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Government Finance Officers Association | OCTOBER <strong>2023</strong><br />
Calibration training for<br />
better decision making<br />
Crushing assumptions for<br />
more visionary thinking<br />
Government Finance Review<br />
How fiscal mapping will<br />
make you more effective<br />
Shaping Stronger<br />
Communities<br />
Recognizing the unique needs of different groups<br />
strengthens the community as a whole. Budgeting for<br />
equity provides a path for making this vision a reality.
“A must-have publicaaon<br />
for every local government.”<br />
Accounnng for Capital Assets: A Guide for State and Local Governments<br />
(2nd ediion) offers clear and straight-forward guidance to public-sector<br />
accounnng professionals who must confront the pracccal challenges of<br />
accounnng for capital assets and similar items on a daily basis.<br />
Chapter-in-Brief Summaries | Quiz Questions | Sample Journal Entries<br />
Purchase your soocover or e-Book copy at<br />
gfoa.org/capitalassets
contents<br />
OCTOBER<br />
<strong>2023</strong><br />
VOLUME 39, NUMBER 5<br />
SPECIAL SECTION<br />
16<br />
Building a<br />
Better Community<br />
for Everyone<br />
Managing the tensions<br />
surrounding equity in<br />
budgeting to build better,<br />
stronger communities<br />
By Shayne C. Kavanagh,<br />
Andrew Kleine, Chris Fabian,<br />
and Erik Fabian<br />
©<strong>2023</strong> DAVIDE BONAZZI (COVER); JING JING TSONG C/O THEISPOT.COM<br />
32<br />
From Guesswork to<br />
Informed Judgment<br />
Using calibration training<br />
for better decision-making<br />
By Shayne Kavanagh, Doug Hubbard,<br />
Philip Martin, and Robert Weant<br />
40<br />
A Key Role<br />
Why economists offer<br />
an essential skill set to<br />
local governments<br />
By Deepayan Debnath, Matthew<br />
Lue, Alex Tabb, and Mark Mack<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 1
contents<br />
44<br />
Map the Way to<br />
Smarter Funding<br />
The Children’s Funding Project<br />
demonstrates how fiscal<br />
mapping can help finance<br />
officers make informed<br />
budgeting recommendations<br />
By Amelia Vaughn and<br />
Ed Harrington<br />
50<br />
Crushing Assumptions<br />
in Two Simple Steps<br />
How to break the curse<br />
of knowledge and unlock<br />
visionary thinking<br />
By Susan Robertson<br />
54<br />
Positive Change<br />
in Action<br />
Build trust and expertise<br />
with after action reviews<br />
By Jake Mazulewicz<br />
6 Contributors<br />
8 From the CEO<br />
By Chris Morrill<br />
10 Rewind: A Look Back<br />
at <strong>GFR</strong> from 1975<br />
11 Students Investigate<br />
Rethinking Revenue<br />
Options<br />
14 Hiring Issues, Solved:<br />
Case Studies and<br />
Solutions in Action<br />
59 Contribution Versus<br />
Collaboration<br />
By Katie Ludwig<br />
64 Distinguishing Between<br />
Internal Cash Flows and<br />
Internal Resource Flows<br />
By Michele Mark Levine<br />
68 The Fiscal Cliff<br />
By Katherine Barrett<br />
and Richard Greene<br />
70 Celebrating Sui Generis<br />
By Justin Marlowe<br />
72 Q&A with Anne Baker<br />
By Mike Mucha<br />
77 An Interview with Glenys Salas<br />
By Jara Kern<br />
80 10 Steps to Establishing<br />
a GFOA Student Chapter<br />
©<strong>2023</strong> ANNA GODEASSI; JAMES YANG C/O THEISPOT.COM<br />
2
Fall Training in Chicago<br />
Debt Management<br />
Best Praccces<br />
November 7-8 | 16 CPE<br />
Gain essennal knowledge and<br />
tools for effeccve debt issuance<br />
policies and management. This<br />
course will highlight pracccal<br />
examples and feature interaccve<br />
discussions.<br />
ERP Implementaaon<br />
and Technology<br />
Governance<br />
November 29-30 | 16 CPE<br />
Implemennng ERP? AAend to<br />
explore all implementaaon<br />
phases, customer and vendor<br />
expectaaons, insights on<br />
managing constraints, and more.<br />
Role of the Finance<br />
Officer in the Budget<br />
Process<br />
December 5-6 | 16 CPE<br />
Learn the skills needed to<br />
Learn the skills needed to<br />
become a “decision architect”<br />
and design a beeer budget<br />
decision-making environment for<br />
your organizaaon.<br />
gfoa.org/events
Publisher<br />
Chris Morrill<br />
Editor in Chief<br />
Michael J. Mucha<br />
Managing Editor<br />
Marcy Boggs<br />
GOVERNMENT FINANCE REVIEW<br />
www.gfoa.org/gfr<br />
EDITORIAL<br />
gfr@gfoa.org<br />
ADVERTISING<br />
gfoa.org/gfr-ads<br />
PERMISSION & REPRINTS<br />
gfr@gfoa.org<br />
CHANGE OF ADDRESS<br />
gfoa.org/update-membership<br />
SUBSCRIPTIONS<br />
gfoa.org/gfr<br />
SUBMISSIONS<br />
GFOA encourages finance officers, scholars,<br />
private consultants, and other knowledgeable<br />
individuals to submit manuscripts to <strong>GFR</strong>.<br />
All manuscripts should conform to the Editorial<br />
Policy and Guidelines for Authors, which are<br />
available online at gfoa.org. Manuscripts should<br />
be submitted electronically to gfr@gfoa.org.<br />
CONTACT<br />
Government Finance Review<br />
c/o Government Finance Officers Association<br />
203 N. LaSalle Street, Suite 2700<br />
Chicago, Illinois 60601-1210<br />
Phone: 312-977-9700<br />
Fax: 312-977-4806<br />
GFOA EXECUTIVE BOARD<br />
Laura Allen<br />
President<br />
Maryland Department of<br />
Budget and Management, MD<br />
Terri Velasquez<br />
Past President<br />
City of Aurora, CO<br />
Tanya Garost<br />
President-Elect<br />
City of Martensville, SK<br />
Sonya Andrews<br />
City of Scottsdale, AZ<br />
Lunda Asmani<br />
Norwalk Public Schools, CT<br />
Jennifer Brown<br />
City of Sugar Land, TX<br />
Timothy Ewell<br />
County of Contra Costa, CA<br />
Edwin Gin<br />
Illinois Housing<br />
Development Authority, IL<br />
Bruce H. Fisher<br />
Nova Scotia Utility and<br />
Review Board, NS<br />
Jason Greene<br />
City of Miami Beach, FL<br />
Anne P. Harty<br />
City of Rock Hill, SC<br />
Sue Iverson<br />
City of Red Wing, MN<br />
Grace Martinez<br />
Metropolitan Transportation<br />
Commission, CA<br />
Debra Roberts<br />
Maryland Teachers & State<br />
Employees Supplemental<br />
Retirement Plans, MD<br />
David P. Schmiedicke<br />
City of Madison, WI<br />
Kendel Taylor<br />
City of Alexandria, VA<br />
Diane Waldron<br />
City of Bristol, CT<br />
Chris Morrill<br />
GFOA<br />
<strong>GFR</strong> (Government Finance Review) (ISSN 0883-7856) is published bimonthly in February, April, June, August, <strong>October</strong>, and December.<br />
Subscription price is $35 annually. Opinions expressed herein are the viewpoints of the authors. They may differ from the policies and<br />
recommendations of the Government Finance Officers Association, its committees, and staff. Letters to the editor are welcomed.<br />
Copyright <strong>2023</strong> by the GFOA. Published by the Government Finance Officers Association, 203 N. LaSalle Street, Suite 2700, Chicago,<br />
IL 60601-1210. Periodicals postage paid at Chicago, Illinois, and additional mailing office. Postmaster: Please send address changes<br />
