Category Archives: Finance Officer’s Desk

Stronger Public Sector Budgeting

Stronger Public Sector Budgeting: Webinar Takeaways

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Yesterday, I had the pleasure of moderating an incredible webinar about public sector budgeting: “Budgeting for Success Amid Uncertainty.” Veteran Finance Directors Bill Statler (retired from San Luis Obispo, California); Boulder City, Nevada’s Finance Director Hyun Kim; and OpenGov’s VP of Government Finance Solutions Mike McCann (retired from Ukiah, California) each shared their perspectives based on their professional expertise and experiences as local finance directors.

Nearly half of all U.S. states are facing revenue shortfalls this year. As governments actively face the near-term prospect of either an economic downturn or the one of the longest growth periods in our nation’s history, the panelists discussed the natural challenges associated with budgeting effectively in such uncertain economic environments –both strong and weak environments. The session melded theory with practice, focusing on providing insights and solutions. In an era compelling governments to constantly do more with less, they noted that modernizing public sector budgeting and planning approaches would be critical to achieving success.

Preparing for the Next Downturn

Bill Statler spoke specifically to strategies for preparing for the next economic downturn. While most local governments have recovered from the Great Recession and have experienced recent growth, future downturns and other uncertainties are inevitable. Those organizations that are planning now are best-equipped to succeed through future challenges. “If you can’t prepare for these in the best of times, when can you?” Statler posited.

He honed in on specific challenges, including economic outlook, unaddressed infrastructure needs, and pensions and retiree health care. To address them proactively, he suggested five strategies for ensuring long-term fiscal health:

  1. Engage your community and align resources with priorities. “At the end of the day, it’s not about the numbers, it’s about the community,” Statler said. The governing body must lead the way while engaging the community early.
  2. Use your favorable results for one-time purposes. Fund capital improvements you deferred and address unfunded liabilities. He said, “Today is your base,” which means there is no catching up. Operate from your current reality and minimize program expansion until your infrastructure plan is caught up and liabilities are sufficiently funded.
  3. Implement fiscal policies. Fiscal policies (such as balanced budget, CIP management, minimum fund balance, etc.) are preventative and curative. According to Statler, they are your “guiding North Star,” providing continuity and articulating organizational values when the organization is under less stress. “If you have a notion of where you want to be, your chances of getting there are significantly enhanced.”
  4. Plan for the long-term. Financial planning forces you to think about factors that affect your fiscal health. Forecasts provide a powerful context to gauge how you are doing, and how best to frame policy decisions for what lies ahead.
  5. Create a contingency plan. What is your strategy? A clear response plan and guidelines, communicated to both residents and internal staff, will enable you to respond to adverse circumstances smoothly. Identify triggers for implementing the plan and engage employees early on when seeking solutions.

Planning for Change, a Case Study

Hyun Kim spoke of how Boulder City, Nevada has navigated post-recession dynamics to while striving for long-term fiscal sustainability. His federally-planned city – originally founded to house Hoover Dam construction workers – grappled with how to do more with less while also anticipating an inevitable growth slowdown. While tourism provides opportunities, Boulder City faces aging demographics that can’t fund growth in perpetuity due to strict growth ordinances.

Beyond demographics, Kim spoke of very practical budget process concerns. He arrived in his position in the middle of its budget season, and he was unfamiliar with the City’s existing Enterprise Resource Planning (ERP) system. Thus, he faced firm budget deadlines amid ever-shifting circumstances such as ongoing labor negotiations and personnel shifts – all while trying to navigate a new ERP system.

He discussed the benefits of long-term planning and leveraging non-traditional approaches within the public sector. For instance, by leveraging cloud technology, he said his team has realized operating and cost efficiencies. In addition to other workflow processes, his team started using OpenGov’s cloud-based budgeting solution, which he said allowed him to leverage existing ERP data through a simpler interface. Whereas static spreadsheets would be stale by the time they made it to council, the new software provided solutions that were “living” – allowing for automatic updates, collaboration, and a faster online process. “We were able to see changes being made in a centralized spot from various departments. It saved our weekends,” he said.

Empowering Stronger Public Sector Budgeting

Mike McCann concluded with brief remarks from his own perspective as both head of OpenGov’s in-house team of finance experts on the Government Finance Solutions team and as a veteran finance director himself. He explained that he joined OpenGov for its mission – to empower more effective and accountable government. That mission exists to help everyone in the industry. He noted that the effort is centered around designing a set of solutions focused on the budget as the heart of government. As capabilities are added, the outcomes increase in turn.

If you were unable to join the live webinar on March 21st, be sure to watch it yourself for more takeaways and first-hand perspectives from seasoned professionals in the field.

Autumn Carter leads Government Affairs at OpenGov.

Beverly Hills Historical Data

We Saved 9 Years of Historical Data Amid Our Financial System Conversion

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When I joined the City of Beverly Hills, our CFO wanted to implement data-driven decision making across the organization. Like all Americans, our citizens expect a high level of service, but at the same time, they understandably want to keep fees and taxes reasonably low. This tradeoff means that in the Administrative Services Department, we must ensure every dollar buys as much value as possible.

We had a ways to go.

“Our Financial System Was Not Easy to Use”

Our financial system was not easy to use; we could not easily analyze General Ledger data. And with our recent financial system conversion, our ability to analyze decade-long trends was dramatically reduced due to the cost and complexity of transferring data from the old system to the new. We often resorted to patching things together to answer ad-hoc questions and run reports.

Beverly Hill OpenGov Historical Data

We wanted to be able to prepare detailed monthly financial reports for each department but our current financial system does not place a strong emphasis on reporting capabilities. Extracting data from our system, formatting it in Excel, then generating charts and tables for every department would have taken far too much time for a monthly task. Limited to less than optimal monthly reporting meant we had trouble empowering department managers to own their results, fostering accountability, and knowing when to make changes if necessary. We knew we had to update our Chart of Accounts in the process.

“Bridged the Gap”

Meanwhile, Beverly Hills had purchased OpenGov to help with management reporting and open data. We decided to delay our implementation of OpenGov until we had fully implemented our new financial system and Chart of Accounts, worrying it would distract us. The City did not want to lose access to historical data after we converted, but working with two separate financial systems would have been tough. OpenGov provided a layer on top of the two systems that pooled data, giving us both current insights and historical trends.

OpenGov bridged the gap by offering multiple ways to upload legacy systems data and align it with our changed Chart of Accounts. In OpenGov, you can either group the old version of the General Ledger account with the equivalent new version of the General Ledger account using the new numbering and naming convention, or you can align the two Chart of Accounts off line and upload already aligned datasets.

We chose the second option to eliminate some hierarchies that might be confusing for end users. This only took a couple of days, but at last, we had a Chart of Accounts that would meet the City’s needs and be easy for departments to navigate when it comes to building their own reports/graphs. And because we built the new Chart of Accounts on top of the old one, we can use OpenGov to examine nine years of data holistically.

