Editor's Alley: Budgeting in Uncertain Times
Monday, May 19, 2025
CSMFO News HTML for YM 5.20.25
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Jennifer Becker is the Financial Services Director for the City of Burbank and has been with the City for over two decades. She currently serves as Chair of the CSMFO Communications Committee and Vice Chair of the San Gabriel Valley CSMFO Chapter. She
is also a member of GFOA and active participant in their “Rethinking Financial Reporting” working group. Jennifer holds a Bachelor of Arts in Psychology and a
Master of Public Administration from the University of Southern California. She is an avid Trojan football fan, and on non-football weekends you can find her skiing
in Mammoth or hiking around Southern California with her husband and daughter.
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Author: Jennifer Becker, Communications Committee Chair
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Editor's Alley: Budgeting in Uncertain Times
May is such a special time for public finance professionals, isn’t it? Yes, it’s budget season again, and boy what a season it has been. Many of us began our budget development
process months ago amid a relatively stable economy, and we’ve watched it slowly unravel in the months that followed. Sales tax returns have waned as consumer confidence predictably
reacts to political instability. Federal grants were cut and then restored and now are back on the chopping block. Tariff policies that change by the day are making the stock
market look more like a page out of the Cal Tech Richter Scale. And labor groups? They’re not interested in your budget woes. They want a contract that keeps up with inflation,
with a side of additional benefits thrown in for good measure. Forget that $26 billion that CalPERS lost in April – now seems like the perfect time to propose some pension enhancements!
The economic anxiety is palpable, and our governing boards and our communities are looking to us for answers. Are our federal grants secure? What is happening with our pension
funds? Will there be a recession?
Anyone have a crystal ball that I could borrow?
Without knowing all the answers, how do we address these understandable economic concerns and avoid impacting our communities at a time when they may need us the most? By
staying true to what we’ve always done: preparing financially responsible budgets, sometimes in the face of enormous pressure to do otherwise. As we settle in for what may be
months or years of economic volatility, let’s remind ourselves of some basic tenets of public finance that we must adhere to and communicate ad nauseum to our stakeholders:
• Let your financial policies be your guide. A former City Manager of mine once said “in the absence of policy, you get politics.” Good financial policies can help take the
pressure off your Board or Council from making unwise financial decisions for political reasons, but only if they feel a sense of ownership and responsibility to those policies.
This means your agencies’ financial policies should not be sitting on a website somewhere collecting virtual dust - they should be discussed frequently as part of the budget process,
readily available to the public, and reviewed and updated regularly by your governing board.
• Now is not the time to be messing with your reserves. Financial reserves are there to help us avoid major catastrophes – they not a tool to avoid making difficult budget
decisions. If your agency is fortunate enough to have an additional budget stabilization or “rainy day” fund, resist the temptation to use it during this light drizzle when you
know a bigger storm is coming. If your reserves only meet the standard two-month minimum, they are probably not enough. Download GFOA’s reserve calculation worksheet to assess
the appropriate reserve levels for your community.
• Engage with your labor groups. For most cities, labor comprises the majority of the General Fund Budget. Thus, your labor groups need to be a part of the conversation when
facing uncertain economic times. Often, union leaders don’t believe the message that a contract is not affordable, because they are only looking at the current budget or fund
balance. So, bring that multi-year forecast to the bargaining table and review it with them. At the same time, be open to negotiate things that don’t have a direct financial impact,
like alternative schedules, remote work opportunities, or a maybe more generous leave cash out policy that also helps mitigate that looming GASB 101 liability.
• Recurring expenses must not exceed recurring revenues. Let’s say it again for the people in the back! Sometimes in a given budget year you may elect to use cash or fund
balance to protect your community from the worst impacts on an economic downturn. But we all know that using one-time funds to fund recurring expenses is not sustainable in the
long-term and does equate to a balanced budget. Yes, it’s hard to say no to that position or service that is really needed, but you know what’s even harder? Laying off someone
you just hired or cutting a program your community has come to rely on when you run out of cash.
When the economy is thriving and revenues are strong, the Finance Director is the most popular person in town. When the opposite occurs, it can feel like a pretty lonely
job. But regardless of the circumstances, our communities rely on us to provide consistent and stable leadership. This means being transparent about your agency’s financial status,
communicating often with your stakeholders, and making responsible decisions and recommendations that will position your agency for long term fiscal health. As we weather this
approaching storm, we must remember to keep our eyes on the horizon and not just the oncoming wave front of us. The tides will continue to change, but if we take good care of
our boats, we can sail through this period of turbulence into calmer waters ahead.
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