During last year’s deliberations on the BOE budget it became clear the public did not understand the current budgeting practices, specifically with regard to “reserves.”
Citizens routinely suggested that the “reserve balance” was a surplus and could be used to offset shortfalls in other areas such as education. The cause for this confusion is the city’s budgeting practice that cause departments to have unexplained double digit under runs.
As a result, the Democratic Town Committee felt the current city budget methodology required more public transparency and understanding.
The reserve practice is common among municipalities as it enables them to offset potential losses in revenue and meet the cost of operations as economic conditions change without increasing taxes or debt.
This practice allows the city to achieve the best possible interest rates. In Shelton, the reserve is funded when departmental expenditures in the general fund balance are less than those budgeted but the estimated reserve amount is co-mingled with the expenditure line item in each department’s operating budget. This practice, although accepted by the auditors, is not the best method as departmental operating budgets are overstated making it difficult to determine how much of the under run was “reserve” and how much is true departmental cost performance.
The DTC has a significant concern that the spending constraints dictated with this method impacts the quality and level of services provided within city departments or may push normal operating expenses into debt. Neither result is acceptable.
To make this process more transparent the change is simple.
Create a separate line item in the general fund expenditures category called reserve and remove the amounts from the department operating budgets. This change would provide more visibility to the reserve and hold the departments accountable to budgets that are aligned with their actual work requirements. In turn, the operating budgets would have to be decreased by an amount equal to the reserve. This change could be accomplished by prorating a reduction to each department’s recommended budget based on their share of the previous fiscal years total city under run. The information is already available and the method provides a fair and equitable distribution.
This method has been previously discussed by the BOA and in fact from the May 6, 2010 Board of Alderman Budget Workshop, Aldermen Anglace stated “Of course there are other ways to achieve the same result and one of them is to designate a specific reserve account.” The concern at that time was that the reserve balance was not a sufficient level.
We believe the conditions have changed and the concern that creating a reserve in this manner should have been eliminated when the Mayor declared a $9.3 million general fund balance for FY 2010. There is adequate funding to establish a separate reserve line item and make this practice transparent and understandable to the public.
In addition to the transparency issue the benefits are numerous. Shelton Boards with budget oversight will better understand spending and surpluses when co-mingling is eliminated and more accountability can be achieved as departments can focus on cost control, productivity and efficiency measures. The Result: the quality and level of service within city departments should improve and benefit the citizens.
The Shelton Democratic Town Committee urges the Board of Aldermen to adopt this change to improve the budget setting process, make departments more accountable and provide a higher level of transparency for City government.
The author is chairman of the Shelton Democratic Town Committee.
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