OpenGov has enabled us to create monthly financial reports and review them with department managers with ease. I begin presenting to departments by placing their revenues, expenses, and budget in a citywide context. We also use our historical data to show trends over time. From there, we can use OpenGov to drill down with department managers and discuss trends, challenges, and opportunities. We would have never been able to do this without an interactive reporting tool such as OpenGov.

“A Crosswalk Between Systems, Enabling Access to Historical Data”

Our system conversion experience taught us an important lesson about OpenGov that governments considering the software should know. Even if you’re in the middle of converting your financial systems, there’s no need to delay purchasing or implementing OpenGov. The software actually helps: it provides a crosswalk between systems, enabling access to historical data and improved reporting.

OpenGov – and the financial transition that OpenGov facilitated – has put us in prime position to continue improving reporting, expanding citizen transparency, and ultimately make better data-driven decisions to benefit the entire government and residents.

Roza Jakabffy, CPA is the Accounting Manager for the City of Beverly Hills, CA.

How Capitola Improved Council-Administration Relations With OpenGov

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Mark Welch serves as finance director for the City of Capitola, CA.

The ballots have been tallied. The yard signs have gone. The town halls are over.

2016’s local government election is behind us, but finance officers will feel its effects in the months and years ahead. New and returning members alike will seek to enact policy agendas and fulfill campaign pledges. And because every policy involves a financial investment, finance officers will find themselves responsible for figuring out how to implement the new council’s policies.

Many will be reasonable. Invest in repairing roads. Pay first responders well. Clean the parks. But then there are the inevitable others. Every year, councils propose pledges that do not reflect financial reality:

Repeal a sales tax that funds bloated salaries!

Slash pension expenses!

Cut travel costs!

I do not believe candidates intentionally mislead citizens. These public servants have decided to step up for their communities and their representation is one of the hallmarks of a democratic society. However, like most citizens, council candidates and members may not have the most informed knowledge of local government operations and finance. Financial illiteracy breeds honest mistakes during the campaign. In turn, this breeds conflict with the administration when it comes time to craft and implement policy.

In the City of Capitola, California, we believe good relationships with our governing body lead to better policies and, ultimately, better services for citizens. I want to share how, during the recent election, we took preemptive steps to educate and engage with candidates. I then will explain how we improved relationships with the existing governing body – elevating the quality of public debate and building trust with staff and citizens – and why this will help us engage new elected officials.

Educating Candidates Before the Election

It was important to us to empower candidates to make feasible promises to their constituents. Therefore, we held an orientation for council candidates after the filing deadline passed. Candidates had lacked an easy tool to learn about and explain financial issues to voters, so they often conducted their own analyses.

These ‘self-explorations’ of financial data displayed in PDFs and often spreadsheets often didn’t end well. Because our financials were not presented clearly, candidates accidentally made incorrect claims about budgets, revenues, and finances. Newly elected members would come in with an incomplete or incorrect ideas, and propose policies they would not support if they understood financial realities.

Our elected officials – and citizens – deserved better. That’s why we decided to hold a candidate orientation. However, if we had relied solely on our financial system to prepare the necessary reports, time constraints would have prevented us from giving candidates the insights they needed.

It would have taken almost two full workdays to build the reports that explain issues candidates tend to care about, such as overtime across the entire organization. I would have been forced to download multiple reports from our financial system, combine them, calculate the right subtotals, determine the correct classifications, and prepare the necessary charts and graphs. And this is for every question a candidate might conceivably ask.

Fortunately, Capitola had purchased and implemented OpenGov, a cloud-based reporting and transparency tool. To generate the overtime report we needed in OpenGov, we simply filtered data by expense type, checked the overtime box, and selected all departments. OpenGov automatically generated charts as we went along. Instead of having to drill vertically into our Chart of Accounts, we could mix and match elements across departments and funds. It took just 15 minutes to build the all of the reports we needed.

Candidates loved having this information available both during the orientation and for their own use afterwards. Because OpenGov is interactive, we could answer any follow-up questions in real-time. Candidates also reported back that they were able to learn a lot more on their own – leading to more informed campaign platforms and councilmembers.

Engaging Existing Councilmembers

When the new council is sworn in, OpenGov will help us engage every member. We’ve had great success with the existing council.

Before OpenGov, although we generally enjoyed good relationships with our council, there were moments when trust broke down. For example, councilmembers would sometimes not trust the reports staff gave them. And because it often took over a day to generate a report, councilmembers could not receive immediate answers to follow-up questions if we hadn’t already pulled the report – reducing the information available to a debate and eroding trust between the administration and the council.

Since we implemented OpenGov, I’ve noticed a concrete improvement in our relationship with the city council. Because of OpenGov’s intuitive interface and visualizations, councilmembers use OpenGov to validate the numbers we give them, answer questions on issues such historical and projected future pension contributions, and inform their policy discussions. And they even use the tool to highlight successes to citizens.

Based on this success, I think the new governing body will benefit greatly from OpenGov just as its members did during the election.

Moving Toward Better Policy

During my time in government, I’ve seen dedicated councilmembers and staff unite to make the community a better place to live and work. A functional council-administration relationship – grounded in trust and mutual respect – can really move the needle on critical policy issues.

But, as we’ve seen, building and maintaining these relationships isn’t easy. It requires engagement both during and after the election. This engagement will always depend primarily on people, but OpenGov’s software is proving to be an indispensable ally. With OpenGov, our relationship with elected officials will benefit both sides – and Capitola’s citizens.

This article was originally published in the November 2016 CSMFO Magazine.

Mark Welch serves as finance director for the City of Capitola, CA. Before joining Capitola, Mark was Santa Clara’s Principal Financial Analyst and Assistant to the City Manager for the City of Sierra Vista. Mark holds an MPA from the University of Oregon and a BA from the University of California, Santa Barbara.

An OPEB Exit Strategy: How to Eliminate your Retiree Health Care Liability/Costs

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Click here to see a list of all editions of the Finance Officer’s Desk column.

Health insurance for retirees and their dependents, life insurance, dental insurance, and long term disability or care coverage are representative benefits typically included in a city’s OPEB program. Even though employment has ended, cities have a contractual obligation to deliver the promised benefits to eligible former employees and/or their family members. This benefit is no longer needed to attract and retain qualified employees. More significant is that escalating OPEB costs can cause structural imbalance of your General Fund. Cities can maintain a skilled labor force without OPEB, It’s time to exit from providing this gratuitous benefit.

Prior to 2004, your annual budget included a line-item for retiree health care that was probably off your radar screen. The amount paled in comparison to health benefits for current employees. That is, until GASB 45 was issued in June 2004. GASB 45 is an accounting and financial reporting provision requiring government employers to measure and report the liabilities associated with other (than pension) post-employment benefits (or OPEB). Although GASB encouraged earlier implementation, GASB 45 became effective for periods beginning after December 15, 2006, for phase 1 governments (those with total annual revenues of $100 million or more); after December 15, 2007, for phase 2 governments (those with total annual revenues of $10 million or more but less than $100 million); and after December 15, 2008, for phase 3 governments (those with total annual revenues of less than $10 million).

