Sponsored content powered by ICMA partner Tyler Technologies. 

Local governments are entering a more constrained fiscal era. Federal stimulus funding has receded; costs for labor, infrastructure, and services continue to rise; and workforce limitations persist. At the same time, demand for services has not declined.

This is not a short-term cycle. It is a structural condition.

The traditional response has been to reduce services or increase taxes. That approach limits strategic choice and often weakens public confidence when tradeoffs are unclear.

Priority-based budgeting offers a different model. It is not simply a budgeting technique. It is a governance approach that enables leaders to allocate resources based on outcomes, service impact, and community priorities.

Moving Beyond Line-Item Budgeting

Line-item budgeting remains essential for financial control. It ensures accountability and compliance. However, it does not clearly show how spending translates into results.

Priority-based budgeting builds on the foundation of line items by connecting spending to the services it enables. It organizes financial inputs around programs and outcomes, adding context such as populations served, funding sources, mandates, and alignment with strategic goals.

This changes how decisions are made. Leaders are no longer limited to incremental adjustments. They can evaluate the full portfolio of services across departments, compare relative impact, and make deliberate tradeoffs.

The question shifts from “What can be reduced?” to “What delivers the greatest value?”

From Financial Data to Operational Clarity

Local governments already have extensive financial data. The limitation is visibility.

At the line-item level, information is fragmented across departments. It is difficult to identify duplication, assess impact, or compare services. Tradeoffs are often implicit rather than explicit.

Cutting-edge software such as Tyler’s Priority Based Budgeting uses AI to organize this information into a program-level view. It creates a system-wide understanding of services, including cost, purpose, and alignment with community priorities. This enables three critical shifts:

• Tradeoffs become visible and defensible.
• Redundancies and gaps can be identified across departments.
• Alternative funding strategies can be evaluated with clarity.

Leaders can explore options beyond cuts or taxes, including fee structures, partnerships, and service redesign. Financial data becomes actionable.

Case in Point: Liberty Lake, Washington

Liberty Lake, Washington, implemented Tyler’s Priority Based Budgeting to prepare for future fiscal pressure rather than react to it.

Since its incorporation in 2001, the city has grown to approximately 14,000 residents with a rapidly expanding commercial base. Its budgeting process relied on detailed line-item reviews and extensive council analysis of large financial documents. This approach provided control but limited strategic insight.

“It was mechanical, very antiquated, and not very strategic,” says Mark McAvoy, city administrator for Liberty Lake. “We’re a young city, so we haven’t gone through that first round of infrastructure rebuild or replacement. When that time comes, we might not be able to budget from a surplus position.”

City leadership recognized a risk. As infrastructure ages and replacement cycles accelerate, the city will not be able to rely on surplus fund balances to fund infrastructure preservation. A more strategic and forward-looking approach was needed.

By shifting to a program-based framework, Liberty Lake created a clear link between spending and strategic priorities. Priority Based Budgeting used AI to translate line items into programs and then to determine costs and evaluate the programs based on alignment and impact.

This changed how budget discussions occurred. Instead of reviewing hundreds of line items, leaders assessed services based on cost and value. Quadrant analysis allowed decision-makers to see which services delivered high impact relative to cost and which required reconsideration.

The effect was measurable. During the 2026 budget process, 76% of new funding requests were tied to programs rated as most or more aligned with city priorities.

This shift influenced behavior. Departments framed requests in terms of outcomes and alignment rather than inputs. Council discussions focused on investment strategy rather than line-item detail.

Liberty Lake established a system designed to function under constraint before constraint arrived. “We wanted to convert to a process and a system that we knew was agile enough to allow us to adjust when times weren’t as great as they are now,” says McAvoy. “Implementing Priority Based Budgeting allows an organization to focus on investment and return on investment.”

Case in Point: South Jordan, Utah

South Jordan, Utah, faced immediate fiscal pressure and needed to act quickly. During the 2007–2008 economic downturn, leadership was asked to reduce the budget by $3 million without clear direction. Most expenditures were tied to personnel. A traditional approach would likely have resulted in across-the-board reductions affecting core services.

“We needed a holistic approach that provided elected officials and other decision-makers a new lens to ensure our community maintains and preserves its highly valued programs and services,” says Sunil Naidu, South Jordan’s chief financial officer.

The limitation was not effort. It was the lack of a clear view of service impact.

By reorganizing the budget around programs such as police operations, fire response, and community services, South Jordan created a direct connection between funding and outcomes. Like the Liberty Lake process, Priority Based Budgeting applied AI to the city’s financials and was able to link spending directly to priorities.

This changed the nature of decision-making. Leaders could evaluate scenarios based on service impact rather than department totals. They could explain tradeoffs in terms residents understood, such as response times and service levels.

The city also incorporated resident feedback. Survey data was linked to service performance, allowing leaders to align funding decisions with community expectations.

The outcome differed from neighboring jurisdictions. South Jordan maintained its full-time workforce while others implemented layoffs and program reductions. Decisions were targeted and informed rather than broad and reactive.

Trust improved as well. Leaders could clearly show how resources were allocated and what changes would mean in practical terms.

“The ability to provide clarity to elected officials and the community is invaluable,” says Naidu. “Priority-based budgeting has transformed how we communicate our priorities, and Tyler’s solution makes that communication possible.”

What Changes for Government Leaders

This approach changes how managers operate, not just how budgets are presented. Budget discussions shift from departments to services. Tradeoffs become explicit and supported by data, and resource allocation is tied directly to outcomes and priorities.

In addition, communication with elected officials and residents becomes more clear and precise. Leaders are able to explain not just what decisions were made, but why they were made.

Enabling Faster, More Informed Decisions

In both cities and counties, governments are adopting tools that support program-level analysis and accelerate implementation. These capabilities allow jurisdictions to:

• Build inventories of programs and services quickly.
• Evaluate cost and impact across the organization.
• Identify opportunities for consolidation or alternative funding.
• Move from analysis to decision-making within compressed timelines.

The result is faster alignment between strategy and execution.

A Shift in Perspective

Adopting the priority-based budgeting approach requires a change in perspective.

Traditional budgeting emphasizes scarcity and incremental change. This approach emphasizes optimization and intentional allocation. Departments define their work in terms of outcomes. Leaders engage directly with tradeoffs, and organizations develop a consistent framework for evaluating services across the enterprise.

The result is greater clarity and stronger alignment between spending and community priorities.

Navigating the Fiscal Cliff

Fiscal uncertainty is now a defining condition for local government. The question is not whether constraints will emerge, but how prepared organizations are to respond.

Priority-based budgeting equips leaders to act with precision. It connects resources to results, makes tradeoffs visible, and supports decisions that can be explained and defended.

In the next budget cycle, the central challenge will not be identifying cuts. It will be determining which services are sustained, which are adapted, and which are reduced. That requires more than incremental budgeting.

It requires a system that can clearly answer a fundamental question: which investments deliver the greatest value to the community and why.

CHRIS FABIAN is senior director of product strategy for Priority Based Budgeting at Tyler Technologies. He has helped more than 300 government entities and schools implement priority-based budgeting. Chris is the co-founder of what is now Tyler’s Priority Based Budgeting. This budgeting methodology leverages machine learning and AI to predict and identify priority-based budgeting opportunities and savings. He has served as an internal business consultant for local government. (chris.fabian@tylertech.com)