Budgeting for Public Administrators - Essay Example

? The paper is an effort to study and assess the relevance of proper financial Budget in different constituencies and the purpose of a budget plan and how to make it effective for the benefit of the public as well as the public administrators to effectively use it for the purpose of running successful governance. Further it tries to analyze the reasons for the current failure of proper financial planning especially post global financial crisis. Study of both theoretical and practical aspects of Municipal Budget making is undertaken with relevant examples occurring in the current financial Budget in some of the Municipalities. This has been done to carefully analyze the current aspects of Budgeting in Public Administration and its trends towards the future thereby helping us to understand the current flaws, if any and estimate the action plans that needs to be accomplished to eradicate them and work towards a better planned and organized Budget that is practical as well as customized according to the peculiar needs of various constituencies. Keywords: Budget, financial plan, practical, Municipality, Constituency, Governance. A budget is a financial strategy that plans any organization’s goal keeping in mind the income and expenditure balance. It means that a budget is an organized plan that helps an institution to function in a well planned manner with the help of the forecast and analysis done to reach out to its desired output. In this regard it is worth to mention that every organization has its peculiar and particular needs which are addressed as goals that need to be channeled through the proper enlistment of action plans and strategies. No Pubic services or organization can function without having any money allocated to function for the various activities assigned to it. If such organizations like a municipality do not have adequate and ‘sustainable’ fund generation system in terms of revenues, it can in no way carry on developmental activities and expenses for the local unit of governance. For all practical purposes this confirms that the municipality has every right to levy taxes, service charges from amongst the inhabitants of the local unit in order to fulfill its commitments of sound municipal development. If we try to understand the recourses and the services or functions that a municipal body need to undertake, we can very well understand that the recourses are limited. Hence it required planning. To have a proper planning we need a Budget plan for the municipality. In simple words we can say that any public service body or organization which has professionals working in financial planning should ensure proper use of the limited resources in hand that it generates through the public money so that it can be best utilized for the interest of the inhabitants as a whole and generate its growth and development adding avenues of further revenue though attracting business and investment with a sound supportive infrastructure, service and maintenance. Since finance is an integral part of it, its meticulous planning to allocate its recourses becomes imperative. A Municipal Budget is a financial planning that is done for a specified period or tenure by a local body of governance to successfully run the organization keeping in mind the income and expenditure balance ratio. It is very important to mention in this regard a budget is always prepared for some fixed duration of time with some concrete and specific purpose which is framed as objectives of budget policy to enable a proper utilization of the recourses, material as well as the manpower of a local unit. There are mainly two key components of a municipal budget. One is the plan for expenditure and the other is what we call a ‘revenue plan.’ One of the main differences between a municipal Budget and a national budget is that unlike national budget a municipal budget carries a number of mandates to be followed. The citizen’s participation in municipal budget is higher due to the fact that the national budget is much more complex and it’s difficult to encapsulate the local issues and specific needs. Hence Municipal Budget demands active people participation and the issue of public accountability in budgeting become as integral part of the municipal budgets. For example building of proper infra structural set-up like good public schools, hospitals, parks may be a necessary feature of a particular municipal budget; where as the issue of ‘business oriented’ setup may be a crucial element of another budgetary local body. Today, quite regrettably we find a gap in between a planning and execution. Also there is a wide difference in municipal planning what is termed as planners plan and budgetary planning. The point is that the planners plan the municipal policies and the professionals in finance in-charge of planning budgets forms the budgetary planning. Often there leaves a gap between the two and a good integration between them working hand in hand is very important for a smooth running of the system as a whole. It means that the planners need to understand the various activities and plans keeping in mind how such planning or such policies would directly or indirectly affect the municipal Budgets. Similarly certain essential budget policies peculiar to the municipality for instance setting up earth quake resistant buildings in earth quake prone areas is a must for such locality and the ‘budgeters budget’ needs to allocate and give due recognition to its specified needs. Further ‘exotic planning’ and the stress to build an Ideal ‘City Ville’ should not be so much that it ignores the basic necessities that require immediate help.