is the financial map for the county, and it provides the elected officials, department heads, and your citizens with great information because it talks about the priorities of the county, the money coming in, the money going out, the county operation and the services being rendered.
Budgets matter. They reveal the county’s policies and priorities. The budget is where the rubber meets the road; it shows how a county will spend and invest. A budget reflects what matters most to a county. Changes in a budget from year to year show the direction in which a county wants to head —or it should. Is your county heading in the right direction?
I understand that sometimes the budget is not fully what we envision for our county, sometimes because of obstacles not of our making. Every budget cycle presents challenges including:
- Diminished or stagnant local government revenues. In Arkansas, counties find themselves having to use more and more of their revenue to support state functions, such as the court system. That leaves less money for local government services and functions. State mandates are a heavy burden that need to be remedied.
- Some counties don’t avail themselves of revenues available. Several counties have not maxed their property tax millage to the detriment of county government operations.
- Lack of clear direction from the quorum court, finance committee and the finance officers of the county (judge, treasurer, clerk or comptroller) — meaning a lack of alignment around a central vision or strategy.
- Lack of budget ownership. Every county official and department head should make the case for the budget they need. But once the budget is established, every official and department head should earnestly strive to stay within their budget.
- Low levels of citizen understanding, input, involvement, and engagement. If you really want to build trust in county government involve your constituency.
When you have budget challenges you must develop “Best Practices” to help overcome those challenges. You must find ways to improve budgeting efficiency, effectiveness, buy-in, budget ownership and public involvement. Here are a few Budget Best Practices:
- Have a clear, well-defined budget process. Establish a timeline with all the key steps. Know what has to happen at each step, when the step must occur, how long the step must take, and who should be involved.
- Start with a vision, goals, and a strategic plan. The budget supports what a county wants to accomplish. The first step in a good budget process is articulation of a clear vision by elected officials. How does that happen? It begins with a strategic planning and goal-setting session of the quorum court and elected officials where visions are shared and short-term and long-term goals are set.
- Focus. Choose a challenge or two to focus on for the budget year. You can’t do everything at once. Pick a challenge, come up with a strategy, and then execute.
- Get buy-in from all officials and departments. Budget time should not be a free-for-all. It should be a Three Musketeers time. Nineteenth century French author Alexandre Dumas developed a great motto for the title characters in his book The Three Musketeers, “All for one and one for all.” All the members of a group support each of the individual members, and the individual members pledge to support the group. It is important for all county officials and departments to understand the vision and goals of the budget, and how they fit into the budget process. Engage all departments in creating and implementing the budget.
- Invite citizen input. Budgets are more credible and receive more widespread support when citizens understand and know that they have a voice in them. It is the citizenry that we are working for.
- Communicate the budget broadly, simply, and clearly. Once the budget has been developed, the key is to communicate it to all key stakeholders, including elected officials, departments, staff, and citizens. Successful county government leaders communicate.
An effective budget process builds trust in local government. For county leaders to successfully implement their plans they must have the support, buy-in, and most importantly, trust of all key constituents. Dr. Michael Stewart, a management consultant, said “A leader can only implement what people can understand.” So successful implementation requires understanding and trust.
Because good budgets, by nature, are complex and detailed, achieving understanding and trust requires moving from overwhelming amounts of data to simple, clear information. In other words, you may have to put the budget in summary form — but not hiding information. Keys to successfully communicating priorities and building trust include:
- Be as transparent as possible. Trust is built through transparency. Share as much as you can, as often as you can. If you’re caught hiding something trust is thrown out the window.
- Make it simple. Don’t assume that all officials, county employees, and residents of your county have the same level of expertise as those developing the budget. As I mentioned earlier, you may need to summarize the budget, but clearly delineate the contents of the budget.
- Allow feedback and interaction. In addition to making budget information transparent, easily accessible and simple, build trust by fostering dialogue with citizens.
What does your county budget reveal about your county operation? Many county budgets in Arkansas reveal too little planning for the future; failure to establish clear priorities (employees should always be a priority); and the lack of reserves for emergencies and infrastructure needs, including courthouse maintenance and preservation.
One of the worst budget habits that counties have developed is the reliance on one-time money for on-going expenses, and that includes carryover balances. Using one-time money to fund budget items that result in recurring costs is a slippery slope that will lead to a structurally unbalanced budget. The carryover balances, or at least a portion, should be used to establish reserve funds that could then be relied on for emergencies, etc. That is actually the intent of law.
Arkansas Code § 14-21-106 actually ascribes the term “surplus” to any moneys left remaining unexpended and unappropriated in any county fund from any previous year. In accordance with law the county court, which is the county judge, may enter a court order to add the surplus to the respective funds of which the surplus remains unexpended and use it as revenue for the current fiscal year.
So it is the county judge, not the quorum court that gets to decide whether to use the surplus/carryover cash from any fund in making the current year budget. More county judges should exercise the authority this law provides to hold back all or part of the carryover fund balances to put the county in a better financial operating position, especially as it relates to cash flow and preparation for emergencies. This is especially important for the major funds of the county, including County General and Road & Bridge.
The few Arkansas counties that employ this budget practice, using the “surplus” or “reserve” as the law intended, have much better cash flow. And they have a reserve to make additional appropriations during the course of the year as unexpected needs arise for capital, infrastructure, and other emergency type expenditures.
Wilbur Mills, former Arkansas Congressman from 1939 until his retirement in 1977, was chairman of the House Ways and Means Committee for many years and was many times referred to as “the most powerful man in Washington.” One of this committee’s main functions was appropriations — budget. Congressman Mills once said, “What I wanted to do was see if we couldn’t balance the budget.” They couldn’t.
Counties of Arkansas don’t have a choice. You must have a balanced budget, or should. I’m afraid some county budgets are only balanced on paper but not in reality.
As you develop your 2020 county budget, remember the law clearly defines those things that a county must fund and those things a county may fund but are not required to [A.C.A. 14-14-802]. A county must prioritize. Dave Ramsey, America’s voice on money said, “Doing a budget means learning an ancient and powerful word: No.” Prioritize, first funding those offices and functions that counties are required to properly fund.
Keeping our counties running efficiently, effectively and financially sound is a painful process requiring shared sacrifice and pain. Making tough choices is what county and district officials do to keep counties solvent and moving forward.
What picture does your county budget paint? It should reflect the values and priorities of your county and its people. A budget is more than just a bunch of numbers in a document; it is a blueprint and priorities; it embodies our values. Make it your first order of business this fall to develop a good budget telling your money where to go instead of wondering where it went.