Such was the case with the City of Sausalito. The following graph depicts the growth of OPEB (Other [than Pensions] Post-Employment Benefits) in the City of Sausalito since FYE 2002. As the graph depicts, by the time GASB 45 was implemented, Sausalito’s Pay-Go costs were growing at an annual rate of 5.5% – a rate faster than the 2% growth of General fund expenditures. Yet, the percentage of these costs to normalized operating expenditures never exceeded 1.6%. I.e., the relative cost to the City was immaterial to our structural balance.

Many cities (including Sausalito) reviewed the required OPEB actuarial studies and decided to continue funding OPEB on a Pay-Go basis, rather than pre-funding OPEB liabilities (click here for a discussion of pre-funding).

Then came the Great Recession. The stock market crash of September 2008 wiped out more than 20% of the equity market. Those cities that elected not to pre-fund and remained on a Pay-Go basis breathed a sigh of relief that they didn’t invest into a Section 115 trust.

Declining city revenue during the recession focused scrutiny on reducing major operating costs to continue balancing budgets. There was no appetite for reallocating money from providing essential services to contributing an OPEB ARC (Annual Required Contribution) into an OPEB Trust Fund. There was also an aversion to equity market risks.

Fast forward to today’s headlines and the news focus on mountains of OPEB debt and unsustainable health care costs. Almost every story references prefunding OPEB irrevocable trust funds as the only viable solution. Bond rating agencies will even put a cap on a score from having an OPEB burden that is considered very high and management’s lack of a credible plan to address the situation.

Now before we begin to fault cities that decide to stay on a Pay-Go basis, let’s examine the pros and cons of prefunding. There are three major positions that are supported by prefunding advocates:

  1. Prefunding costs less
  2. Prefunding promotes intergenerational equity
  3. Prefunding prevents crowding out

Today’s blog examines these three positions and concludes with a surprise recommendation for OPEB reform.

Costs Less

Is Prefunding a lower cost for the City than Pay-Go in a sense that a given OPEB benefit can be provided with a lower contribution rate under funding?

Proponents of prefunding assert: “Although pre-funding requires higher contributions in the short term, it is actually the cheaper option in the long term.” Graphs such as the one lifted from the above linked report, are presented that juxtapose retiree health care costs with prefunding alternatives, giving supporting visualizations that are actually somewhat misleading. Despite parenthetical warnings such as “(if assumptions are met and absent catastrophic investment losses)” the ability to relieve OPEB cost pressure is offset by relying on the stock market to pay for a substantial portion of the benefit! I.e., the Pay-Go approach is in nominal dollars, but the prefunding alternative is betting heavily that sustained growth in equity markets will pay for the difference!

Source: United States Common Sense


It’s not due and payable at a moment’s notice. Nor does it represent a legal debt obligation. It’s not like a car loan – you pay it off and it’s gone forever. It is an actuarial calculation built on assumptions that may or may not happen.

There isn’t a credible actuary who would assert that an 80% funded OPEB plan is better off that a 50% funded OPEB plan. The real deciding factor is can the entity sustainably afford to pay for its’ retiree health care obligations.

For many years, public pensions have relied on over 60% of their revenues from investments in Wall Street. And look at how underfunded they are! Under the red -herring of “Costs less”, governments were driven to invest more heavily in stock equities, increasing fiscal volatility. Let’s not make the same mistake with OPEB.

Cities that decided to remain on the Pay-Go system minimized their exposure to increasingly volatile financial markets and saved their cities substantial amounts of money from recent stock market downturns or investment returns less than the assumed discount rate. On the other hand, the impact of GASB 45, and the upcoming GASB 74 & 75 results in higher unfunded actuarially accrued liabilities (UAAL) because discount rates are lowered.

Takeaways –

  • There is no true cost difference between the two approaches, only different investment scenarios.
  • If you are going to set up a trust fund, do not invest in stock market equities expecting unreasonable investment returns! Rather target asset allocation in your trust fund closer to risk-free investment returns, such as US Treasury bonds.

Intergenerational equity

Is full-funding more fair from the standpoint of intergenerational redistribution than Pay-Go?

While it’s true that today’s taxpayers are essentially paying for health care for services that were rendered to the public decades ago, this has always been the case for cities and their retirees. Yes, this arrangement violates a cardinal principle of public finance—namely, that each generation of taxpayers should be responsible for funding the services that it enjoys. However, it was the tacit societal contract that each generation of taxpayers pays for the preceding generation retirees’ health care costs, on the understanding that the next generation of taxpayers will pay for the current workforce’s retirees’ health care costs. This can be advantageous to successive generations if population growth and health care costs are increasing at a steady state, and exceeding real interest rates. This was the case until recently. Increasingly longer life expectancies, escalating health care costs, and low fertility rates are not growing proportionately as was the case historically, and it has only begun to become unfair to successive generations.

Takeaway – Remember there is a transition cost in the decision to shift from Pay-Go to prefunding. It double loads the current generation with paying for past AND current health care services.

Crowding out

Is the real problem created by rising retiree health care costs “crowding out” other government priorities?

Structural balance is the goal of preparing annual balanced budgets. (See GFOA’s best practice “Achieving a Structural Balanced Budget”) Simply put, you have a structurally balanced budget when recurring revenue growth meets or exceeds recurring expenditure growth. Whenever a major expense category increases faster than revenues, another expense must be reduced.

Takeaway – Fully funded trust funds are not the goal of OPEB reform. The ultimate goal of OPEB reform should be General Fund structural balance. This means making sure that revenue growth keeps pace with all expenditure growth.

What’s the Answer?

When health care costs inflate faster than all other expenditures, Pay-Go funding will consume larger percentages of government’s annual budget plans. But, so will prefunding because of the intergenerational equity transition cost discussed above! In other words, both approaches work against structural balance.

Here’s an approach to successfully manage structural balance. Phase in a comprehensive OPEB reform program!

1. Close OPEB benefits for all new entrants! – By terminating total medical benefits OPEB for all future employees your accrued actuarial liability and normal cost will be eliminated when all current and legacy retirees/annuitants are deceased.

2. Offer to transition current employees from defined benefit OPEB to defined contributions – Many employees will voluntarily elect to take cash now rather than wait for a future benefit, especially newer workers that are in occupations that have high mobility or turnover. Take advantage of this! Offer cash into a deferred health plan, or deferred compensation plan and have them waive any rights to future defined OPEB benefits. When current employees elect to shift from the defined benefit OPEB to a defined contribution plan, there are significant decreases in accrued actuarial liabilities and normal costs.

