Introduction
A budget process refers to the approach used in the development and approval of a budget. Budget processes are often used by institutions such as government entities and enterprises. It often encompasses the allocation of available resources to essential functions. This paper evaluates the budget-making process of the city of Chicago. It finds that its budget is created based on best practices.
Types of Revenue and their Sufficiency and Sustainability
There are various revenue sources in the city of Chicago. According to Budget Overview (2019), these sources of revenue include corporate fund, which constitutes collectible taxes such as transaction taxes, recreation taxes, and transportation taxes. The second revenue source is special revenue taxes, which are collected and meant to fund specific functions such as garbage fund, vehicle tax fund, and library fun. The other sources of revenue for the city include debt service funds, enterprise funds, property tax levies, and grant funds.
The proposed budget is sufficient for the city’s needs. Budget Overview (2019) shares one of the areas that created insufficiency in the 2018 financial year was the 911 surcharge, which could not fully cater to the cost of emergency and response preparedness. The insufficient was solved by raising the surcharge from $3.90 to $5.0. Another step that the city has taken to ensure that the budget is sufficient is to maintain unrestricted fund balances that will serve as a mitigation for future risks, emergencies and unpredicted shortfalls.
The revenues collected by the city are sustainable. The assertion is based on the revelation that the city made efforts meant to increase sustainable revenue sources, which include taking advantage of economic growth in the city. There are a number of occurrences in the economy that are contributing to the sustainability of the budget. One of the issues is that there has been changing consumer behavior attributed to an increase in consumption, which translates to increase sales, which factor in collectible taxes from each sale. Budget Overview (2019) further states that the city has experienced an increase in transportation tax owing to the growth of the rideshare industry.
The capacity of the Budget Process to Identify and Integrate the Needs and Expectations of the Community
The budget process has the capacity to point out and integrate the needs and expectations of the community. Budget Overview (2019) shows that the budget process has the capacity to point out the needs of the community as each department is given the mandate of developing its own detailed budgets. When developing the budgets, departments tend to utilize a process known as zero-based budgeting which has the beneficial implication of encouraging each department to employ strategic thinking to that they can have the resources to provide quality services. The ability to identify community needs is enabled by the fact that the city has five departments that are dedicated to dealing with community issues. These departments include the department of public health, the commission for human relations, the mayor’s office for persons with disabilities, the Chicago public library and the department of family and child services. Budget Overview (2019) states that these departments focus on providing services to those who are in need within the community.
The budget process is also able to integrate the expectations of the community. According to Budget Overview (2019), once the budget draft is complete, it is made available to the public through its official website so that members of the community can study it. Public hearings are then scheduled so that community members can air views on whether it addresses their intricate needs and so that they can propose amendments to it.
Budget Creation Process in Relation to Identified Best Practices
It appears that the budget creation process followed identified best practices. One of the best practice processes in budgeting encompasses keeping a minimum number of budget iterations (Lanzkron, 2017). The best practice can be manifested in Chicago’s budget process. In fact, in some cases, the city does not include any iteration. The assertion can be seen in its proposed 2019 budget, which is shown below in figure 1. The lack of using iterations ensures that few budget line items are included hence providing a viewer with an easy to read a summary of the budget.
Figure 1: Proposed Budget Summary
The second best practice process that the city has employed in its budget preparation process is using the what-if analysis. A what-if analysis is often required since there might be disruptions and changes that the city had not expected (Lanzkron, 2017). According to Budget Overview (2019), the city has a policy that requires that unrestricted funds be maintained. The maintaining of these unrestricted cash balances is meant to ensure that the city can be safeguarded from current and future adverse likelihoods as well as budget shortfalls that were not anticipated. Therefore, the what-if analysis creates unrestricted cash balances.
Formal Process for Monitoring and Evaluating the Budget
The city did not include a formal process for monitoring and evaluating its budget. The assertion means that it did not apply best practice measures in its monitoring and evaluations. Ordinarily, the city should have a monitoring and evaluation process which accounts for its process towards the achievement of its goals and mission. The city should have a set of metrics that can assist it to balance accounting for the effort and finances that it directs towards community issues that it aims to address. In essence, the monitoring and evaluation process should be tied to the city’s strategic plan.
Performance measures should be in place since they serve as an indication that informs stakeholders exactly how the organization is faring towards the attainment of city goals. These performance measures may include issues such as improvement of transport infrastructure, increased regulatory oversight over the city’s construction of buildings and consumer protection and increased revenue collection in areas that are untapped.
Recommend a Minimum of Five Strategies for Improving the Budget Process
There are some recommendations that can be made to improve the city’s budget-making process. Bryant (2015) recommends that the budget-making process should be tied to a strategic plan. The reason is that the mayor’s office is a public office whose mission is to serve the public in general. When serving the public it should have clear expectations and priorities for where money will be spent. Therefore, clear expectations and priorities should be based on a strategic plan. The second recommendation that can be made on the city’s budget-making process is that it is should be based on management philosophy. Bryan (2015) states that a management philosophy serves as a framework for guiding the budget process on the goal s of the city. It helps with the determination of priorities and the coast that will be required to achieve them. Thirdly, for greater transparency, the budget process should encompass iterations. While fewer iterations are recommended, having no iterations as seen in figure 1 above is not advice. Having no iterations means that readers cannot know the specific details of the budget. The fourth recommendation is that the evaluation process should be budgeted for. In fact, the evaluation function should be a function of the office of budget and management and it should allocate funds towards the ascertainment of whether the budget met the goals for which funds were allocated. The fifth recommendation for improving the budgeting process encompasses redistributing the allocation of resources for the purposes of contingencies. If an unprecedented occurrence does not occur in a financial year, it should be used on deserving areas that are financially strained.
Conclusion
The focus of this paper was to evaluate the budget-making process of the city of Chicago. The paper finds that the budget that has been created is sufficient since unrestricted cash balances have been maintained in case of emergencies and it is sustainable due to the growth of collectible revenues. In addition, the budget has the capacity to identify and act on the needs of the community since it has a department focused on attending to community needs and a public hearing for the inclusion of amendments made by members of the community. It is determined that the budget was created in relation to identified best practices.
References
Bryant, M. (2015). Improving the Budget Process. Government Finance Review. Retrieved 18th November 2019 from https://www.gfoa.org/sites/default/files/GFR101542.pdf
Budget Overview (2019). The city of Chicago. Retrieved 18th November 2019.
Lanzkron, R. (2017). Best practice in the budget and planning process. PWC. Retrieved 18th November 2019 from https://www.pwc.com/il/he/events/assets/2017/15-6/best_practice_in_the_budget_and_planning_process.pdf