Case 6.1: Reading a Budget

An operating budget reflects a government’s policy priorities and financing plans. Budget documents come in all sizes and formats. This assignment asks you to evaluate the budget of a general-purpose local government (e.g., state, city, or county government). *

Your evaluation should address the following:

  1. What are the government’s short-term and long-term policy priorities? How has the government proposed to address the long-term fiscal challenges, including the effects of a recession, funding in key policy areas (e.g., education, affordable housing, and infrastructure), institutionalized racism and racial inequity, unfunded pension and other post-employment benefits (OPEB) obligations, etc.?
  2. Summarize your observations on the government’s operating budget, including sources of revenue (tax and non-tax), expenditure priorities (by program), percent change in revenues, percent change in expenditures, and number and change in full-time employees.
  3. What object of expenditure in the proposed or approved General Fund or operating budget was the largest? What object was growing the fastest? What is held harmless or treated as a sacred cow?
  4. Are there limits on the government’s taxing and spending authority? Do these rules or limitations have a substantial impact on resource allocation?
  5. Has the government adopted formal procedures to address budget shortfalls? Are those procedures equitable?
  6. Do intergovernmental issues (e.g., federal or state aid) affect the government’s budget?
  7. Summarize your observations on the government’s spending in other funds, including special revenue, debt service, capital improvement, and enterprise funds. What are the major sources of revenues in each fund, percent change in revenues, percent change in expenditures, and number of full-time employees?
  8. Based on your review of all funds, has this government prepared a budget that is solvent (i.e., current revenues cover projected expenditures)? To answer this question, consider how much this government reports in reserves (e.g., unreserved General Fund balance or Budget Stabilization Funds). Are these projected to grow? Is the government using budget gimmicks to balance its operating budget? This may include the use of one-time sources of revenue or the inclusion of revenues or savings that remain uncertain (e.g., federal funds that are not yet approved or projected savings or efficiency gains). **
  9. Provide an assessment of the overall readability of the budget document. Your assessment could consider the following: length of the budget document, clear statement of policy priorities, cogent narrative with limited use of jargon, etc.

*We don’t recommend looking at single-purpose governments (e.g., water and sewer districts, school districts) as they rely on a single source of revenue or have no competing policy priorities.

**Note, the use of debt to cover costs associated with capital projects is not considered to be a budget gimmick.


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Financial Strategy for Public Managers Copyright © 2023 by Sharon Kioko and Justin Marlowe is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.