to Government Finance Review, 203 N. LaSalle Street, Suite 2700, Chicago, IL 60601-1210.<br />
4
Encore Presentaaon<br />
The <strong>2023</strong> Governmental GAAP Update includes<br />
last-minute guidance on current standards, such as<br />
Subscrippon-Based Informaaon Technology, along<br />
with implementaaon details about GASB 100,<br />
Accounnng Changes and Error Correccons; GASB 101,<br />
Compensated Absences; and the upcoming GASB 102,<br />
Risks and Uncertainnes Disclosures.<br />
New this year, we'll discuss effeccve strategies for<br />
hiring in accounnng and audiing roles—a crucial<br />
aspect in the public finance sector.<br />
gfoa.org/gaap-update
CONTRIBUTORS<br />
Deepayan Debnath, who has a Ph.D. in Agricultural Economics, is an economist for the City of Columbia,<br />
Missouri. Currently, he manages a team of economic and ERP analysts. Before joining the city, Debnath<br />
worked with several organizations, including the University of Missouri-Columbia, Iowa State University,<br />
the University of Illinois at Urbana-Champaign, and the Organization for Economic Cooperation and<br />
Development. As an economist, he has more than ten years of experience. Debnath has published numerous<br />
reports, peer-reviewed journal articles, books, and chapters.<br />
Chris Fabian is the chief executive officer and co-founder of Resource Exploration (ResourceX). ResourceX<br />
supports local governments in their initiatives to strategically align resources with community outcomes.<br />
Through priority-based budgeting methodology and software, local governments are accelerating data-driven<br />
decision-making to align resources toward society’s biggest challenges. ResourceX provides a platform to fund<br />
equity initiatives, climate action plans, and a fiscally sustainable future for residents and the community.<br />
Fabian has more than a decade of experience consulting with local governments.<br />
Erik Fabian is the business development manager at ResourceX, which supports and accelerates local<br />
government’s ability to tackle massive societal challenges, from climate change and homelessness to equity<br />
and sustainability, through program identification and resource reallocation. Before joining ResourceX, he<br />
was president at Edgewerk: Tactical & Creative Business Solutions. Fabian has years of senior-level finance and<br />
operations experience in both the public and private real estate sectors, including more than ten years with the<br />
Housing Authority of Portland, Oregon.<br />
Ed Harrington is a former controller for the City and County of San Francisco and a former GFOA president. He<br />
is a board member for Children’s Funding Project. He was general manager of the San Francisco Public Utilities<br />
Commission before moving to the city and county government. Harrington was also a member of the Financial<br />
Accounting Foundation Board. Since his retirement, Harrington has worked extensively with governmental<br />
and nonprofit organizations. He is a member of the San Francisco Port Commission, a board member for the<br />
national Children’s Funding Project, and an adviser to California’s Funding the Next Generation. He was also<br />
the treasurer of SPUR and Greenpeace International for a number of years.<br />
Doug Hubbard is chief executive officer of Hubbard Decision Research. He developed a decision analysis<br />
method he calls Applied Information Economics (AIE), and it has been his specialty for the last 25 years of his<br />
35-year management consulting career, specializing in the application of quantitative methods in management.<br />
Doug uses AIE to solve difficult forecasting, measurement, and decision analysis problems in business and<br />
government. He’s completed more than 150 risk-return analyses of large, critical projects, investments, and<br />
other management decisions.<br />
Shayne Kavanagh is the senior manager of research for GFOA. He started GFOA’s long-term financial planning and<br />
policy consulting offering in 2002 and has been working with governments on financial planning and policies ever<br />
since. Most recently, Kavanagh has pioneered the use of computer simulation to “stress test” the long-term financial<br />
position of local governments. He is also the author of a number of influential publications on financial planning<br />
and budgeting. His work has earned him a fellowship with the National Academy of Public Administration, a<br />
position on the board of advisors for the University of Chicago’s Center for Municipal Finance, and recognition as<br />
one of the 100 most influential people in local government by Engaging Local Government Leaders.<br />
Andrew Kleine is senior director, EY-Parthenon Government & Public Sector, Ernst & Young LLP. He is the<br />
author of City on the Line: How Baltimore Transformed Its Budget to Beat the Great Recession and Deliver Outcomes<br />
(Rowman & Littlefield Publishers: 2018). Kleine is passionate about helping governments get the most possible<br />
value for their resources and achieve great outcomes for their residents. In his 25-year public service career,<br />
he served as a White House budget examiner, federal chief finance officer, big-city budget director, and county<br />
chief administrative officer. In 2016, Kleine received the National Public Service Award from the National<br />
Academy of Public Administration.<br />
6
Matthew Lue is a director and chief financial officer with 15 years of private- and public-sector accounting,<br />
financial, and management experience. Lue holds a bachelor’s degree in finance with an emphasis in<br />
accounting from the University of Central Missouri, and a Master of Business Administration degree from<br />
Avila University. He currently serves as the director of finance and chief financial officer for the City of<br />
Columbia Missouri, where he has been since November 2019.<br />
Mark Mack is a senior manager in GFOA’s Research and Consulting Center. Mack supports governments<br />
through finance-related consulting projects. Mark supports government jurisdictions through finance-related<br />
consulting projects and technology acquisitions. He also conducts research and writes on topics that affect<br />
public-sector finance. In addition to research and consulting, Mack also staffs finance- and budget-related<br />
professional development trainings. He holds a Project Management Professional (PMP) Certification from the<br />
Project Management Institute. Before joining GFOA, he worked in municipal government and higher education.<br />
Philip Martin is chief operating officer of Hubbard Decision Research. Martin has spent most of his<br />
professional career in the software engineering industry, both as an engineer and, in recent years, a program<br />
manager. Most of this work in recent years has been with avionics software companies working on testing<br />
and verification of their software to be in compliance with the FAA’s safety standards. In addition to program<br />
management, Martin has been responsible for developing new training methodologies and tools for engineers,<br />
