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New Budget Processes for the “New Normal”

by on October 29, 2014

Library budgeting has never been an easy task. As we settle into the “new normal” in library budget planning, traditional approaches like line item budgeting become less effective. The decline in traditional library metrics, such as print circulation, also makes it difficult to justify flat or increased funding from year to year.

New approaches, like priority-based and outcome-based budgeting, could help align a library budget with its services and dollars received. These methods can provide enhanced accountability and transparency to the budgeting process. They both have the potential to better communicate the goals and intended outcomes of new and existing programs. Outcomes, outputs, inputs, strategies, and performance are aligned and regularly evaluated. Governmental units, like libraries, can align more strongly with their city’s or county’s priorities.

A priority-driven budget is in some ways the opposite of a traditional line-item budget approach. The budget process begins with a review of the organization’s priorities rather than the dollars spent on activities the previous year. Each program or activity is evaluated based on predetermined performance indicators. The focus moves from dollars spent to effectiveness of programs and services in relation to the value of those services.

Creating priorities prior to funding considerations helps to focus on the mission and role of the organization. The process can also help to weight the value of one program over another. In cases where a program may be ranked at a lower value for results achieved, stakeholders and program participants have the opportunity to take on more responsibility for the success or support of the service. San Jose, Calif., is an example of how a city has applied this process.

Outcome-based budgeting is a specific form of priority-based budgeting. It is an approach that government entities have successfully implemented and is now moving to the non-profit sector.  It is interesting to see how some government agencies have used this method to incorporate their strategic plan initiatives directly into their budget process. An example is Newton, Massachusetts, a city that has used an outcome-based approach throughout their city, including their library budget.

The four principles of outcome-based budgeting include:

  1. Establishing outcomes
  2. Developing approaches to achieve outcomes
  3. Developing a budget with approaches to achieve outcomes
  4. Evaluating performance and making adjustments

These four principles allow the organization to align its budget tightly with its strategic plan.

Traditional library metrics and performance indicators need a tune-up. This is an opportunity for library leaders to adjust indicators to demonstrate long-term strategic priorities. By aligning them with the budgeting process, libraries will be in a better position to communicate value to financial stakeholders.

Resources

Stanz, C., Backes, S., Fokerts, N. “Budgeting for Results: Outcomes Based Budgeting.” Presentation of Nonprofit Financial Roundtable Series, Waite Park, MN, August 26, 2014. Powerpoint slides from the presentation.

Kavanagh, S.C., Johnson, J., Fabian, C. Anatomy of a Priority-Driven Budget Process, Government Finance Officers Association, 2011.

Outcomes Based Budget Overview,  City of Newton, Mass., 2014.


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