What is priority based budgeting?
What is priority based budgeting?
Priority based budgeting is the practice of making budget decisions and allocating funds based on the needs of the community. Priority based budgets emphasize working with the resources available as a starting point rather than with the previous year’s expenditures, as well as allocating funding to programs rather than departments.
What is the purpose of priority based budgeting?
Priority based budgeting is built on the idea that community needs should determine how a budget is allocated. Because of this, priority based budgeting takes a more holistic approach to the budget process, borrowing from several other budget types in order to best serve the community. As such, there are usually three elements that define priority based budgeting:
- Budgeting from zero: Like zero-based budgeting, priority budgets start with a clean slate, putting all funds on the table, rather than working from an existing model. This allows each program or initiative to be evaluated with a fresh pair of eyes, leading to funding decisions that better meet community needs.
- Programmatic allocation: Whereas many budget types allocate funding to departments in general, priority based budgeting funds specific programs, so it’s always the initiative that’s being supported.
- Community engagement: While involving the community in the budgeting process isn’t a requirement of priority based budgeting, since priority budgeting seeks to solve problems in the community, it tends to be one of its defining characteristics.
What are the principles of priority based budgeting?
Priority based budgeting embodies several principles, which all center around the core concept of delivering services to the community. Expanding on the elements of the budget process described above, priority based budgeting is guided by the following principles:
- Prioritize services: This means the programs that serve the community should be what guide funding decisions, and not the departments that provide them.
- Eliminate the unnecessary: Whereas traditional budgets often address funding cuts by reducing spending all around, priority based budgets ask city and county leaders to take a closer look at their choices, to continue to robustly fund the programs that need funding, and to simply eliminate the ones that don’t.
- Question your spending: By making all funds available, government leaders are required to question past spending decisions and to make the choices that make the most sense in the moment.
- Budget within your means: Starting with available funds rather than the previous year’s budget forces local governments to make spending choices based on the resources on hand.
- Understand your expenditures: One of the biggest challenges to priority based budgeting is understanding the true cost of programs. This principle urges local leaders to gain a better understanding of these costs in order to fund them
- Be transparent about community priorities: Priority based budgets aim to best serve the community. Therefore having a strong understanding of community needs, and being transparent about them, is essential to effective budgeting.
- Be transparent about impact: Because priority budgets fund services, it’s important to be clear about how those services are impacting the community.
- Be accountable: With funding going directly to programs, it’s the responsibility of local governments to be accountable for the services delivered and impact of those programs, and not just for staying within the budget’s spending limits.
What are the advantages and disadvantages of priority based budgeting?
No budget process is perfect, and like all budget types, priority based budgeting has both its strengths and weaknesses.
The main advantages of priority based budgeting are:
- Priority budgets often include resident feedback from the start, ensuring that the initiatives that are funded truly reflect the needs of the community.
- Because priority budgets start with a clean slate, they give city and county managers more flexibility to fund the programs they see fit, rather than having to conform to budget priorities that have already been pre-defined.
- Priority budgets fund programs rather than departments, which means available resources are going directly to projects for the community.
- The result of the advantages listed above is greater transparency and accountability on the side of local governments for where valuable resources are going.
The main disadvantages of priority based budgeting are:
- Starting from zero means a more time-consuming process. Without the previous year’s budget to work from, local government leaders can expect to spend more time drafting their budget.
- Because funding is going to programs rather than departments, it can sometimes be challenging to allocate resources effectively, as the full cost of programs—including overhead—can be difficult to calculate.
What is the process of priority based budgeting?
When starting the priority budgeting process, two factors are equally important and need to be identified in tandem:
- Identify all available resources: While many cities and counties start their budget process by asking which resources are needed, priority based budgeting asks government leaders to identify which resources are available.
- Identify community priorities: Understanding what’s most important to the community is imperative to the priority based budgeting process. Only once needs are identified from the entire community, can resources be allocated to reflect them.
Once those two steps are completed, the priority based budgeting process requires further definition of community priorities, the creation of services, allocation of resources, and implementation of programs.
How to incorporate community feedback into the budget process
The linchpin of priority based budgeting is community priorities. This means that cities and counties practicing priority based budgeting must employ a range of methods to obtain community feedback and identify resident priorities. While some of these methods, such as town hall meetings, tend to be outdated and only give a partial picture of resident needs, there are many new, innovative methods that are being employed as well. These include digitally distributed community surveys, which can be used to rank specific services or areas of need; fresh twists on community meetings, such as the City of Savannah’s CityCamp; and gathering organic feedback in order to hear from residents who aren’t active participants.
Today, many cities and counties across the United States are using priority based budgeting to better serve their residents through a deeper understanding of community needs.
No matter which budget type your city or county uses, incorporating resident feedback into the budget process helps to better prioritize the allocation of funds, evaluate the success of initiatives, correct mistakes, and ensure the community as a whole is being served.