as well as providing risk analysis assessments for projects and proposals.<br />
Jake Mazulewicz, Ph.D., shows leaders in high-hazard industries why errors are signals, not failures, and how<br />
to address the deeper problem, so that everyone can work more reliably and safely. He makes keynote speeches<br />
and advises globally. Mazulewicz has a decade of experience in safety for electric utilities, and he’s served as a<br />
firefighter, an EMT, and a military paratrooper. To learn more, visit www.reliableorg.com.<br />
Susan Robertson empowers individuals, teams, and organizations to more nimbly adapt to change by<br />
transforming thinking from “why we can’t” to “how might we?” She is a creative thinking expert with more than<br />
20 years of experience speaking and coaching in Fortune 500 companies. As an instructor on applied creativity<br />
at Harvard, Robertson brings a scientific foundation to enhancing human creativity. More information is<br />
available at SusanRobertsonSpeaker.com.<br />
Alex Tabb is an economic analyst for the City of Columbia, Missouri. Tabb earned a Bachelor of Science degree<br />
in economics at the University of Kansas. He is currently working on finishing his graduate degree at the<br />
University of Missouri-Columbia, where he also served as a teaching assistant. He is developing a revenue<br />
forecasting model that incorporates the hierarchies that exist within municipal fund structures. Alex also<br />
helped provide information on the impact of recreational marijuana tax on the city’s revenue.<br />
Amelia Vaughn is co-director of research capacity at Children’s Funding Project, where she supports the<br />
growing strategic public financing work of the organization by providing technical assistance, coaching, and<br />
supervision to contracts with a range of local, state, and national partners. She has worked for the Virginia<br />
Governor’s Children’s Cabinet. Her passion and career began in direct service as both a birth doula and early<br />
childhood parent educator for a home visiting program.<br />
Robert Weant is senior analyst at Hubbard Decision Research. He has led several large, risk-focused projects<br />
and acted as project support for a variety of industries. Weant has also been instrumental in developing<br />
algorithms that have enhanced the methods used by AIE and increased the effectiveness of the Monte Carlo<br />
simulations the firm builds for its clients. Among other pursuits, he led a team of economics students to<br />
successfully compete in a monetary policy competition hosted by the Federal Reserve to become one of the top<br />
five finalists in the country.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 7
FROM THE CEO<br />
Christopher P. Morrill<br />
Executive Director/CEO<br />
We Agree, and We Don’t<br />
G<br />
FOA’s Code of Ethics<br />
requires finance officers<br />
to disclose the information<br />
that both local officials<br />
and the public need<br />
to fully understand the financial<br />
condition of their communities. It also<br />
emphasizes the importance of striving<br />
to produce timely information. This<br />
concept—that the timely disclosure<br />
of relevant information is crucial to a<br />
well-run local government—is part of<br />
GFOA’s core values, and it provides the<br />
foundation for our awards programs,<br />
advocacy work, and education.<br />
Most people agree with this idea, but<br />
we can find ourselves disagreeing about<br />
the best path to get there. Many people<br />
think that our method of reporting,<br />
using the current generally accepted<br />
accounting principles (GAAP), may not<br />
be the best way to achieve the objectives<br />
of transparency and accountability.<br />
This is backed by continued feedback<br />
from our members. The complexity<br />
of GAAP’s requirements, especially<br />
some of the recent changes, have led<br />
to additional time and effort, and<br />
many practitioners think this makes<br />
communication with the public and<br />
other key stakeholders more difficult.<br />
GFOA’s Rethinking initiatives (like<br />
Rethinking Financial Reporting) were<br />
designed to ask questions that will lead<br />
to discoveries about what drives value<br />
in common finance processes. And now<br />
is the time to ask if lengthy, technical<br />
financial reports that are published<br />
months after the close of the fiscal year<br />
are the most effective way to achieve<br />
transparency goals, inform citizens,<br />
and ultimately work to build trust.<br />
Recent GASB statements have not only<br />
added significant time and expense to<br />
the task of producing financial reports,<br />
but as with any major change, they<br />
also create confusion. This impact<br />
is most felt among the many local<br />
governments that are already facing<br />
challenges in recruiting and retaining<br />
staff and lack the resources to purchase<br />
more software or hire consultants.<br />
With the recently passed Financial<br />
Data Transparency Act of 2022<br />
(FDTA), the federal government<br />
may add even more requirements<br />
for local government financial<br />
reporting, creating yet another layer<br />
of unfunded mandates and confusion.<br />
The law requires federal departments<br />
and regulators to develop machine<br />
readable data standards for state and<br />
local annual comprehensive financial<br />
reports and other disclosures for<br />
issuers of municipal debt. Unless those<br />
standards are informed by a thorough<br />
understanding of local government<br />
financial reports and the processes<br />
used in creating them, we’re probably<br />
facing even more misunderstandings<br />
and unnecessary expenses.<br />
GFOA has a variety of strategies for<br />
helping our members navigate these<br />
challenging times. Our Federal Liaison<br />
Center will make sure that GFOA<br />
members receive updates on the status of<br />
FDTA implementation and what it means<br />
for your government. GFOA will create<br />
a dedicated resource page at gfoa.org/<br />
fdta to provide information, tools, and<br />
recommendations. We will also continue<br />
to provide ongoing education in the form<br />
of webinars, conference sessions, and<br />
other presentations to communicate<br />
best practices in financial reporting.<br />
For example, GFOA recently released a<br />
short video series with timely accounting<br />
8
©<strong>2023</strong> MICHAEL AUSTIN C/O THEISPOT.COM<br />
Recent GASB statements<br />
have not only added<br />
significant time and<br />
expense to the task<br />
of producing financial<br />
reports, but as with any<br />
major change, they also<br />
create confusion.<br />
discussions (TAD), which you can find<br />
online at gfoa.org/justatad. And our<br />
research will continue to pose difficult<br />
questions and uncover new information<br />
about what the public wants, document<br />
how to best communicate it, and tell<br />
the story of leading governments with<br />
lessons learned to share. (To get involved<br />