3. Set up an irrevocable OPEB trust fund – An irrevocable trust fund is the only vehicle where assets can be shifted into that offset the accrued actuarial liabilities (remember key takeaway from above – don’t bet your trust fund on stock market volatility!) In setting up the irrevocable trust fund, do not limit your permitted investments to cash and cash equivalents, but also include capital income producing assets to generate income for paying for retiree health care benefits.

4. Move income producing capital assets into the irrevocable OPEB trust fund – Typically governments only invest cash into their irrevocable trust funds. The impact on the statement of net assets is a corresponding reduction in unrestricted net assets. However, by moving capital assets into the irrevocable trust fund, the book value of the capital asset is offset by a corresponding reduction in restricted net assets! By moving assets into the irrevocable trust fund that have market values approximating the UAAL, you effectually eliminate the UAAL, and the ARC reverts to the Pay-Go amount. To preserve the integrity and purpose of the irrevocable trust fund, only move assets that are producing significant income such as cell towers, municipal buildings that are rented to the private sector or other government agencies, parking lots, etc. (Yes, this takes the income out of your General Fund – see next step)

5. Pay all retiree health care costs out of the irrevocable OPEB trust fund – by paying all retiree health care benefits out of the irrevocable trust fund, these expenses are also moved out of the General Fund offsetting the impact from previous step.

6. When there are no more PAY-Go annuitants, close the irrevocable OPEB trust fund and return all income producing assets back to the original fund of origin – Talk about leaving a legacy for your grandchildren! A revenue source that was previously dedicated to paying retiree health care costs becomes unencumbered when an actuary certifies there are no more annuitants subject to the benefits of the trust. These income-producing assets are now transferred back to the government’s balance sheet generating fresh cash flows of added revenues. They can be used to reduce or eliminate taxes, or increasing capital investment in infrastructure. Thus unleashing true grass-roots economic stimulus for your local government.


There are other subsets of OPEB reform mechanisms such as removing the implicit subsidy element of health care provision and making use of medical exchanges to lower retiree health care costs. Of course, it’s always smart to monitor the progress of political efforts to nationalize health insurance and make changes in Medicare (e.g. co-pay rules). Look for guidance from your state association of cities: the League of California Cities has a very comprehensive document outlining many OPEB reform ideas. Incorporate these into the above to focus on structural balance of your General Fund.Conclusion

But just don’t stop there! There is tremendous political and labor union pressure to continue with OPEB, a gratuitous benefit that reduces funding for essential public services. The real focus of this article is to convince you to close out your retiree health care program! Make meaningful OPEB reform your number 1 priority, not just marginal changes on the edges.

A new OPEB liability and cost-reduction option now available to California cities is participation in the League’s Health Benefits Marketplace (HBM) (click here for more information)

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Charlie Francis is a municipal finance expert. He has more than forty years of local government financial management experience in both the public and private sector, including twenty years of experience as a Chief Financial Officer. Most recently, he served as the Director of Administrative Services and Treasurer for the City of Sausalito where he earned the unofficial title of “OpenGov super user”.  He has also served as a finance manager for the Town of Colma, CA, and as CFO and acting City Manager for the Cities of Indian Wells, CA and Tracy, CA.

Questions or comments? Email Charlie at

The Anatomy of an Oil Boom and Bust

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From pumping oil to paving roads

In 2010, Catarino “Cat” Castro had a great job working in the oilfields around Douglas, a city in Converse County, Wyoming. He started working for an energy company in 1999, and after several years, the company had promoted him up the ranks. Life was good for Cat Castro in Converse County. And he wasn’t alone. Converse County was a great place to live in 2010.

Although the financial crisis affected small towns to entire states across America, large portions of Wyoming remained mostly unscathed. Converse County in particular thrived on one of the state’s most diverse economies. While oil and gas development rose and fell throughout the years, our coal mines formed a rock of stability; the uranium mine’s managers were considering expansion, and the county’s fourth wind farm was about to come online.

In the second half of 2010, the Wyoming Oil & Gas Commission received 62 oil and gas permit requests for exploration in Converse County’s portion of the Powder River Basin. That number almost tripled by the first half of 2011, more than doubled again by the second half of 2013, and peaked in the first half of 2015 at 1,072 requests. By the end of 2014, 1,497 completed oil and gas wells fueled Converse County’s economy.

As national unemployment topped ten percent in late 2009, the county’s rate was under seven percent. And while hiring had slowed, the energy boom ensured the sector’s jobs still accounted for one of every six, and growing, of the county’s jobs. Those jobs — in the coal mine, the uranium mine, the railroads serving coal shipments, oil and gas fields, or the coal-fired power plant — were relatively high-paying, with annual wages averaging over $60,000. The standard of living was high; the cost of living, low.

A stable job market also meant a stable community with a growing population, rising numbers of children in classrooms, and – most important to the County’s government – a stable tax base. The County had just experienced its seventh consecutive year of rising revenues; although income was projected to be flat in 2010, projections for 2011 suggested a seven percent increase in property tax and sales tax revenue.

Property tax valuations surged, rising from $505 million in 2007 to a record $693 million in 2010. The tax revenues allowed the County to invest in infrastructure, roads, and employees. Although the County was in good financial condition, as the recession across the U.S. continued, economic worries began to surface.

In the Fiscal Year 2010 budget, the Commissioners noted, “County departments and outside agencies were cautioned during the budget work sessions that next year will likely see a significant decrease in valuation; therefore, the County will probably not be able to fund programs at the same level as this year.”

Those concerns never materialized. Instead, the county valuation jumped 18% to another record of $851 million in 2011, fueled in large part by the surging oil and gas play in the Powder River Basin.

The boom resounds throughout Converse County

Cat had moved to Williston, North Dakota, away from his family, to take advantage of the oil boom there. But in 2014, Cat saw the changes the energy boom was bringing to Douglas, with new building and new shops. Douglas wasn’t as busy as Williston, but there were lots of employment opportunities with oil companies. He decided to return to Douglas. Even though he would take a pay cut, it was worth it to be home every night and be with his family.

Cat wasn’t the only energy-sector employee to move to Converse County. Past 2010, employment in Converse County surged.

The impacts started with traffic. Trucks and crews began hauling rigs, materials, and workers along corridors in the northern half of the county. Highway 59, the main route north to Campbell County and Gillette, became the focus of safety concerns as the personal vehicles of those headed to the mines in Gillette sometimes collided with large trucks hauling oilfield materials. The results of these accidents were often deadly.

According to the Wyoming Department of Transportation, the Annual Average Daily traffic count on Highway 59 increased 43% from 1,720 vehicles per day to 2,458 between 2004 and late 2013. In a one-month stretch from October 25 to November 25, 2014, the Wyoming Highway Patrol reported 31 crashes between Douglas and Gillette, with one fatality and fourteen injuries. On December 7, 2014, the Casper Star-Tribune wrote that the Wyoming Highway Patrol added more troopers on Highway 59 to address “unsafe highway conditions.”

