Budgeting is inevitable—the pain of it is optional.
Key Takeaways
  • Plan beyond the fiscal year. Projects that are not in front of you yet will eventually need funding.
  • Start from your municipal objectives and back into the budget. Limited resources then follow the strategic plan constituents helped shape.
  • Tie major budget items to outcomes and KPIs. Residents can then see why taxes rose or a program was cut.
  • Recognize employees whose work advances the goals. Incentive pay is often impossible in government; recognition costs little and lifts satisfaction.
  • Show residents results on a public-facing community dashboard. It shows where tax dollars go and whether you are meeting your goals.
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There are as many budgeting approaches as there are municipalities. Every municipality knows budgeting is unavoidable and necessary to keep the city running. But municipal budget preparation can be downright difficult, so your process needs to be smooth and well thought out.

What Is A Municipal Budget?

Municipal budgets vary, and a small town’s budget will likely differ from a large city’s, but each aims to outline how resources coming from many different sources will be allocated. Typically this will include a highlight of expected revenue as well as estimated expenditures across various departments and services.

‍The National Advisory Council of State and Local Budgeting neatly summarizes five municipal budgeting best practices:

‍“A good budget process:

  • Incorporates a long-term perspective,
  • Establishes linkages to broad organizational goals,
  • Focuses budget decisions on results and outcomes,
  • Involves and promotes effective communication with stakeholders, and
  • Provide[s] incentives to government management and employees.”

Below, we explain why each element matters. Take these five into account and you’ll have a solid approach to budgeting.

The Municipal Budget Preparation Process: 5 Things To Consider

1. Your municipal budget guidelines should incorporate a long-term perspective.

Even if your budget only extends through the fiscal year, think ahead when creating it. That way, you’ll consider how to budget for important projects that aren’t right in front of you but will eventually require funding.

A capital improvement plan is the usual way to keep those projects in view. The capital budget is one fiscal year of funding, while the plan is the runway: its first year rolls into this year’s budget, and the rest sets the schedule for what comes next. Most of these plans span five to ten years. Put a named person next to each project, not a division. In ClearPoint platform data, a capital project with a named owner is completed more than twice as often.

2. Your municipal budget should establish linkages to broad organizational goals.

No municipality has an unlimited budget (or unlimited time to formulate that budget). Every municipality has to carefully consider their limited resources and how to allocate them properly. The best way to do this is to start with your municipal objectives and back into your budget from there. By doing this, you’ll ensure that your strategic plan (which should have included input from constituents across your municipality) is taken into account during the budgeting process.

The City of St. Albert, Alberta, shows how this works when money is tight. The city keeps inventories of its internal and external service levels, which set the direction for business planning, budgeting and service delivery. As St. Albert implements priority-based budgeting and ties the budget to those inventories, ClearPoint helps council decide which projects may need to halt so something else can be done without increasing the budget.

Show a visual comparison of projected budget to the real cost of implementing initiatives. Use a Budget vs Actual Dashboard.

3. You should focus municipal budget decisions on outcomes.

Because the majority of budgeting processes draw on information from previous years and the current year, as well as projections for the next few years, you’ll need to have at least some of your municipality’s outcomes in mind while budgeting. If you have a clear set of goals (see step #2 above), then you should have key performance indicators or outcomes linked to those goals. Many high-performing municipalities will align their major budget items to outcomes to demonstrate why they are spending their funds in a certain way. This way, your constituents can better understand why there’s been an increase in taxes or why a program has been cut.

The City of Durham, North Carolina, ties performance data to budget requests. Departments attach linked performance measures to their budget request documentation, and they must now show strategic benefits and performance impacts, which has led to a dramatic reduction in unfounded initiative requests. In one case, Durham avoided unnecessary hiring of 4-5 communication officers annually after data showed a 95% emergency response level was already achieved. The fire department’s successful request for fire-inspection software made its case the same way, through personnel cost reduction, more reliable data and more efficient revenue.

4. Your municipal budget should involve and promote effective communication with stakeholders.

If you’ve complied with suggestion #2 and #3 and focused your budgeting decisions on goals and outcomes, communicate this to anyone who has a stake in city government. This includes municipal employees, businesses, citizens, council members, the mayor, administrators, and more. One of the best ways to do this is to have a public-facing community dashboard on your website. This gives you a simple way to express to your community where tax dollars are going and whether or not you’re meeting your goals.

