Cost Accounting in Local Government

Using a Program Budget to Restore Trust

With every passing day the State budget deficit seems to grow deeper. So what do the voters say to Sacramento? We don’t believe you. The voters think that they are sending enough revenue to the State for them to be able to provide all of the services that the State provides. Of course, the voters are wrong, but that is a whole other article. But they are taking that anger at State government and channeling it to their own local government agencies.

How can local agencies gain the trust of voters?

One thing that local agencies can do to diminish that anger is to try to restore the connection between revenues received and services provided. The best way that a local agency can do this is through a program budget. This process involves identifying all of the services that are provided to the public down to the lowest functional level that makes sense for your agency. Then the revenues associated with that service are identified and any difference is made up from general taxes.

This process is similar to stacking building blocks, with each service being a separate block. If total costs exceed total revenues, then blocks either need to be removed or they need to be made smaller. But until all of the blocks are identified and stacked up before the community it is impossible for the community and the Council to make informed decisions about what services they can truly afford. If the community says they still want all of the services, then the groundwork has been laid for a discussion about revenue increases.

But until the trust with the community is restored about what it truly costs to provide all of the services that it receives, any discussion about cutting services or increasing revenues will be very difficult.

We have written in more detail about program budgets in past newsletters. Go to www.revenuecost.com/newsletter.php and look at the newsletter articles for September and October 2008.

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