The traffic wasn’t just on highways and paved roads. When wellhead locations are overlaid onto the county transportation system map, it becomes clear that the majority of drilling activity was occurring in areas that were miles from any paved road. County roads that were lonely and rural prior to the oil and gas development became bustling truck routes, seemingly overnight. Bill Hall Road, in northern Converse County, saw an average of 5 trucks a day in 2011, 800 in 2013 and 1,300 trucks per day in 2014. County roads not designed for commercial use endured thousands of trucks daily; the County Road & Bridge department struggled to keep up.

Converse County’s Road & Bridge department expanded its workweek to include mandatory overtime. Their departmental overtime budget ballooned from $12,264 in 2011 to $31,696 in 2014. Like other departments and businesses in the County, Road & Bridge struggled to find and keep employees. If someone could operate heavy equipment, they were more than likely working for an energy company and making twice what we could offer.

Housing shortages became the next issue. The influx of workers drove vacancy rates in the county from almost 7% in late 2009 to 1.9% in the fall of 2013. Our school districts hired teachers to keep up with increasing enrollment, but couldn’t find them places to live. Hotels sold out every night; people filled every campground. Many employees commuted from Casper.

Elevated housing demand boosted housing prices. According to the Wyoming Cost of Living Index, apartment rent in Converse County increased 22% from the 4th Quarter of 2012 to the 4th Quarter of 2013. It wasn’t unusual to see advertisements for houses renting for $1,200 per month — double what a resident would have paid in 2008.

Rising housing costs were just part of the inflationary picture. The prices of fuel and groceries were also higher than in surrounding counties. As lines grew and patience shortened, local businesses struggled to meet demand and find workers. Suddenly, Converse County became one of the most expensive places to live in Wyoming.

Converse County responds to citizen complaints with financial transparency

Increasing prices brought our government more revenue. Countywide sales tax revenues doubled from $34 million in 2011 to $68 million in 2013, then rose to $89 million in 2014. Every week, the local newspaper ran stories touting the record production and county revenues.

In the November 2012 election, voters approved a sales tax increase to fund three projects totaling $31.7 million: a remodeled library branch in Glenrock, a new library building in Douglas, and a new branch of Eastern Wyoming College in Douglas. The tax was estimated to raise $500,000 a month for six years; instead, it averaged $1.1 million in revenue each month, paying off the projects in 31 months.

As the Treasurer’s Office began preparing to bill the 2014 property taxes for a record valuation that just topped $1 billion and the county began preparing a budget with record revenues and expenses, citizens grew frustrated.

Concerned about soaring living costs, upset with gridlocked traffic, and exasperated at the hassle that comes with living in a bustling boomtown, residents began asking questions. What was the County doing with all of the money? Would the County lower their taxes? How much were energy companies paying in taxes? When will roads be fixed?

Policymakers used to the boom and bust cycles of an energy economy were putting record numbers into reserves but struggling to explain that need to citizens who focused on the millions of dollars being pumped into the local economy. Although the County published a budget book with pages of figures that detailed revenues and expenses, citizens used to finding answers in seconds on Google were unlikely to scour a PDF budget book.

Interest in the energy boom spread beyond the county’s borders and even the region, as stories about the exploration in the Powder River Basin appeared on major newswires and newspapers across the country. The Treasurer’s Office began fielding several calls a week from reporters wanting more information about the revenues, the impacts, the long-term sustainability, and the changing landscape of the newly-industrialized rural areas of the county.

There had to be a better way to tell the story of the boom and to show citizens how the County was using hard-earned tax dollars to repair roads, upgrade schools, and encourage inclusive economic growth. We wanted a way to demonstrate both how the oil boom impacted public finances and that we were putting their money to good use.

In October 2014, we announced a partnership with OpenGov – a management reporting and transparency company based out of Silicon Valley. For the first time, interested citizens could see the visual, interactive story of how the oil boom affected County’s finances, including what revenue came into the County and where it went. They could see that although revenues doubled, so did the costs of maintaining roads, retaining employees, housing additional prisoners, and combating higher crime.

Journalists from anywhere in the state, or the world, now had instant access to the numbers they needed to investigate, track and spread the message of what an energy boom means to a small county. The County Treasurer began referring inquiries about the county’s finances to the OpenGov site instead of providing data verbally or emailing documents.

Editors from one of the largest newspapers in Wyoming, the Casper Star-Tribune, attended a county commissioners meeting to thank the county for the OpenGov site, expressing their hope that other government entities would follow suit and usher in a new era of transparency and accountability.

The OpenGov platform helped tell the story of the boom and how we were dealing with the revenues and expenses so that County Commissioners and residents could work through the issues together and explore what benefits would come from living in the hottest energy town in the state.

From boom to bust

Then our boom fell apart.

In June of 2014, fourteen oil rigs operated in Converse County and the price of crude oil was over $105 per barrel. By November, only three rigs were drilling oil wells in the county – and the price of oil fell below $45.

By March 2016, the rigs and workers were gone.

In the winter of 2015, the dramatic dip in oil prices caused the company Cat was working for to suspend all drilling. Cat was laid off. “It was stressful,” Cat says, feeling the immediate pressure of not being able to find work and watching the nest egg he worked so hard to build during the boom being depleted. He tried to find a job in the Douglas area but found it “impossible.”

The County’s unemployment rate doubled from 3.2% to 6.3%. And not only was the promising oil boom over; the coal mines that formed the county’s economic bedrock were also about to come under fire.

On August 3. 2015, as the price of oil crashed, President Obama released his Clean Power Plan that specifically targeted coal-fired power plants and set new emissions standards.

As the power industry redoubled efforts to transition from coal to cheaper, more environmentally-friendly natural gas, demand for coal plummeted. In 2014, Converse County’s mines produced over 33 million tons of coal. The Energy Information Administration estimates that coal production in 2015 was 10% lower than 2014 – and the lowest since 1986. Powder River Basin production in 2016 is already down approximately 28%.

The bust sets in

In March 2016, Wyoming’s (and America’s) two largest coal mines announced layoffs. Arch Coal cut 15% of its workforce, or 230 people, and Peabody Energy cut 235 people at North Antelope Rochelle mine. In April, Alpha Natural Resources followed suit and laid off workers from their Belle Ayr and Eagle Butte mines. By the end of April, the largest coal producer in the United States and operator of the coal mine north of Douglas, Peabody Energy, filed for bankruptcy.

Cuts in coal production and shipping cascaded to the railroads. Union Pacific announced that in the fourth quarter of 2015, they shipped 22% less coal than in the same quarter of 2014, and were putting 1,200 locomotives in storage nationwide. U.P. also shed 4,100 jobs nationwide, some of those in Converse County.

The economic damage was immediate. Sales tax collections that had peaked at over $10 million per month in February 2015 plummeted to $1.9 million in April 2016.

