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

As the old saying goes, “Don’t put the cart before the horse.” If things are out of order, you won’t get anywhere worth going. That holds true for local government budgeting and planning processes. There is a proper order to follow if you want your funds spent wisely. Below, we 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 sets goals, then aligns resources and plots how you’ll reach them. This is big-picture stuff. Strategic planning covers long-term ambitions, while shorter-term, day-to-day tasks usually fall under operational planning.

Local Government Budgeting Process

Budgeting is one of the most important things a municipality does. Allocating funds and resources to specific programs and services isn’t easy. Ideally, the process takes a long-term view and ties funding decisions to high-level objectives and goals, focusing on results and outcomes. Involve the right stakeholders in each local government budget cycle, so decisions are sound and account for all relevant information.

You do not need to tie every dollar to a goal. As our step-by-step budget guide explains, most of a local government budget is fixed: debt service, personnel and mandated services. The alignment work belongs to the discretionary 20–30%, where new initiatives compete for funding. Any of four common approaches can link that money to the plan: priority-based budgeting, zero-based budgeting, budgeting for outcomes and base budgeting. Our guide to linking your budget and strategy compares them.

Put Strategy First

Funding should follow 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 shifting community priorities. Using strategic goals as the “reasoning” keeps budgeting decisions objective, consistent, and appropriate. Strategy should come before the budget, and the links between them must be clear and visible.

If goals are unclear or disconnected from the budget-setting process, things can break down badly.

Breakdowns When Local Government Budgeting Isn’t Linked To Strategy

When your government’s strategic plan and budget aren’t linked, the disconnect can cause:

• 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 City of Durham, North Carolina, saw the opposite effect once it linked the two. Durham keeps budget request documentation with linked performance measures in ClearPoint, and its data requirements for budget requests showed staff that their information was being used for important decisions. The results were concrete. Durham avoided hiring 4-5 communication officers a year after data showed it already met a 95% emergency response level. Unfounded initiative requests dropped sharply, because departments must now show strategic benefits and performance impacts.

The City of Fort Lauderdale, Florida, took a similar step. At the time of our case study, it had just begun integrating its budget process with strategy execution. For the first time, it could use data to show its strategic priorities as it prepared budget requests, and it planned for each department to present funding requests to a budget advisory board and the city commission, showing goals and performance indicators.

A budget that isn’t aligned with the strategy 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.

One caveat. The most successful municipalities would say their budget is tied to their overall goals, but sometimes the tie is loose. Build your budget-setting process around your strategic plan, but don’t expect every line item to connect directly to a high-level goal or objective. Sometimes it takes an extra step or two to see how a program or service links to the strategy, but the link will exist.

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

One ClearPoint client that models how to align strategy and budget is the City of Fort Collins. The city has a biennial strategic plan that’s focused on seven outcomes. Fort Collins stresses that its strategic plan reflects input from citizens, community partners, and government leaders and staff. The city has built strong feedback channels and updates its strategy every two years based on what it hears. 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 uses the same seven outcomes, and its sole aim is to get results on the strategic plan’s directives. This regimented approach creates a strong link between the strategic plan, which the city updates regularly to keep it relevant, and the budget. Fort Collins is one to learn from as you develop your own procedures for preparing local government budgets.

Fort Collins tracks this in ClearPoint, and its performance reviews show how the link works in practice. The city organized its metrics like a pyramid. At the top were 38 metrics showing progress toward its 7 strategic outcomes. The second layer was a larger group of metrics tracked to support budget requests and to show how council funding contributed to performance. For each outcome, executive reviews look at the strategic objectives, the metrics linked to them, and the programs and services funded in the budget that support those same objectives.

Budget Director Lawrence Pollack made sure departments knew the process was not fixed. “If you have a way to improve it,” he said, “then we'll make those changes real-time throughout the year.” The result: Fort Collins no longer sees initiative statuses slipping as the year goes on.

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, and it sets you up to execute your strategy successfully.