in our research, please visit gfoa.org/<br />
rethinking-financial-reporting.)<br />
We will continue to support GFOA<br />
members through advocacy on your<br />
behalf both in Washington, D.C., and<br />
with GASB. Our purpose is to represent<br />
government finance professionals,<br />
communicate your feedback and<br />
positions, and push back against<br />
unreasonable standards.<br />
Our commitment to GAAP remains<br />
as strong as ever, and we believe that<br />
the consistency and comparability<br />
GAAP reporting offers is the best way for<br />
governments to meet their obligations<br />
to be transparent and accountable. But<br />
we also realize that GAAP aren’t perfect<br />
and, in their current form, may have<br />
even taken a few steps backward. So,<br />
we will continue to provide resources,<br />
advocacy, and research, and we look<br />
forward to a future with more timely, less<br />
burdensome financial reporting that<br />
meets the needs of an engaged public.<br />
We also invite your assistance and<br />
welcome your engagement as we work to<br />
advance excellence in public finance.<br />
To participate in sharing ideas, case<br />
studies, or your experience, or to help<br />
get the message to policymakers, please<br />
join the discussion in GFOA’s online<br />
communities or visit gfoa.org/volunteer<br />
for a current list of opportunities.<br />
Sincerely,<br />
Resources At-a-Glance<br />
Find up-to-date information on<br />
the Financial Data Transparency<br />
Act of 2022 and what it means<br />
for your government.<br />
gfoa.org/fdta<br />
Our Just a T.A.D. video series<br />
offers timely accounting<br />
discussions in ten minutes<br />
or less on specific topics.<br />
gfoa.org/justatad<br />
Get involved with our research<br />
on how local governments<br />
can best communicate financial<br />
information to the public.<br />
gfoa.org/rethinkingfinancial-reporting<br />
Share your ideas and join us in<br />
our work to advance excellence<br />
in public finance.<br />
gfoa.org/volunteer<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 9
ewind<br />
Cash Management 50 Years Ago<br />
A look back at <strong>GFR</strong> from November 1975<br />
The 1960s and ’70s<br />
were the decades when<br />
local government<br />
cash management<br />
started becoming more<br />
sophisticated, along with<br />
the treasury function as a whole. The<br />
November 1975 issue of Governmental<br />
Finance (now <strong>GFR</strong>) published the<br />
steps taken by the finance office of<br />
Westchester County, New York, that<br />
emphasized banking relationships “to<br />
assure the maximum participation by<br />
and encourage competitiveness among<br />
the banks serving the community, thus<br />
permitting the highest realistic return<br />
for the county’s working dollars.”<br />
“All too often, we become totally<br />
technical in our approaches to cash<br />
management and forget that the banking<br />
community with which we deal is<br />
essentially made up of businessmen<br />
with strong ties to the community in<br />
which they work and live,” according<br />
to the article, which noted that before<br />
1960, the county relied solely on the<br />
locally owned and operated banks for all<br />
day-to-day operations and investments.<br />
Around this time, states started<br />
passing legislation that allowed local<br />
governments to invest further afield.<br />
Many or most local governments had<br />
substantial cash positions and only<br />
issued debt for capital projects. Banks<br />
working with governments provided<br />
much of the financing for projects. In<br />
the mid-1970s, a well-run government’s<br />
needs for banking services fell primarily<br />
into two main areas: investment of<br />
funds and disbursements of the types of<br />
funds under the organization’s control.<br />
For example, checks might be issued<br />
for social services, payroll, claims<br />
disbursement, and capital. Those checks<br />
would be primarily computer-generated,<br />
and the disbursements would be<br />
controlled by the Department of Finance.<br />
Using objective and subjective criteria,<br />
the placement of operating accounts<br />
needed to disburse these funds and<br />
residual demand deposits with various<br />
banks was continually evaluated. The<br />
county had 60 accounts in all 12 of<br />
its officially designated banks, which<br />
was considered the maximum number<br />
of accounts capable of being easily<br />
controlled on a daily basis.<br />
Only 11 percent of the county’s<br />
revenues came from departmental<br />
sources (the rest was sales tax collected<br />
by the state and remitted monthly, and<br />
federal and state aid, which comprised<br />
40 percent of revenues and was<br />
collected monthly), so the control of<br />
these revenues was maintained using<br />
individual cash pending accounts.<br />
Each day, all revenues collected and<br />
deposited were transferred into a<br />
concentration system that allowed<br />
for their daily investment or use. This<br />
number of accounts (60) was then divided<br />
into a two-tier operation that provided for<br />
a consolidation of balances in each of the<br />
major areas. At this point, Finance simply<br />
designated banks and the accounts were<br />
opened as either concentration accounts<br />
(pending accounts for revenues) or<br />
operation accounts (for disbursements).<br />
In reviewing the placement of these<br />
designated accounts with the 12 depository<br />
banks, the three major considerations<br />
were: 1) Is this account and subsequent<br />
activity suitable to the specific bank?<br />
2) Will this account be part of the<br />
automated system, or provided as one of<br />
the government’s few manual checking<br />
accounts? And 3) Is the account in question<br />
a duplicate account already in operation at<br />
another bank? (If so, why the duplication?)<br />
An important aspect of selection of the<br />
most suitable bank for a specific account<br />
was to have a thorough knowledge of the<br />
bank and its operational capabilities<br />
and financial resources. To ensure that<br />
the county was always on top of this<br />
aspect of the relationship, it requested<br />
that all the services provided by the<br />
banks be demonstrated, that the county<br />
be appraised of any new applicable<br />
service, and that these items were<br />
reviewed with the county. The opening<br />
or closing of a new bank branch was kept<br />
on file and demographically recorded<br />
and maintained, allowing the county<br />
to keep track of nearby banks.<br />
10
In Brief<br />
STUDENT ENGAGEMENT | CASE STUDIES<br />
At left, the group meets to discuss<br />
revenue options. Attending via Zoom<br />
video are Leah Benz, health program<br />
manager, County of Sonoma Department<br />
of Health; Shayne Kavanagh, senior<br />
manager of research, GFOA; Bryan<br />
Glenn, chief executive officer, SERVUS;<br />
and Adriana Rizzo, board member,<br />
Common Ground California. Attending in<br />