In July 2016, the Wyoming Department of Workforce Services announced that Converse County had one of the largest jumps in unemployment statewide between June 2015 and 2016, from 3.9% to 6.8%.

The County’s assessed valuation dropped over $300 million, from $1.8 billion to $1.5 billion; and the Fiscal Year 2017 budget process became all about guessing when we would hit bottom and how to deal with a General Fund that would receive 20% less revenue.

Citizens asked questions – and transparency answers them

Citizens now asked how the County would sustain services, how far revenue would fall, and how the commissioners planned to prioritize expenses and projects.

To answer these questions, we turned again to OpenGov.

First, after a letter to the editor in the local newspaper asked where the county spent all the money from the boom and why more wasn’t put into reserves, we promoted the Checkbook Report that showed every check the County issued throughout the year, so that citizens could see for themselves where the money went. We saved views that showed the county spent over $400,000 to purchase and transport gravel for county roads and another $350,000 to a machinery company for equipment and repairs.

Next, when news stories about the oil and coal company bankruptcies created concerns about whether property taxes would get paid and whether the bust would create a deluge of delinquent tax accounts, we created a report comparing delinquent tax amounts for 2015 against prior years. The report provided visual reassurance that delinquent property taxes for tax year 2015 were similar to prior years, lessening the worries about budget shortfalls in the current fiscal year.

The OpenGov platform was also vital in explaining how and why sales tax collections could drop so far, so fast – from a high of $96 million in countywide collections in Fiscal Year 2015 to $26 million in Fiscal Year 2016. We published a report to the OpenGov portal showing sales tax collections by industry sector, so the public could see that the Mining sector dropped from $46 million to $12 million and how the loss of population and jobs affected Retail sales, which fell from $14 million to $6 million.

The platform became a method for the public to see the anatomy of the boom and the bust: a visual telling of the rise and fall of the Powder River Basin oil and gas play and the crash of the coal market.

Moving forward

Cat is now looking for work back in North Dakota. Even though he’s not looking forward to being away from his family again, he knows he’s got to go where the work is. His future in the oilfield seems uncertain. Like most, he’s hoping for a resurgence in oil prices, but knows the energy sector could become even more depressed, depending on the whims of the market.

Cat’s story is not unique.

Some businesses have closed; others are for sale. Some families moved out of the community to find work elsewhere, while others seek employment opportunities in different labor sectors, or hope oil prices will recover and things will pick up soon.

Long-time residents just shrug and accept the ups and downs as just part of the boom-bust cycle common to places that rely on the energy industry to drive the economy.

The County, like many residents, will rely on the reserves they built during the boom to ride out the current energy down-cycle and wait for better days.

As a bumper sticker on the back of an old truck parked downtown says, “Please, Lord, just give us one more oil boom. We promise this time we won’t waste it.”


Joel Schell is Converse County’s Treasurer. Kim Hiser is Converse County’s Deputy Treasurer. 

The Path to Collaborative Budgeting

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Budgeting is at the heart of every government, and smart governance starts with smart budgeting. In most cases, budgeting is a mandated, formal, and highly structured process. Classic budget development often happens within the Finance Department or Executive Budget Office. Over time, most governments have developed sophisticated and elaborate budget procedures using either Excel (often with many linked worksheets) or complex vendor provided budget software.

Today, we all hear collaboration thrown around in lots of ways regarding budgeting as the process slowly expands from the central offices to include the broader management team. The Great Recession taught us we need to hear the ground truth from the people doing the work, collect ideas from everywhere, and iterate together to balance new and old practices. Getting the “straight dope” was essential when the details mattered and choosing among competing needs was most critical.

As the Great Recession worsened, it began to eat into historical revenue sources long considered stable and dependable. Traditional budgeting processes had difficulty adjusting to new demands for financial efficiency and rapid change as the financial pressure on governments grew worse. Surfacing solutions which would allow to governments continue delivering essential services with decreasing resources was a growing challenge.

As we searched for policy solutions, we found that we tended to have a more concrete conversation, gain new perspectives, and find solutions not apparent from the top down when the people who have to live with the leaky roof, cut back on open hours, or struggle on with obsolete technology get to defend and prioritize requests for themselves.

This is where we began to see some of our budget software’s limitations. It’s one thing to send out an Excel worksheet and ask departments to update their operating costs for the year. It’s an entirely different thing to ask departmental teams to reconsider everything they do and defend the money they need to spend on those activities. It is even harder to develop and communicate alternative plans. The budget process, and ideally the software, must help the government evaluate and decide among difficult trade-offs.

Despite our best efforts to streamline our tools and support, we still found ourselves spending more time than we should have in basic staff training on how to use our tools; and not nearly enough time on the actual process of collaboration and the intelligent consideration of alternatives. Instead, our focus was more on the mechanics, rather than the goals we had to achieve.

In my role as the Assistant Finance Director, I led the team which conducted training for budget staff, issued the budget worksheets, mandated the timing of their submission, collected and assembled all the supporting documentation, and created the budget binders that went to our executive and budget review teams. I staffed the budget review team meetings and updated the results. We presented the draft budget document to the city manager and supported him in front of the City Council. Once the budget was adopted, we produced the budget book and posted the details back to the accounting system. Managing this controlled and elaborate process distracted from and overshadowed the collaborative solution-seeking focus we were trying to achieve.

As the recession ground on and we went through this process for the second and third time, it was clear something needed to change. Instead of putting thought into discussion and collaboration, we were repeatedly forced to put the process in front of results. We were able to save little time for original thought and research. Once all the easy savings have been made and we were down to the to the bone, every cut hurt, every decision was more important than the last.

It was a painful time for everyone working in government, and for citizens who needed the services we provided. The lack of tools was onerous to me and ultimately lead to the role I took on with OpenGov when they first entered the scene as a newly incorporated technology startup in the local government space.

I jumped on the opportunity to join in and help design a new reporting and budgeting system, starting with a clean sheet, without worrying about legacy code and concepts. We based our work on the experience of experts active in the field, including our own hands-on knowledge. From the beginning, we built tools that are focused on bringing people together and enabling teams to better communicate, plan and think about their current work and strategic initiatives.

The working name of OpenGov’s just released budget product was Collaborative Budget Builder. Enabling effective collaboration has been our first objective since the product was conceived. It is designed to help governments achieve superior results through robust and flexible functionality that adapts to each agency’s unique needs, yet Budget Builder is simple to use, easy to learn, and respectful of the government staff’s time.

In budgeting, there is a long-standing paradox: Many staff members develop significant expertise in their fields. They may have great ideas on better ways of doing business, saving money, and providing better service to the public. However, speaking up during the budget process takes them far out of their comfort zone and into the black arts of finance and budget. Governments can open the door to innovation with deep collaboration using straightforward software, shared access to a risk-free suggestions platform, and clear communications. Turning the team loose to iterate, discuss, and come to consensus can result in a smart plan that everyone is poised to implement successfully.

