What Should Come First In Local Government: Budgeting Or Strategic Planning?

As the old saying goes, “Don’t put the cart before the horse.” The implication is you won’t be able to get anywhere worth going if things are out of order, and that certainly rings true in the case of local government budgeting and planning processes. There is a proper order you should follow to ensure your funds are spent wisely. In this article, we’ll explain what should come first—strategy or money—and why.

Strategic Planning In Brief

Strategic planning is a method organizations use to assess the current environment and create plans to influence the future. The process involves establishing a set of goals, then aligning resources and methodically plotting how you’ll reach those goals. This is big-picture stuff—strategic planning is all about visionary, long-term ambitions versus shorter term, day-to-day tasks that are typically categorized under operational planning.

Local Government Budgeting Process

The budgeting process is one of the most important activities a municipality undertakes. The delicate act of allocating funding and resources to specific programs and services isn’t easy. In an ideal world, the process looks at long-term perspectives and ties funding decisions to high-level objectives and goals, focusing on results and outcomes. The right stakeholders should be involved in each local government budget cycle to ensure decision making is sound and takes all relevant information into account.

Put Strategy First

As we hinted in the previous section, funding allocation should be based on your goals, so your municipality’s strategic plan should always come first. Decision makers need a North Star when dealing with notoriously tight local government budgets and fluctuating community priorities—using strategic goals as “reasoning” ensures budgeting decisions are objective, consistent, and appropriate. Not only should the strategy precede the budgeting, but there must be visibility and clear links between them.

If goals are unclear or disconnected from the local government budget-setting process, an organization can suffer some major breakdowns.

Breakdowns When Local Government Budgeting Isn’t Linked To Strategy

Failing to link your government’s strategic plan with the budget may be the single most important factor in poor financial performance. A disconnect can spell doom in several ways:

• Poor strategy implementation
• Misapplied resources
• Inadequate results on key performance indicators
• Sandbagged numbers by managers
• Unclear accountability
• Hidden misuse of funds
• Drawn-out planning cycles

The bottom line is this: When the budget isn’t aligned with the strategy, it significantly limits your government’s ability to execute that strategy and achieve your goals. When the budget and strategy are linked and decision makers can see how the two impact each other, funds are allocated more effectively.

A quick aside: The most successful municipalities would say their budget is tied to their overall goals, but the tie can be loose in some cases. Your local government budget-setting process should be built around your strategic plan, but it’s not realistic to expect every line item on the budget to directly connect to a high-level goal or objective. There will be instances where it takes an extra step or two to see how a program or service links with the strategy...but that link will exist.

“Strategy-Before-Budget” Example: The City Of Fort Collins

A ClearPoint client who serves as a model for organizing and aligning strategy and budget well is the City of Fort Collins. The city has a five-year strategic plan that’s focused on seven outcomes. At every turn, Fort Collins emphasizes that its strategic plan reflects the input of citizens, community partners, and government leaders and staff—the city has developed strong feedback channels and updates its strategy every two years based on the information it receives. From its website: “The City is reviewing the Strategic Plan to ensure that it reflects your needs and priorities. Your feedback will be reviewed, compiled and used as we move forward into the Budgeting for Outcomes (BFO) process, which emphasizes priorities and results, not just cost.”

The city’s BFO process is based on the same seven outcomes and the sole intention is to get results on the strategic plan’s directives. Fort Collins’ regimented approach creates a strong link between the strategic plan (which is consistently updated to ensure relevancy) and the budget, making this city one to learn from when developing your own procedures for preparing local government budgets.

In Summary

Create your strategic plan, build a mechanism for continuous feedback from appropriate stakeholders (citizens, city council, city manager, staff, etc.), and then develop your local government budget based on the plan’s goals or outcomes. This is the proper order to the process and will allow you to successfully execute your strategy.