The budget is, arguably, the most important policy document a government produces. If this is the case, then the budget has a big influence on a community’s ability to thrive. Local governments are being asked to deal with issues of increasing complexity in an environment of declining trust in institutions. This means that traditional approaches to budgeting may no longer have the same value they once did. Further, today we have access to new technologies, to new research on how people make decisions, and a better appreciation of the importance of fairness in budgeting. These are opportunities to take new approaches to budgeting.

All of the forces above inspired ICMA and the Government Finance Officers Association (GFOA) to launch the Rethinking Budgeting initiative a few years ago. Let’s review the major elements of Rethinking Budgeting.

1. Rethinking Budgeting posits that the primary reason a local government budget exists is to pool the community’s resources to purchase goods and services.

Pooled resources, like a local government budget, are often bedeviled by a “collective action problem.” Put simply, a collective action problem occurs when individuals, because of immediate self-interests, fail to achieve an outcome that would make everyone better off. To illustrate, a pooled resource often produces a zero-sum competition, where one person’s gains come from another person’s losses. Zero-sum competition characterizes much of how the traditional budget process takes place. This can been seen, for example, where one department is pitted against another in competition for resources or one neighborhood against another. Rethinking Budgeting shows how to solve these collective action problems.

2. Rethinking Budgeting suggests that the budget officer is responsible for architecting a budget process that creates the best chance of producing savvy and wise decisions.

But decision-making is messy. It is done by humans, so it comes with the myriad well-documented cognitive biases and inconsistencies (i.e., “noise”) in human thought. Budget officers can help government officials reduce the negative impact of bias and noise in decision-making processes. Helping people avoid bias and noise is called “decision architecture.” Rethinking Budgeting casts the budget office in the role of “decision architect” and outlines the core skill sets that budget officers should bring to budgeting in order to create a budget process that helps decision makers perform at their best and that builds trust in the process.

3. A budget process is the series of steps and actions that lead to a decision on how to allocate resources.

One of the essential organizing ideas of Rethinking Budgeting is to help local government budgeteers “be chefs, not cooks.” This means that budgeteers understand:

• The underlying challenges of budgeting.
• The principles for addressing those challenges.
• Ideas for how the principles can be applied under different circumstances.

This means Rethinking Budgeting will not provide hard-and-fast rules for how budgeting should be conducted. The process we present is not a “brand name” budget process that provides detailed instructions for every step to the final budget. Rather, we describe principles that can be used to design a budget process that is a fit to local needs and addresses the fundamental reasons of why we budget. We supplement this with links to detailed examples and stories about how to put the principles into action.

4. Rethinking Budgeting is in competition with a local government’s current method of budgeting.

That means that there must be a compelling reason to change the budget process. We provide “A Guide for Changemakers” that has resources for those looking to make a change in the budget process. This guide includes the following:

• Many governments follow a traditional budget because it offers certain strengths. The guide shows how Rethinking Budgeting can offer comparable advantages.
• One primary strategy for changing a system is to identify sources of dissatisfaction with the status quo. The guide shows how Rethinking Budgeting can address common pain points associated with budgeting.
• The guide includes an interactive needs assessment tool to help you identify the best opportunities for change.
• The guide addresses politics, power, and how the budget officer cannot just survive but thrive in this environment.

Stay Tuned

At the time of this writing, the Rethinking Budgeting documents will be concluding a public review and comment period. We’ll then publish a refined set of documents. (We do not say “final” because Rethinking Budgeting will continue to seek out new information and change our guidance as new things are learned.) Stay tuned to ICMA and GFOA for information on how to access the refined documents after the public review is concluded.

We hope you will join us on this journey to improve budgeting for the benefit of the communities we serve.