Mike McCann moved into government service in Ukiah, then Monterey CA, after beginning his career in corporate (ADP, Wells Fargo Bank, Blue Shield of CA), not-for-profit (Blue Shield of Ca, Mendocino Private Industry Council), and start-up accounting. For the last 20 years, Mike has been hands-on with budget, financial reporting and accounting operations, including City budgets and CAFRs. He holds a B.S.  in Accounting from SJSU and M.S. in Instructional Technology from  CSUMB.

Contact Mike with questions or comments at

My perfect budget team

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The budget process is fascinating. A complex combination (should we say collision?) of technical, political, and human factors produce a plan that determines how public money will be raised and spent.  

My first contact with any kind of budget was as a young soldier. Our captain (who was not much older than me) called us together and explained that if we did not spend our allocated budget this year, we would lose the difference and our budget would be reduced in the next year. With his prodding, we discovered a sudden need for expensive new radios and other high-tech gear.

I wasn’t in Kansas any more

Since then, I have budgeted in corporate, not-for-profit, and start-up organizations. I have balanced budgets in the face of indecipherable Federal JTPA regulations, stuffed-shirt corporate officers, and explosive yet poorly-capitalized growth. But none of those technical challenges prepared me for the drama of municipal budgeting, in full view of the public, staff, and Council.

There was never a need to actively socialize the budget process in the private sector. We drafted the budget, casually ran numbers by various people in operating areas, adjusted the numbers when necessary, and wrapped up the process. There was little concept of give and take, of achieving consensus or addressing any stakeholders beyond the Board of Directors. Our interests were fully aligned around controlling expenses, building revenue, and maximizing profits.

“Welcome to government service”  

“The budget means something a little different around here, and the annual process is just a little different too,” I was told by my new bosses. I spent a lot of time going from department to department in those early years. I learned that if I left a department head unsatisfied, his pipeline to the City Manager was fatter and faster than mine. I also learned that most folks did not know as much as they thought they did. In particular, acceptance of of a fixed resource pie seemed to get little traction.  

We had a gruff old Public Works Director who had probably occupied his office longer than I had been in the work force. He ran his domain with expertise and daunting authority. I remember him rearing back at a budget meeting and telling us his shop had given enough and it was time to “cut some guns and hoses” from the budget. Of course the Police and Fire Chiefs had some other cost saving suggestions for him, and me.

Experience is a hard task master, but I finally realized that finding some allies would be a good idea in this battle. We started developing a group of people interested in budgeting who could come together and explore the reality of limited resources and unlimited demands. It was a gradual process, but we made progress — expanding the envelope and spreading the learning and the budget process more widely each year.

Over time, I found that some groups and individuals grow stronger and more central to the budget process while others fall out of the process to varying degrees. While budget work is central to staff in a dedicated budget or finance office, it is extra work for staff in other shops. If their boss does not actively support their involvement and allow time for them to focus on the budget process, then they are put in an awkward situation.

Core team and other players

“Team” may be too strong a term for what usually evolves. “Temporary work group” might be more accurate for the loose amalgamation of people that get involved. Budget team members tend to have a combination of departmental needs, affinity for numbers, desire to be on the inside, and obsession with detail. In my experience, Assistant Directors, Analysts, or whichever title the number two person in each department goes by tend to have these traits. My most successful teams have been heterogeneous mixes; they represent every department and include a range of seniority and management levels.

In addition to this core team, there are two other “teams” in play. First, the executive group is often asked as a body to support the working budget team, and of course, are the ultimate arbitrators of the budget that is recommended to the legislative body.

Second, it is beneficial to have an expanded budget team of stakeholders outside the core process that includes representatives from organizations like Library, police and recreation oversight boards, labor units, and the general public. You may not get them together physically, but may share information and feedback over the Internet or at their own group meetings. Bringing these people into the process often makes it harder for them to oppose difficult decisions as they may if relegated outside the process.

Education is magic

I have tried many approaches to training teams and managers on budgeting, and every attempt has yielded mixed results. Some get it immediately, wonder what all the fuss is about, and want to know when they can get back to work. Others take more time. Sometimes they understand but are nervous about plunging in and need some moral support. And some just come to it more slowly — although they can be very strong because once they do get it, they really get it. They know how to dot the ‘i’s and cross the ‘t’s, how to account for every dollar.

In the end, a mix of face-to-face training with Q&A and written material including screen shots has worked best for me. Shortcuts like memos and blank worksheets cause more cleanup time than what we would have invested in proper training at the front end.

One reason to keep teams open and flexible was the the budget cycle’s length — usually running six months or more each year.  People get promoted, move around, and are tasked with new projects and find interests over time. We learn best by repetition and iteration. An annual cycle makes the accumulation of expertise a slow process, and budget veterans a prized commodity.

So what’s the point?

The budget expresses the government’s vision and strategy. It is not desirable or realistic do it alone. Crafting a budget that supports staff in their work for their stakeholders is the goal. The budget is best crafted by a team working in the daylight, listening and learning broadly, iterating and testing ideas. The process will produce superior results, with a budget that is widely understood and accepted on the day it is adopted.

Mike McCann moved into government service in Ukiah, then Monterey CA, after beginning his career in corporate (ADP, Wells Fargo Bank, Blue Shield of CA), not-for-profit (Blue Shield of Ca, Mendocino Private Industry Council), and start-up accounting. For the last 20 years, Mike has been hands-on with budget, financial reporting and accounting operations, including City budgets and CAFRs. He holds a B.S.  in Accounting from SJSU and M.S. in Instructional Technology from  CSUMB.

Contact Mike with questions or comments at

Nine Lessons I Learned in Budgeting

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After a dozen years building corporate budgets and another dozen years assembling government budgets, I have learned some hard lessons. Many of you may share similar thoughts:

1. The legislative body does not have the technical skills to forecast revenues and should not be expected to do so, especially since revenues are primarily the result of events outside local control. Finance professionals need to use their skills and experience to generate the most accurate possible revenue forecast for the legislators. They consider local and national factors, review historical trends, analyze current conditions, and project trends into the future.

2. The completed revenue forecast is the best professional estimate of revenue available to the budget process. Together with unrestricted reserves, these revenues are the total funding available for expense planning in the budget process.

3. Accurately managing personnel costs and their allocation is incredibly difficult, but key to accurate budgeting. These costs represent 75% or more of most government budgets so errors in salary-related costs can be particularly damaging — four times as distorting as the same percentage errors in non-personnel costs.

4. Expense budgeting should start as close to the action as possible. Line supervisors and project managers often have the most current and detailed information to work with. Equally important, they can best tell their project’s story, and explain both why funds are needed and how they will be used.

5. Budget leaders must ensure that line staff and the budget team are properly educated and oriented to both goals and methodology. Old fashioned line-item worksheets are less effective for organizing budgets than more activity-oriented budget input tools. Formats that start with the story and then encourage thoughtful expense planning help avoid across the board and generally less thoughtful line-item percentage increases.