person are (left to right): Karen McMillen,<br />
Malluli Cuellar, Professor Rob Wassmer,<br />
Dexter Davis, and Marco Martinez.<br />
STUDENT ENGAGEMENT<br />
Students Investigate Rethinking<br />
Revenue Options<br />
BY MALLULI CUELLAR, DEXTER DAVIS, MARCO MARTINEZ AND KAREN MCMILLEN<br />
GFOA recently guided<br />
students at California State<br />
University, Sacramento in a<br />
project on local government<br />
revenue. The students,<br />
who are in a Master of Public Policy<br />
and Administration program, spent a<br />
semester considering a problem: that<br />
the way California local governments<br />
raise their own-source revenue could<br />
be outdated, lack transparency, and<br />
is predicted to not raise enough future<br />
revenue to satisfy the needs and wants of<br />
its residents. GFOA’s Rethinking Revenue<br />
research publications led the students<br />
to contact GFOA for support, and GFOA<br />
Executive Director Chris Morrill and<br />
Senior Manager of Research Shayne<br />
Kavanagh helped define the problem,<br />
select alternatives to mitigate it, define<br />
evaluation criteria, and participate in<br />
a panel discussion. Below are some of<br />
the students’ insight from this project.<br />
MALLULI CUELLAR<br />
I am a recent first-generation<br />
graduate, having earned my bachelor’s<br />
degree in political science last May<br />
from California State Polytechnic<br />
University, Humboldt. I moved to the<br />
City of Sacramento, California, to<br />
pursue a Master of Public Policy and<br />
Administration from Sacramento<br />
State (California State University,<br />
Sacramento) last August. I work for<br />
the California State Legislature in<br />
the Office of Senate Majority Leader<br />
Mike McGuire.<br />
As a young professional, I am eager<br />
to learn. I began this research project<br />
excited to develop familiarity with<br />
local government revenue, an area<br />
of local governance I wasn’t familiar<br />
with. Before working on this semesterlong<br />
research project, my experience<br />
in finance was limited to my work with<br />
my undergraduate student government.<br />
I served as the social justice and equity<br />
officer and, later, the legislative vice<br />
president of associated students. I<br />
began my involvement in student<br />
government in the second year of my<br />
undergraduate studies. At Cal Poly<br />
Humboldt, Associated Students collects<br />
a student fee to fund its programs and<br />
services. I was able to participate in the<br />
budget development, public hearing,<br />
and allocation processes to ensure<br />
student dollars resulted in student<br />
services that have an impact.<br />
I began this project hoping to<br />
understand local government revenue,<br />
but as I delved into research and my<br />
curiosity grew, I developed a fondness<br />
for segmented pricing that grew into a<br />
passion. I worked with Bryan Glenn,<br />
founder and chief executive of SERVUS,<br />
to research applying the private-sector<br />
strategy of segmented pricing to local<br />
government fees and fines. I thank<br />
Glenn for volunteering his time for<br />
this research project and culminating<br />
presentation. There are students, just<br />
like us, who are eager to learn.<br />
DEXTER DAVIS<br />
As an accountant working for local<br />
government in an internal service<br />
fund, I don’t have to worry about<br />
where, specifically, our government<br />
revenue comes from. Learning about<br />
streams of local government was very<br />
interesting—how different types<br />
of revenue collection affects<br />
equity, how much a tax generates,<br />
administrability, and whether it’s<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 11
IN BRIEF<br />
politically feasible to enact. It was<br />
eye opening to realize the level of<br />
transparency of revenue collection<br />
among local jurisdictions. I am grateful<br />
to GFOA, our client, and our stakeholders<br />
who volunteered to help us learn<br />
about unique approaches to revenue<br />
generation. After this project, I am more<br />
thoughtful about where government<br />
revenue is derived from and how<br />
revenue streams affect my work.<br />
MARCO MARTINEZ<br />
As an undergraduate, I had the<br />
opportunity to intern for the City of<br />
Sacramento, where I worked directly<br />
with local communities and was able to<br />
listen to their concerns firsthand.<br />
As our district worked efficiently to<br />
provide resources for our communities,<br />
I was still able to see that many of the<br />
concerns that our constituents voiced<br />
were out of our control because local<br />
governments often lack revenue.<br />
After my time interning for the City of<br />
Sacramento, I grew passionate about<br />
continuing my involvement in local<br />
government. I was excited and eager<br />
to work on a semester-long project<br />
about this specific topic. I completely<br />
immersed myself in the topic of local<br />
government revenue and explored<br />
alternatives to help local governments<br />
generate revenue that were efficient,<br />
equitable, and easy to implement<br />
with the existing administration.<br />
My team, along with GFOA,<br />
produced a great project with<br />
innovative findings, which showed<br />
me how to efficiently work with a<br />
team to achieve a common goal.<br />
After a semester of research and<br />
much thought among my team and<br />
our professor about the intricacies<br />
of our project, I am proud of the work<br />
we were able to produce.<br />
KAREN MCMILLEN<br />
I currently work for a local government<br />
treasurer-tax collector, and I was<br />
excited when my cohort wanted to study<br />
local government revenue. I went into<br />
this project with an interest in local<br />
government revenue, as revenue is<br />
essential to support local government<br />
services and projects. What I took<br />
away from this project is that revenue<br />
generation does not just play a support<br />
role to policy initiatives—it is policy<br />
itself. There is strategy in choosing<br />
revenue streams, and it can be designed<br />
to help ensure the long-term success of<br />
an initiative through political cycles,<br />
promote equity, or generate revenue in<br />
nontraditional ways. This project has<br />
challenged me to look beyond the status<br />
quo of property tax, sales tax, and more,<br />
and to look for opportunities to generate<br />
revenue in ways that are more efficient,<br />
modern, and equitable.<br />
MALLULI CUELLAR<br />
DEXTER DAVIS<br />
MARCO MARTINEZ<br />
KAREN MCMILLEN<br />
EDUCATION<br />
Sacramento State Master<br />
of Public Policy and<br />
Administration student<br />
EDUCATION<br />
Sacramento State Master<br />
of Public Policy and<br />
Administration Student<br />
EDUCATION<br />
Sacramento State Master<br />
of Public Policy and<br />
Administration student<br />
EDUCATION<br />
Sacramento State Master<br />
of Public Policy and<br />
Administration Student<br />