(Professor Jack R. Huddleston ,“The Intersection Between Planning and the Municipal Budget”, July 2005).All it means that too much of excitement in building a classy dynamic city should not undermine the budget planning since it would not benefit the citizens in the long run cause such immediate happiness is indeed short lived and the results are disastrous. For Example in areas where Traffic circulation is very badly required if we try building shopping malls and business centres to attract new business , it would obviously lead to a chaos. People would no longer be ready to pay for more re-development taxes and the financial budget till then would be paralysed. Also the services that are required for the maintenance of existing and newly developed structures would be stopped due to lack of proper allocation and circulation of funds in an effective manner. In short all happiness and excitement for the ideal ‘City Ville’ would be gone. So to summarise the scenario it can be concluded that in the planners of the municipal budget in this case has not adhered to the budget revenues and did not pay need to the fact how their policy would negatively affect the municipal budget. Proper Co-ordination amongst planners and Budgeters have been unsuccessful. That is why today there is a growing awareness amongst the planners, policy makers and Budgeters of municipality to have a proper municipal budget that could be successfully implemented for better and steady local governance. The municipal budget must meet the requirements of the residents, attract and meet the demands of the existing and new business and local infrastructural development needs and maintenance of the existing setup. The proper use of the existing recourses to sustain and develop new development is an excellent way of planning municipal activities which would have a positive effect on the budget. The overall Municipal Budget consists of mainly three components. The Personnel cost which includes health benefits, wages, salary, taxes levied, pension benefits and so on. The major portion of the Personnel Costs comes from the Public Safety sector including Fire & Police. Some of the other parts of this component are Recreational/ Library and other departments. The Fixed Cost sector on the other hand includes certain fixed expenditures like taxes on land, revenue and certain recurring expenses. Some other components of the budget include the miscellaneous expenditures. Quite often in budget making the miscellaneous component of the budget becomes a sort of a ‘black hole’ to cover up the deficit since it is generally not well articulated. However today its immense importance has been realized and we find that adequate thoughts and attention is given to formally structure the miscellaneous category in financial budget. That is why we find that in the current fiscal Budget of Beijing we find that the miscellaneous expenditure is the second largest category amounting to about 12 % of the whole budget. The education department has been allotted one of the biggest investments of 22.6 billion Yuan. Surprisingly in an audit conducted on the miscellaneous category revealed that in Lingbi County of Suzhou city it consisted of items like funds for poverty relief, public treatment , subsidies which are also plays a significant role amongst the local inhabitants of the area. As one of the financial executive of the department has put it that while the legitimate category in the budget consists of necessary items having an immediate effect or need for the livelihood, there are many such items that cannot be enlisted in those categories that are subsequently put under the ‘miscellaneous’ segment. Thus contrary to the common man’s thinking this category is not an additional buffer segment but an essential element in the constituent’s fiscal budget policy. (“Two Sets of Books: China’s Budget”- Tang Xiangyang, April, 2011). Budgeting involves a dynamic plan. A plan that is unique and innovative that would cater to the requirements of the day. We do not need over enthusiastic programmes that are short lived and have no role to play to benefit the inhabitants of the locality whether short term or on long term basis. Each constituency be it a county municipality or borough requires help in some immediate attention areas. For example the Erie and Buffalo County plans this year to cut down the $ 6 million Library cost. Chris Collins the county executive has recently proposed some measures to arrive at its objective. One of the unique proposal has he stated is that the Budget and the tax rates of the county would first be presented to the Public for votes. This means that Public accountability and People’s participation would receive its due respect. He termed this new plan as “democracy at its best” (Buffalo News, June 18, 2011). Budget is a very serious matter as it involves finance. It is not merely policy document that is produced by the various constituencies accessing and informing the debit and credit balance in the financial chart. Most important fact is that it includes the finance that is paid by public as revenues in the forms of various taxes and service charges that are levied. Hence it is a duty of the Public Administrator to make sure that the financial aspects of the Budget are effective and shock proved. That means, a budget should be able to live up to the expectation of the public and also have a buffer to cater to some exigencies that may occur without giving any notice. It may be a Katrina or some sudden ecological change that might occur needing immediate help. It is practically true in the present scenario today. The practicality of a proper budget lies in e fact that Budget should be based on realistic figures based on estimated revenues that are fixed. The taxes that are levied by the municipality should be made acceptable to the people who would actually pay for it. The confidence of the people in good governance is a key to any successful Municipal administration. One such positive demonstration of public confidence that occurred in recent times is in LA Constituency. Los Angeles one of the popular county has most recently faced some financial challenges in the Budget. An anonymous individual had donated $ 10,000 Cashier’s Check in favour of the LA County and mentioned that in case of ‘economic difficulty’ the government can get such help from the public and it should be used for good cause. (The Sacramento Bee, The Associated Press, web, June 17, 2011).These is certain exceptional situations when someone gives a helping hand like a guarding angel at times of financial distress in Budget plans. A public administrator has to be extremely cautious of such unexpected situations by some realistic understanding of the present situations. To understand and analyse the effectiveness of a proper budget a public administrator professional has to ponder and focus of certain aspects of financial plans. First, Budget has to be based on ‘expected revenues’ that are realistic and not futuristic. There should be a clear and transparent co-operation and communication with the Council, various Municipal executives, managers and most importantly, the public under whose interest a budget is supposed to be formed. Secondly, the financial information should be very lucid and clear so that it could be easily understandable to the general masses. In this regard the initiative taken by Chris Collins, the County Executive of Erie County in making budget approved by the people through