The City of Coral Springs, Florida, pairs a dashboard with face-to-face sessions. Its budget workshops give residents a direct voice in the fiscal stewardship of the city. Its Community Dashboard, published through ClearPoint, lets residents track progress on key initiatives, understand budget allocations and monitor performance metrics in real time. The city’s strategic plan is closely linked to the budget and aligned with its mission and vision.

5. Your municipal budget should provide incentives to government management and employees.

When your strategic plan is aligned and incorporated into your municipal budget preparation process, you’ll see buy-in increase across your municipality. Both government management and employees will be able to see that what they’re doing on a day-to-day basis is contributing to yearly goals and that their contributions are important to the success of the municipality.

Durham found that the budget itself can be part of the incentive. When budget requests required performance data, staff could see their information was being used for important decisions. The city’s lesson is simple: staff engagement increases when people see their data influencing important outcomes.

Incentive compensation is trickier, and sometimes not possible in government, but giving recognition is easy and doesn’t cost much. It also has a high payout in employee satisfaction. At a minimum, you should be consistently looking for ways to encourage the right employee behavior across the organization.

A Final Takeaway

Think of your budget less as an operational necessity and more as a tool. Used properly, it can help ensure that you meet your goals (laid out in your strategic plan) by tying them directly to your budget (which informs what you’re able to do). The two should work together, and the five suggestions above will help you get there.

Municipal budget FAQ: how to communicate your budget, engage residents, prepare a budget, and the benefits of budget planning

Common questions

How do you prepare a municipal budget?

Preparing a municipal budget is a complex process, but here's a simplified overview:

  • Gather Information: Collect data on past revenues and expenses, economic forecasts, and community needs.
  • Set Priorities: Determine which services and programs are most important to the community and prioritize those in the budget.
  • Estimate Revenues: Forecast how much revenue the municipality will receive from taxes, fees, grants, and other sources.
  • Allocate Expenses: Determine how much money will be spent on each service and program.
  • Balance the Budget: Ensure that revenues and expenses are equal. If not, adjustments must be made.
  • Review and Approval: The proposed budget is reviewed by the governing body and may be subject to public hearings before final approval.

How do you read a municipal budget?

Reading a municipal budget can be overwhelming, but it's essential to understand how your tax dollars are being spent. Here are some tips:

  • Look for a summary: Most budgets start with a summary that provides an overview of revenues and expenses.
  • Focus on the categories: Budgets are usually organized by categories, such as public safety, transportation, and parks and recreation. Focus on the categories that are most important to you.
  • Look for changes: Compare the current budget to previous years' budgets to see where spending has increased or decreased.
  • Ask questions: If you have questions about the budget, contact your local government officials.

What is a municipal budget?

A municipal budget is a financial plan that outlines how a city, town, or village will raise and spend money over a specific period, usually a fiscal year. It covers all aspects of local government operations, including public safety, infrastructure, education, and social services.

How does a municipal budget work?

A municipal budget works by allocating resources to different services and programs based on the community's priorities and available funding. It is a legal document that must be approved by the governing body. The budget also serves as a tool for accountability, allowing residents to see how their tax dollars are being spent.

What are the steps in the municipal budget preparation process?

  • Budget Calendar: Establish a timeline for the budget preparation process.
  • Departmental Budget Requests: Departments submit their budget requests to the budget office.
  • Revenue Projections: Estimate the amount of revenue the municipality will receive from various sources.
  • Budget Review: The budget office and governing body review the budget requests and make adjustments as needed.
  • Public Hearings: The proposed budget is presented to the public for comment.
  • Adoption: The governing body adopts the final budget.
  • Implementation: The budget is implemented, and spending is monitored throughout the year.
Ted Jackson
Ted Jackson
Co-Founder & Alabama Native

Co-Founder and Managing Partner of ClearPoint. Former VP at Kaplan and Norton's Balanced Scorecard Collaborative.

Ted Jackson is the co-founder of ClearPoint Strategy, a B2B SaaS platform that empowers organizations to execute strategic plans with precision. Before ClearPoint, he was Vice President at the Balanced Scorecard Collaborative — later the Palladium Group — the firm Drs. Robert Kaplan and David Norton founded to put their framework into practice, where he led global sales and support for its strategy management software and wrote three articles for the Balanced Scorecard Report. A Duke and Harvard Business School alumnus, he brings over 30 years' experience in strategy execution, including 15 years implementing the Balanced Scorecard in the field. Ted works closely with customers to ensure the software meets unique challenges, continually refining the platform with his global expertise.