As local governments in Canada and beyond get back to work in earnest after a summer break, administrative managers have already turned their thoughts towards next year’s budget. Even if the elected officials have not yet considered what revenue and expenses for 2025 will look like, their administrators have.
Finance is always a tricky topic for any order of government. It’s time to balance what people want and need against what they are willing to pay. Service types and service levels face scrutiny as many factors eat away at the value of the dollar. Inflation and downloading mean that the basket of goods that a municipality bought last year will cost more next year even without any changes to what’s in the basket.
In some parts of Canada, Saskatchewan and Nova Scotia in particular, this year brings about elections for many local governments. This adds the focused lens of politics into the financial equation, and it moves the debate from one that’s based purely on value to one that’s based on what gets individuals elected – or unelected in some cases.
Whenever we work with local officials right after they are elected, one of the topics we discuss is the governance role in finance. We know there are always local circumstances and cultures that make experiences unique in every place, and that adds complexity, but the governance role of finance is fairly basic. Essentially, that role is oversight.
The deeper that councillors go into the dollars and cents of their government, the more fraught with peril the experience will be, and the more frustrated the governors and their administrators will get.
Overall, I see councillors having three main jobs when it comes to finance – they establish the budget, they monitor the variance from budget through the year, and they oversee the audit at the end of the year. While this is simplistic, it’s correct at a high-level.
Setting the budget is probably the most onerous part of this scenario and it’s the part of the process that lies in front of councils right now. It really helps if the council is following its strategic plan though. That plan lays out what changes the council wants to see over the course of the plan and beyond – what’s making the municipality a place where the council members’ grandkids want to live. The priorities in this plan ought to set the tone for next year’s budget.
The strategic plan is aspirational and it’s about change, however the bulk of the municipal work isn’t about change, it’s about keeping the momentum going and meeting the basic service requirements laid out in legislation and in whatever the community has done in the past. This is a fact that new council members often don’t understand and it tends to frustrate them. That 85+ percent of municipal dollars are already committed to be basics means that the change part of the municipal budget – the stuff councillors had on their election brochures – is necessarily limited.
Budgets are complex, and municipalities hire people to build, monitor, and review them. Councillors need to trust their officials and they need to provide input and oversight to keep the budget on track through the year. If councils don’t trust their officials to provide the best objective advice, well that’s the topic for another blog post.
Elected officials know more about their communities than anyone else does, including their spouses and partners. This deep knowledge means that their budget choices may differ from what the person behind them in line at the grocery store might see as ‘common sense’, and it’s one of the times when elected officials really earn their compensation. They sometimes need to make choices that may not be popular now so that the municipality is best suited to remain viable and to grow in a way that meets the needs of future generations.
The topic of budgets and tough financial decisions could be the topic of a series of blog posts, so these comments merely provide a high-level overview.
As a municipal leader, how do you plan for budget season? How does your council determine what goes into next year’s budget and what might fall by the wayside?
As always, you can reach me at ian@strategicsteps.ca
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