voting is worth appreciation. (Buffalo News, June 18, 2011). Recently a new method of Budgeting has been formulated by the public administration professionals to help aid a proper budget plan. It is known as Budgeting for Outcomes (BFO). The method is different from the traditional method in terms of its focus and orientations. The new method is result oriented and focuses mainly on the outcomes of the Budget making and it is a highly effective tool in case of fiscal emergency. This new Innovative method of Budgeting has been successful in many of the American Municipalities today. BFO is a strategic plan that allows leaders to re-think in terms of the emphasis and priority that it gives to any particular sector and it also enables the managers to ensure that it is delivered and executed in the best possible manner. While the traditional budget policy mainly focuses on funding a particular department or areas of improvement, the new approach gives more stress on the services that it provides to the citizens of a constituency. Effort is undertaken to have a more ‘realistic’ time frame to measure the effectiveness of a particular financial budget of a Municipality which helps to tackle complex issues and concerns. It makes the councils more involved in the work processes by ensuring proper priority set up from day one. Further the needs and requirement of a particular constituency needs to be clear and specific that would leave no room for any ambiguity for a gateway to uncertainty and back door. It needs to be presented in line with the priority to achieve some tangible outcomes within some specified time frame to measure. The priorities of a Municipal Budget should always be based on a clear understanding of the objectives and its subsequent impact on the budget. This is highly important as mentioned earlier, to have a proper integration between policy making and budget formulations. Further in order to make more innovative and cost effective the various service providers in and across the various departments preparing the proposals should be able to produce cost effective proposals with their ‘competitive price’ quotes. This would encourage as well as ‘challenge’ the municipal departments to work towards making their services as competitive as possible leaving room for innovations, healthy competition and healthy service oriented plans and proposals that would benefit the financial situation of the budget. (“Budgeting for Outcomes”- Hutchison, Peter & David Osborne, Oct, 2004). For final evaluation and analysis of the budget policy let us discuss and check a particular constituency. As an example let us analyse the Riverside County Budget for the year 2010-2011 and the current recommended budget for 2011-12. Since there is an overall financial deficit in the economy, very little help could be envisaged as aid from the state government in the local Budget. As far as the revenue earning is concerned, the county has indeed marked a good progress. While in the previous financial year, (2009-10) there was an overall property value loss close to $ 100 million, in the year 2010-11 the revenue loss in property was around $27 million. It is important to note that 45% of the discretionary revenue comes from property taxes, 32% comes from motor vehicles and the rest 8% comes from the property of delinquent property taxes. Further the recourses in assessing the revenue budget have estimated a forecast in an increasing trend in earning good sales tax revenue in the current year 2011 -12.However, certain deficit in formulating structural plans was envisaged in the previous year budget plan. There was a large gap that was evident between the current revenue and the expenditure. The structural gap was around $ 130 million for the last financial year. Despite the openness of the policy for innovation and making changes it could not function well. On a positive note, the budget allocated the largest share of discretionary recourses to the public protection department about $ 494 million. A further study of the current recommended Budget of the riverside county for the year 2011-12 reveals a total estimation of $630.3 million budget in this year. This tentative recommended plan would reduce the general fund budget by 8.1% from the last year. The present plan has approved the Sheriff Department district attorney’s office, Fire department and Probation department a share of $ 3.5 million in order to have a more balanced budget in the present year. It has apparently tried to bridge an amount of $ 60 million gap in allocating funds in sheriff department. The new cost saving policy has been primarily adopted in order to overcome the total shortfall of about $ 16.5 million. However, there has been a major concern amongst the health care departments as the recommended budget has reduced the funds for jail inmates and mental health care units. As per the recent study about $ 6.6 million needs to be appropriated that is beyond the present budget plan. As per the present planning, there would be ‘open budget hearings’ (“Recommended Budget for County of River side”, Bill Luna, County Executive officer, 2011-12). The new fiscal year commences on July 1 for the constituency and we are here to witness the success story and hope for its true success in implementing the budget plans as per the policy envisaged. More over it can be concluded that no budget can be perfect however if the public administrator’s policy is innovative, transparent, open to learn from past experience and able to make necessary corrective step then it is bound to be successful. Citations: 1) Municipal Management: serving the people-By Annelise Venter, Gerrit Van der Waldt. (Page 185-198, Ch -11). 2) http://eng.biznesowe.edu.pl/725-municipal_budget/ web,np. 3) The Intersection between Planning and the Municipal Budget”- Professor Jack R. Huddleston, July 2005. Lincoln Institute of Land Policy. http://www.lincolninst.edu/subcenters/teaching-fiscal-dimensions-of-planning/materials/huddleston-plan-budget.pdf. 4) “Budgeting for Outcomes”- Hutchison, Peter & David Osborne, n.p.Oct, 2004. 5) Fiscal Year 2011-12 Recommended Budget-Riverside County. Web, n.p. http://www.countyofriverside.us/government/budget/2012_recommended_budget.html 6) “Riverside county bridges most of Sheriff’s budget gap”-North County Times, by Dave Downey, web, June 13, 2011. 7) Chinese-Economic Observer-(English Edition) web, “Two Sets of Books: China’s Budget” page 3, Issue 514, April, 2011. 8) The Sacramento Bee, “LA County receives Anonymous donation of 10K” The Associated Press, web, June 17, 2011 Read More