6. There are many more line department leaders at all levels than there are budget analysts. Line department leaders know what they need; let them advocate for themselves. Empowering line staff to contribute directly to the budget process is a win-win proposition — as long as the budget team and executives have visibility and the final say.

7. The budget leaders need to understand the current state of the budget throughout the process.  Current revenue and expense totals should be visible, clear, and accurate. Access to every proposal and detail should be online and easily found.

8. Good budgeting takes time. Socialization, consensus building, iteration, political tradeoffs, horse trading; these are all common terms and concepts surrounding this inherently political process. Budget calendars and firm significant milestones help an organization move forward in a measured and orderly manner.

9. Taking enough time to reconcile the details and circulate the latest results at each major step is crucial to staff consideration and political buy-in. If the budget is not realistic or if staff know they will not be able to operate within its constraints, then the process is a failure and disservice to the entire organization.

As a financial professional, crafting a clean and functional balanced budget might be the most important and creative work you do all year long. It is the product of your many years of experience, education, and sheer hard work. It is critical to the functioning of your entire organization and its ability to provide services to residents and other stakeholders.

The things you do in Excel to build that budget look like magic to everyone else – but often keep you awake checking and double checking late into the night. The package of linked budget worksheets you have built over a career are effective and accurate, but you know that they are going to make it hard to retire someday. No amount of documentation and hand-off is going to adequately cover it.

Peer-to peer tip: Try out the Budget Milestones Report which is available at no extra cost as part of the OpenGov Intelligence platform!

Mike McCann moved into government service in Ukiah, then Monterey CA, after beginning his career in corporate (ADP, Wells Fargo Bank, Blue Shield of CA), not-for-profit (Blue Shield of Ca, Mendocino Private Industry Council), and start-up accounting. For the last 20 years, Mike has been hands-on with budget, financial reporting and accounting operations, including City budgets and CAFRs. He holds a B.S.  in Accounting from SJSU and M.S. in Instructional Technology from  CSUMB.

Contact Mike with questions or comments at

Finance Discussions at ICMA

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Every year, governments across the country debate whether to consolidate or merge services. Passions often flare during these debates, as many of the services directly impact citizens’ lives. Making this debate as transparent as possible is essential for success.

During this year’s annual ICMA Conference, Charlie Francis will share how he navigated a Fire Department consolidation in his city. Charlie will provide tips and tricks for governments considering their own mergers and annexations.

Reinventing Government, a failure or a lesson learned?

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September 6, 2016

In the latest issue of Governing Magazine, John Buntin asks, “25 Years Later, What Happened to ‘Reinventing Government’?” Reading his thorough analysis triggered several thoughts I want to explore.

John discusses how many people see performance-based and zero-based budgeting as ways to start with a clean slate and focus the budget process on desired results. He explains how many contrast this movement  favorably with traditional approaches where total prior year costs were used with only incremental changes. Preserving existing programs was more valued than focusing on new priorities and trying ideas. However, in my experience, many of these new budget approaches feel more like passing fads than solid theoretical constructs.

Zero-based budgeting is a “pure” concept that, in my view, is not practical in the real world. Asking an entire government team to do fresh calculations for every account on the books flies in the face of time and resource constraints, budget deadlines, and other important priorities. 70 to 80 percent of operating costs directly relate to personnel. Staff have civil service protection from unreasonable changes in work rules, labor units actively negotiate for pay and benefits resulting in binding contracts, and these units have professional skills that must be acknowledged in compensation decisions.

More than once, I have explained to activists and others that it is very easy to save money in government – simply stop providing services. The only problem is governments exist precisely to provide services that the citizens want and are willing to pay for. Government services require people. The machines have not yet totally displaced the police officer, librarian, recreation leader, and landscaper. It is not rational to consider zero-basing the police department or the sewer plant, and it is usually a waste of time to go through the exercise.  

Performance-based budgeting (“PBB”) may have value in large complex systems, but it is somewhat a red herring at the local level. Priorities are valuable; setting measurable goals and evaluating performance against them are important planning and management tools.

PBB takes a long step past those markers. Building a budget on PBB principles is very close to ZBB in closing out existing spending plans.  Then it makes teams rebuild their work plans based on the relationship between funding levels and outcomes. There are endless papers written, and systems designed to direct governments through the complex processes of establishing performance measures, tracking them, associating costs with measures, and evaluating the results.

There is a certain dissonance in focus between these highly analytical and theoretical approaches and the actual results local governments seek to achieve for their communities. Government work is largely done in the field by skilled, hands-on, practical, and pragmatic people. They are used to achieving direct physical results: putting out the fire, preparing the softball field for the youth league, or clearing the storm drain. Tomorrow they will come in and do it again.

Great government managers from the executive office to the front-line supervisor are often working managers who use management-by-walking-around techniques and judge results by years of experience and applied common sense. Often the true range of options in budgeting activities the public needs done is relatively limited and has been well considered over the years.

The U.S. Post Office offers a good example of budgeting and service delivery in public vs. private organizations. Sometimes I think about how frustrating it must be for Postal Service managers: the mail gets delivered six days a week to every address in the country, for less than 50 cents an envelope (far less for bulk mailings). But thanks to rather bizarre legislation, they are the only organization in or out of government that has to recognize and fund long-term pension liabilities with current receipts, making the Post Office appear financially mismanaged and starving it of the funds needed to modernize and improve operations. In contrast, private services charge several dollars per delivery and do not have to deliver to every address. So which is actually the better deal for the public?

John makes the point that it has proven difficult to make complex management systems work consistently over the long term in budgeting and performance management. I would like to offer the idea that maybe simpler approaches to both issues are more workable and easier to live with. My thesis is that many of the issues these systems seek to solve are largely problems of data visibility.

During my career, I have encountered few individuals and fewer managers who do not desire to do good work, to use public resources wisely, or to operate efficiently. However, I have run into many managers who are left to work in dark by the lack of easily accessible tools in their accounting and management systems. Simply providing better transparency into the costs of services and the outputs and outcomes delivered by operating organizations may be the key to self-directed, flexible, and sustainable improvements in every area of government.

Managers are not unsophisticated about workplace dynamics or unwilling to make changes to improve the quality and quantity of the their work. They just need the tools. Famous management thinker Peter Drucker is often quoted as saying that “you can’t manage what you can’t measure.” Success is directly related to visible and measurable outcomes and costs.

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Mike McCann moved into government service in Ukiah, then Monterey CA, after beginning his career in corporate (ADP, Wells Fargo Bank, Blue Shield of CA), not-for-profit (Blue Shield of Ca, Mendocino Private Industry Council), and start-up accounting. For the last 20 years, Mike has been hands-on with budget, financial reporting and accounting operations, including City budgets and CAFRs. He holds a B.S.  in Accounting from SJSU and M.S. in Instructional Technology from  CSUMB.

Contact Mike with questions or comments at