Key takeaways regarding budgeting and how to approach the unknown amid the current COVID-19 crisis
Cities across the country are deep into the preparation of their FY2021 budgets, a job that is difficult in the best of circumstances for both City Managers and Finance professionals. However, under the current pandemic conditions, it is seriously daunting and looks almost impossible. This is particularly true for those jurisdictions preparing multi-year projections. The first challenge is doing the projections at all. The second challenge is working with your elected officials, bargaining groups, and community to accept them!
So how do cities prepare budgets in these radically uncertain times?
The key is the assumptions underlying the numbers. In any crisis management challenge, accurate information is critical. However, the more turbulent and uncertain the environment in which the budget has to be developed, the greater the importance of collecting broad data to support grounding assumptions; and the more critical it becomes for staff to share that supporting data and their related analysis with their elected officials.
That brings us to COVID-19 and the unknowns of the rapidly evolving economic landscape. While all cities currently share the same general uncertainty, each community is, in fact, unique. They are different in size. Their business community mix may be very different than the adjacent communities. Their social priorities may vary widely. Their ability to deliver services, and the type of services they deliver, may differ. Their population may be younger or older than other communities. So, while certain assumptions may apply across all of them, others are going to be unique to each community.
With this in mind, how does each city approach budget development?
There are four areas that any city must now consider when building their FY2021 budgets (particularly when building Year One of a multi-year budget), although how they gather information and the resulting assumptions they make may vary widely:
- The Pandemic
- The Economic Shutdown
- Future Planning (Lessons Learned)
Download our recent White Paper: Budgeting in a Sea of Unknowns to read more as we outline ways to approach budgeting in these uncertain times.