On Preliminary Budgets

The Cedar Hills city council recently passed a resolution that "mocks the state legislature for forcing the city to pass a preliminary budget and challenges legislators to spend more time attending city meetings so they can better understand how they force municipal government to function." The editorial staff of the Daily Herald endorsed the council's point of view by issuing a buffalo chip to the state legislature for requiring "pointless preliminary budgets." (See Caleb Warnock's article here and the Herald's editorial here.)

Council members based their complaint on the fact that the tentative budget must be adopted by the first council meeting in May, a good four weeks before June 8, when the county is required to issue the certified tax rate. This, they say, leaves cities guessing at what their revenue will be for the coming year. Plus it feels to them like micromanagement.

I disagree with this point of view for two reasons.

First, it is the legislature's right and duty to regulate the basic functions of city government. A city government's authority derives from the enabling acts of the state legislature. Given that the budget is the city's single most influential document -- it authorizes all spending and taxation -- the legislature is wise to prescribe how it will be drafted. The legislature's "micromanagement" protects the people from the inexperience of citizen council members like myself. In the best democratic spirit, city council members are lay leaders elected more for their ability to interpret the public will than for their financial, legal, or managerial acumen. Municipal councils rely on the state's guidance in much the same way as the local PTA relies on the state and national PTA for operation and policy manuals. They rightly submit to processes established by better and more experienced planners.

Second, with or without the certified tax rate, preparing a preliminary budget is good planning. There's nothing magical about that certified tax rate -- it doesn't guarantee the coming year's revenue. But a good financial officer can ballpark a good estimate, and this estimate is enough to give a fairly final form to the budget. Doing this in May gives council members meaningful time to grapple with the tactical realities of the budget and make any necessary adjustments before final adoption. It also gives department heads time to plan for the coming year.

Here's how the budget time line works under Utah state law:

• First council meeting in May. By this date, the chief financial officer of the city must present a balanced budget to the City Council together with a memo detailing the highlights of the budget. The city council adopts this tentative budget on this same date.
• June 8. The county must provide the coming year's certified tax rate to the city. (This is a provision of Utah's Truth in Taxation law, about which see here.)
• June 22. By this date, the final budget and the certified tax rate must be adopted by the city council unless there is to be a tax increase. If a tax increase is proposed, the deadline for adoption shifts to August 17. This gives the city council time to complete the extensive process of public notice required by Truth in Taxation.
• July 1. The fiscal year begins. (If a tax increase is proposed, the tentative budget governs between July 1 and August 17.)

A realistic draft. Time to consider, haggle, and proof-read. Advance notice to department heads. This is just plain good planning.

I confess to scratching my head a little more when Cedar Hills said their process begins in April. Perhaps this works in a small town with few services. In American Fork, on the other hand, the process begins in January. In January, council members begin meeting with department heads and advisory committees to look at needs and priorities. In March, the mayor schedules an all-day retreat where department heads present formal budget requests to the city council, both orally and in writing. Between March and May, at least a couple more retreats are held, and council members visit individually with department heads and the chief financial officer.

Essentially, we use the first half of the fiscal year, from July to January, to evaluate the current budget, and the second half, from January to July, to plan for the coming budget. This is a thorough process that enables careful stewardship of public dollars.

Cedar Hills set out to mock the legislature. Mockery is intended to provoke laughter. I hope the legislature will see the resolution in this spirit and laugh it off.

In accordance with statute, the American Fork city council heard the financial officer's budget memo and adopted the preliminary budget on May 7. I share the text of the memo below.