B.A. Political Science, Law,<br />
and Public Policy Concentration,<br />
California State Polytechnic<br />
University, Humboldt<br />
WHY AM I INTERESTED<br />
IN LOCAL GOVERNMENT<br />
REVENUE? I’m a young<br />
professional who is eager to<br />
learn about public finance!<br />
B.S. Joint Mathematics-<br />
Economics, University of<br />
California, San Diego<br />
Prospective CPA<br />
WORK<br />
Accountant, Placer<br />
County, California<br />
WHY AM I INTERESTED<br />
IN LOCAL GOVERNMENT<br />
REVENUE? I’m interested<br />
in public accounting and<br />
finance as a career path.<br />
B.A. Political Science and<br />
Chicanx Studies, University<br />
of California, Davis<br />
WORK<br />
Compliance and<br />
Grants Analyst, UEI<br />
WHY AM I INTERESTED<br />
IN LOCAL GOVERNMENT<br />
REVENUE? I’m excited to<br />
explore ideas that would<br />
improve public finance at<br />
the local level.<br />
B.S. Managerial Economics,<br />
UC Davis<br />
WORK<br />
Treasurer-Tax Manager,<br />
Placer County, California<br />
WHY AM I INTERESTED<br />
IN LOCAL GOVERNMENT<br />
REVENUE? I intend to make<br />
a career in public finance,<br />
and I am very involved in the<br />
public finance community. I<br />
am a member of GFOA, the<br />
California Municipal Treasurers<br />
Association, and the California<br />
Association of County<br />
Treasurers and Tax Collectors.<br />
12
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IN BRIEF<br />
CASE STUDIES<br />
Hiring Issues,<br />
Solved<br />
In response to common hiring challenges reported<br />
by our members, GFOA conducted a series of case<br />
studies with eight municipalities that have grown their<br />
applicant pools and reduced hiring times through<br />
process change. Their stories reveal solutions that can<br />
help other governments overcome similar challenges.<br />
GFOA has consistently<br />
heard about hiring issues<br />
from our members—few<br />
applicants, extended<br />
hiring timeframes, and<br />
the interaction of these issues leads to<br />
vacancies that sit open for months. To<br />
support our members in confronting<br />
these issues, GFOA identified eight<br />
local governments across the country<br />
that have increased their applicant<br />
pools and reduced hiring times through<br />
process change. GFOA spoke with staff<br />
from the City of Los Angeles, California;<br />
Nevada County, California; San Diego<br />
County, California; the City of Memphis,<br />
Tennessee; the City of Hollywood,<br />
Florida; the City of West Plains,<br />
Montana; Pierce County, Washington;<br />
and the Kitsap County Public Health<br />
District, Washington.<br />
COMMON ISSUES<br />
The governments all reported similar<br />
issues. Difficultly attracting qualified<br />
candidates was a problem for highly<br />
technical, certified, or law enforcement<br />
positions. But we found that in some<br />
cases, governments can make this<br />
worse. In Pierce County, for example,<br />
supplemental questions about<br />
experience on each job posting meant<br />
that new graduates were being removed<br />
from the applicant pool even though<br />
they would be able to do the job.<br />
Extended hiring processes was<br />
also a problem. In Nevada County,<br />
applicants were being delayed for so<br />
long that by the time the county was<br />
ready to move forward, applicants had<br />
been able to find jobs elsewhere.<br />
RESULTS<br />
The case study governments were<br />
trying to address hiring issues in<br />
various ways, so results have also been<br />
varied—but all eight governments,<br />
despite different contexts, state laws,<br />
and political environments, have been<br />
able to make progress toward their own<br />
hiring goals. By adapting available<br />
solutions to their own contexts, GFOA<br />
member governments can also start<br />
to chip away at their hiring times and<br />
grow their workforces for the future.<br />
SOLUTIONS<br />
The case study governments<br />
implemented a wide variety of solutions<br />
to address their hiring challenges, but<br />
some common themes are:<br />
Outreach to expand the candidate<br />
pool. Several case study governments<br />
reported a number of actions to<br />
encourage more applicants. The City<br />
of Los Angeles reported using not<br />
just the typical job fair booths, but<br />
also strategies including same-dayhire<br />
events where they interview<br />
candidates and provide conditional<br />
offers for targeted positions.<br />
Reduce barriers for applicants. Another<br />
common strategy was to make changes<br />
to job descriptions and application<br />
processes to stop qualified candidates<br />
from self-selecting out of the process.<br />
The Kitsap County Public Health District<br />
reviews job descriptions for any problem<br />
positions to remove barriers such as<br />
overly strict supplemental questions.<br />
Review your process. Several<br />
governments emphasized the<br />
importance of detailed process<br />
analysis at the start of any project to<br />
address hiring time. Clearly laying<br />
out each step in the process will<br />
help in identifying steps that could<br />
be combined, eliminated, or done<br />
concurrently instead of sequentially.<br />
Collaborate. Many governments<br />
noted that improving the relationship<br />
between Human Resources and client<br />
departments was a key part of their<br />
process improvements. Sharing<br />
responsibilities and giving lower-level<br />
staff more control over the process speeds<br />
things up and also gives these employees<br />
more of a stake in each recruitment.<br />
Some human resources staff also noted<br />
that changes can be piloted by eager<br />
departments and then rolled out to others<br />
once they’ve demonstrated success.<br />
©<strong>2023</strong> HARRY CAMPBELL C/O THEISPOT.COM<br />
14
Pierce County, Washington<br />
Population: 921,000<br />
PROBLEM: Inconsistent hiring processes<br />
between government branches created<br />
barriers and delays that were exacerbated<br />
in 2020, especially for wastewater, civil<br />
engineering, and medical examiner positions.<br />
SOLUTION: Recruiting was centralized<br />
through the Human Resources Department,<br />
with analysis of historical position data,<br />
holistic applicant evaluation, and specific<br />
strategy sessions for hard-to-fill positions.<br />
San Diego County, California<br />
Population: 3,000,000<br />
PROBLEM: The one-two punch of population<br />
loss and difficulty attracting candidates to<br />
public service meant the County encountered<br />
difficulty hiring for positions including public<br />
health, public safety, and technical staff.<br />
SOLUTION: The county deployed a<br />
three-prong strategy to strengthen its<br />
hiring processes, including pre-planning<br />
interview dates, introducing same-day<br />
offers, and allowing for walk-in applicants.<br />
City of West Plains, Missouri<br />
Population: 12,500<br />
PROBLEM: Like much of the nation,<br />
the city has had a difficult time<br />
