It is more important than ever to rethink budgeting practices. The economic environment is uncertain and volatile. Political differences seem magnified. Our ambitions—from sustainability to equity to public safety and beyond—require more resources and fresh solutions, and all the while local government is depended upon to provide essential services to communities. However, with limited resources, inflationary pressures, and a shrinking workforce, budgeting for the services we need in order to deliver on the results we’ve committed to seems daunting if not impossible.

The traditional budgeting approach is not up to the task of today’s challenges. And in response to these circumstances, in 2022, the International City/County Management Association (ICMA), the Government Finance Officers Association (GFOA), and the National League of Cities (NLC) launched the Rethinking Budgeting initiative to modernize budgeting practices in local governments and make them more responsive to community needs. The initiative emphasizes innovative budgeting practices to better align local government resources with strategic priorities instead of allocating funds based on historical spending patterns.

This collaborative Rethinking Budgeting initiative involves key players from ICMA, GFOA, NLC, influential local government leaders, academics, and private sector entities dedicated to supporting local governments. The resulting data from an extensive exploration of budgeting processes and practices led to a recommendation for a shift from traditional line-item budgeting to program and priority-based budgeting. When governments budget programmatically, they can better challenge the status quo, improve efficiency, and address real needs by basing budgets on priorities rather than the previous year’s numbers. Done well, a program-based or priority-based budget serves as a strategic plan with dollar values associated with achieving the identified priorities. This new budget document is an accountability and decision-making tool that can drive growth and ensure the community’s highest priorities receive the necessary resources.

Unlike traditional line-item budgets that base new budgets on past decisions—regardless of their continued relevance or success—taking a priority-based approach to preparing and implementing your budget puts current community needs and requirements front and center. ResourceX, a key contributor to this initiative, has developed breakthrough approaches to budgeting at a program level to drive decision making directly linked to the funding of strategic priorities. Packaged in modern budgeting software, the methods are made simple for local government and public sector practitioners moving away from traditional budgeting practices. Organizations can use the ResourceX software to develop, propose, and adopt a budget built on programs supported by budget data. This software scales the program data creation process to increase the adoption of program and priority-based budgeting. The faster organizations can produce reliable program data, the easier it is to promote transparency in the budgeting process and increase awareness of issues of fairness in the budget.

“ResourceX is contributing actively to GFOA’s Rethinking Budgeting efforts. Central to ‘rethinking’ is the shift from the line item decision-making unit to a program decision-making unit within the budget process. That is the key, simple, practical, and breakthrough step to ensure resources are strategically aligned with results and outcomes for the benefit of residents and the community,” says Chris Fabian, CEO and co-founder of ResourceX. “That’s how we move the needle to address society’s biggest challenges.”

Shayne Kavanagh, the director of research at GFOA, along with Chris Fabian, have been working closely together to promote program-based budgeting and published a paper, “The Promise and Challenges of Program-Based Budgeting,” in 2015. This article discusses the benefits of program budgeting for decision-makers as this methodology and set of tools clarify what government does and how much it costs. This approach emphasizes aligning local government resources with strategic priorities instead of allocating funds based on historical spending patterns. By adopting this approach, local governments can better address community needs and maximize resources.

Program-based Budgeting

Program-based budgeting defines the programs and services a local government provides in terms that are digestible to residents and decision-makers. When discussing budgets, it is more significant to all stakeholders to focus on topics like police patrols and tree services rather than expenses related to salaries, benefits, goods, and contractual services in the budgets of departments such as public works and law enforcement. Budget resources are then allocated to those programs to clearly show the cost of providing each program. This approach provides a clear understanding of how local government resources are being utilized in a language accessible to cross-departmental staff, residents, and decision-makers.

Priority-based Budgeting

Priority-based budgeting takes the programmatic approach to the next level. It involves identifying the programs most aligned with community priorities through a scoring exercise carried out by department staff and leaders. The data tied to each program in the priority-based budgeting approach illustrates alignment to goals, such as a safe community, climate, a thriving economy, a sound infrastructure, equity, and access to cultural and recreational services and areas. Additional data points such as levels of mandate, demand, cost recovery, and reliance on the organization to provide the service enable data-driven decision-making. Priority-based budgeting enables local governments to allocate resources according to priority alignment and the community’s goals.

Transparency

Transparency is critical to building trust with the community. Financial transparency tools can allow residents to interact with their community’s financial information and foster greater understanding. Many municipalities have successfully translated the priority-based budgeting purpose and potential by way of their budget book, their website, community-facing data visualizations, and interactive resident dashboards. The 2022 ResourceX Impact Report highlights many of these organizations, including Beach Cities Health District and the cities of Flagstaff, Arizona; Rowlett, Texas; and Pittsburgh, Pennsylvania.

Social Change

Rethinking Budgeting also highlights the power the local government budget has to enact social change. The budget is one of the most influential policy documents a local government produces, and equity is an important consideration in the budgeting process. Looking at the budget through an equity lens can open eyes to more positive outcomes for each community member.

Tools like the budget equity tool in San Antonio, Texas, can help guide city departments and offices to assess how their budgets can support or hurt each part of the community. Cities like Salt Lake City, Utah, used the priority-based budgeting scoring process to identify equity opportunities. When dealing with complex public and community issues, leaders need to see the full impact of every budgeting decision across all departments. This level of granularity isn’t possible with traditional budgeting approaches.

The Rethinking Budgeting initiative is an excellent example of how collaboration among local governments, leading academics, and private sector companies can drive innovation and change. By adopting these modern budgeting practices, local governments can better align resources with strategic priorities and more effectively serve their communities. Rethinking Budgeting helps local government leaders better meet these needs by introducing improved approaches to budgeting, such as priority-based budgeting, new technologies and budgeting software, and best practices that support successful community outcomes.

CHRIS FABIAN is CEO and co-founder of ResourceX. For over a decade, Chris has been invested in solving the problems associated with resource scarcity in local government. Through ResourceX, his team provides the software solution for priority-based budgeting (PBB) using data and evidence to transparently and exponentially improve results for citizens and the community. PBB is now practiced and applied by over 250 organizations across North America.

ResourceX created the original priority-based budgeting (PBB) framework and software to enable local governments to strategically align resources with community outcomes. This alignment between resources and priorities accelerates data-driven decision-making and provides a platform to fund critical initiatives to ensure a fiscally sustainable future for the community. ResourceX believes in the purpose of government and its potential to lead the charge in tackling some of the world’s most significant challenges, such as equity and climate action. As thought leaders and budget software innovators, we can support local governments in their vital work.