recruiting for public service roles,<br />
specifically in the police department.<br />
SOLUTION: A proactive scheduling<br />
process fast-tracks hiring timelines,<br />
and an employee training and<br />
advancement program helps<br />
hires learn while they earn—and<br />
advance quickly.<br />
Kitsap Public Health District,<br />
Washington<br />
Population: 300,000<br />
PROBLEM: When the pandemic hit,<br />
Kitsap Public Health District faced<br />
surging demand for public health<br />
services coupled with high turnover.<br />
SOLUTION: The district embraced<br />
innovation and flexibility in hiring,<br />
expanding its recruitment outreach<br />
channels and streamlining staffing<br />
for early-stage interviews.<br />
Solutions<br />
In Action<br />
These eight success stories<br />
offer a variety of solutions<br />
to common hiring issues.<br />
To learn more about the<br />
challenges they faced and<br />
lessons learned, visit<br />
gfoa.org/workforce<strong>2023</strong>.<br />
City of Memphis, Tennessee<br />
Population: 620,000<br />
PROBLEM: When the Great Resignation<br />
hit, City staff grappled with record staff<br />
turnover and evaporating applicant pools,<br />
especially for mechanics, executive-level<br />
finance positions, and summer staff.<br />
SOLUTION: Staff enhanced collaboration<br />
between recruiters and departmental<br />
hiring managers, and compensation<br />
and talent management teams to<br />
create an internal culture of efficiency.<br />
City of Los Angeles, California<br />
Population: 4,000,000<br />
PROBLEM: The City faced high vacancy<br />
rates, at times nearly 25% of its workforce,<br />
with difficulty recruiting for police,<br />
clerical, analyst, and specialized positions.<br />
SOLUTION: City staff engaged in<br />
process mapping to streamline the<br />
hiring process, introduced alternative<br />
targeted hiring pathways, and hosted<br />
community-based hiring events.<br />
Nevada County, California<br />
Population: 100,000<br />
PROBLEM: Because of excessively<br />
long delays, many applicants accepted<br />
private sector offers before the County<br />
could complete the hiring process.<br />
SOLUTION: The County set a 60-day<br />
recruitment goal, sought key outside<br />
perspectives for process improvement<br />
and diagramming, and consolidated<br />
final staff approval into a single meeting.<br />
City of Hollywood, Florida<br />
Population: 150,000<br />
PROBLEM: The city struggled to replace<br />
employees in lower-paying and technical<br />
positions, with a limited applicant pool and stiff<br />
competition from private-sector industries.<br />
SOLUTION: City staff added sign-on<br />
bonuses for hard-to-recruit positions,<br />
revised compensation packages, used<br />
technology to streamline hiring processes,<br />
and invested in online recruitment.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 15
16
SPECIAL SECTION | BUDGETING FOR EQUITY<br />
SPECIAL SECTION<br />
BUILDING A<br />
BETTER COMMUNITY<br />
FOR EVERYONE<br />
©<strong>2023</strong> JING JING TSONG C/O THEISPOT.COM<br />
BY SHAYNE C. KAVANAGH, ANDREW KLEINE, CHRIS FABIAN, AND ERIK FABIAN<br />
Today, discussions on equity are making their way into every aspect<br />
of decision-making—including budgeting. Because budgeting is<br />
ultimately about who gets what, and how much, equity must shape<br />
the process. But budgeting for equity is difficult and reveals tensions<br />
in a community. This section explores these tensions and techniques<br />
for managing them to build better and stronger communities.<br />
Many local governments<br />
are taking an interest in<br />
“budgeting for equity,”<br />
which, broadly defined,<br />
means allocating local<br />
government resources<br />
in a way that is intended to address<br />
unfair disparities between different<br />
groups of people, such as racial groups<br />
or income groups.<br />
Local government budget officials<br />
have a duty to develop a budget that<br />
is fair. 1 And equity is one perspective<br />
on fairness that has historically not<br />
been given much attention in local<br />
governments.<br />
Social inequities are associated<br />
with a host of undesirable conditions<br />
that include lower interpersonal<br />
trust and reduced physical health. 2<br />
American society has several large<br />
social inequities, some of which have<br />
worsened in recent decades. Income<br />
inequality might be the most well-known<br />
example. 3 Rising income inequality is<br />
associated with lower interpersonal<br />
trust. 4 Less well-publicized but at least<br />
as concerning is reduced lifespan. 5<br />
For example, in 2019, in one large U.S.<br />
city, there was as much as a 20-year<br />
difference in life expectancy between<br />
men living in a poor neighborhood versus<br />
a more affluent neighborhood. 6 If local<br />
governments want their communities<br />
to thrive, these disparities must be<br />
evaluated and addressed.<br />
What a local government does is driven<br />
by its budget. To be part of the solution to<br />
these inequities, then, a government’s<br />
budget takes center stage. Budgeting<br />
for equity is hard, though, because it<br />
reveals tensions. It raises the central<br />
tension in budgeting of who gets what.<br />
(Budgeting is inherently political and it<br />
concerns, at its core, how limited public<br />
resources will be allocated.) If resources<br />
are going to be used differently in the<br />
future, there is a risk that people who are<br />
used to the current levels of service will<br />
object. Those who are comfortable with<br />
the current allocation of resources may<br />
also have advantageous relationships,<br />
connections, and power dynamics to<br />
secure those resources.<br />
There are also ideological tensions.<br />
Equity is one perspective on how to fairly<br />
distribute resources. People define what<br />
is fair differently. The result is that the<br />
term “equity” is often used imprecisely.<br />
At best, this causes people to talk<br />
past each other and, at worst, fosters<br />
destructive conflict over what is defined<br />
as fair or unfair treatment.<br />
There are tensions that underlie the<br />
need for equity in budgeting, including<br />
those between the “haves” and “have<br />
nots,” and those inherent in asking<br />
local government to confront racial and<br />
other injustices. These tensions require<br />
local government to take account of the<br />
interests of people who have traditionally<br />
been underserved by the local<br />
government budget—which requires<br />
forming relationships and connections<br />
with members of marginalized<br />
communities and changing the power<br />
dynamics of budgeting to give the<br />
members of these communities a voice.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 17
BY JOE BUCKSHON AND MATTHEW STITT<br />
SPECIAL SECTION | BUDGETING FOR EQUITY<br />
In this special section, we focus on<br />
four tensions in budgeting for equity<br />
and suggest how they could be managed.<br />
The tensions are:<br />
Budgeting for equity is hard because it reveals tensions.<br />
It raises the central tension in budgeting of who gets what.<br />
EQUALITY OF OPPORTUNITIES<br />
VERSUS EQUALITY OF OUTCOMES.<br />
This is at the core of the ideological<br />
tension over what’s fair. Is fairness<br />
defined as leveling the playing field or<br />
evening up the scoreboard?<br />
SYMBOLS VERSUS SUBSTANCE.<br />
Symbols represent abstract concepts<br />
and help people understand the concepts.<br />
Budgeting for equity is a concept, and<br />
symbols are necessary to get people on<br />
board with the concept. But substance<br />
is required to make a difference in the<br />
lives of community members.<br />
BREADTH VERSUS DEPTH.<br />
An equity lens could be applied across<br />
the entire budget, but this risks a shallow<br />
analysis that doesn’t make a meaningful<br />
change in how resources are used.<br />
Alternatively, focusing on just a few<br />
areas risks missing opportunities.<br />
IDEALISM VERSUS PRAGMATISM.<br />
Idealism is needed for bold action but risks<br />
being unrealistic. Pragmatism is needed<br />
to get things done but risks being timid.<br />
To help resolve the tensions, we’ll draw<br />
on a philosophy called “pragmatic<br />
idealism.” This philosophy originated<br />
in the early 1900s, a period in history<br />
with great relevance to our own times.<br />
Esteemed sociologist Robert Putnam<br />
has shown that the early 1900s were<br />
like today’s United States in terms of<br />
high political polarization, low trust,<br />
and other social problems that plague us<br />
today. The successful reform movement<br />
that arose in response was rooted in<br />
pragmatic idealism. This philosophy<br />
holds that it is an ethical imperative to<br />
implement ideals of virtue or good. At<br />
the same time, it is immoral to refuse<br />
to make the compromises necessary<br />
to realize ideals or to discard ideals in<br />
the name of expediency. Budgeting for<br />
equity involves ideals. The tensions<br />
involved mean that any one person’s<br />
ideal version of budgeting for equity<br />
probably cannot be realized. This doesn’t<br />
mean we give up on the virtue behind<br />
budgeting for equity—rather, we find<br />
workable solutions to balance competing<br />
interests, beliefs, and attitudes while<br />
still improving on the status quo.<br />
We’ll also show that managing these<br />
tensions does not require “picking<br />
a side.” Rather, the tensions help us<br />
identify a spectrum of possibilities.<br />
Once we see the possibilities, we can<br />
negotiate them. The goal is to find a<br />
balance within the tensions.<br />
1<br />
According to the GFOA Code of Ethics. See: gfoa.org/ethics.<br />
2<br />
For an overview of the correlation between inequities and<br />
social impacts, see: Richard Wilkinson and Kate Pickett, The<br />
spirit level: Why greater equality makes societies stronger<br />
(Bloomsbury Press: 2010).<br />
3<br />
The United States has the highest level of income inequality<br />
among the top seven largest industrialized democracies.<br />
See: Katherine Schaeffer, “6 facts about economic<br />
inequality in the U.S.” Pew Research Center, 2020.<br />
4<br />
Eric D Gould; Alexander Hijzen, “Growing apart, losing trust?<br />
The impact of inequality on social capital,” IMF Working<br />
Paper, 2016.<br />
5<br />
Raj Chetty, Michael Stepner, Sarah Abraham, et al, “The<br />
association between income and life expectancy in the<br />
United States, 2001-2014, PMCID: PMC4866586.<br />
6<br />
Adrienne Roeder, “The deadly effects of social inequality,”<br />
Harvard T.H. Chan School of Public Health, 2019.<br />
CITY BUDGETING<br />
FOR EQUITY<br />
AND RECOVERY<br />
EFFECTIVE CHANGE<br />
MANAGEMENT IN EQUITY<br />
IMPLEMENTATION<br />
In 2021, we worked with 11 cities across the United States to bring an equity perspective to the budgeting<br />
process through the What Works Cities: City Budgeting for Equity & Recovery (CBER) program, funded<br />
by Bloomberg Philanthropies and led by Results for America. The last article in this series draws<br />
on the lessons from this experience to show a process for budgeting for equity that addresses the<br />
tensions identified.<br />
Read the article:<br />
City Budgeting for Equity and Recovery: Effective Change Management in Equity Implementation<br />
gfoa.org/materials/gfr1022-city-budgeting-for-equity-and-recovery<br />
18
PART ONE<br />
Equality of<br />
Opportunities<br />
Versus<br />
Equality of<br />
Outcomes<br />
Perceptions of fairness are<br />
essential to any decisionmaking<br />
system. Without<br />
them, the system will<br />
likely fail. A key tension<br />
about fairness that must be resolved<br />
by budgeting for equity is equality<br />
of opportunity versus equality of<br />
outcomes. Or put another way, is<br />
budgeting for equity intended to level<br />
the playing field or even the scoreboard?<br />
This is no mere academic distinction.<br />
People can vary dramatically in their<br />
views on which of these is preferable.<br />
The resulting conflicts can be intense<br />
because they get right to the heart of<br />
people’s differing moral intuitions<br />
about what is fair. 1 Research has shown<br />
that this distinction is closely related<br />
to political polarization. Most people<br />
endorse a definition of fairness that<br />
includes equality of opportunities, but<br />
this definition is especially preferred<br />
by conservatives. Progressives/liberals<br />
are more likely to include equality of<br />
outcomes in their definition of fairness. 2<br />
The way to manage this tension and<br />
get better results from budgeting for<br />
equity is to:<br />
• Disaggregate outcomes into ultimate<br />
outcomes and intermediate outcomes.<br />
• Consider how equality of opportunity<br />
supports achieving the outcomes.<br />
• Consider the role for local government<br />
in both opportunities and outcomes.<br />
Exhibit 1 illustrates a decomposition<br />
of outcomes related to education and<br />
mobility. At the bottom of the exhibit,<br />
EXHIBIT 1 | DECOMPOSITION OF OPPORTUNITIES AND OUTCOMES<br />
Ultimate Outcome<br />
Local government’s role is indirect—<br />
to contribute to people’s ability to achieve<br />
the ultimate outcome<br />
Intermediate Outcome<br />
Local government has a role, but perhaps<br />
a partial role. Need to consider local<br />
government’s limits and partnerships to<br />
help reach the outcome.<br />
Opportunity<br />
A clear role for local government<br />
we have opportunities like access to<br />
quality education and transportation<br />
infrastructure. Providing these<br />
services is a traditional role of local<br />
government, which can examine its<br />
budget to see if these opportunities are<br />
provided to all community members.<br />
As we move up in Exhibit 1, we<br />
arrive at intermediate outcomes. Local<br />
governments have a role in intermediate<br />
outcomes too, but sometimes the role is<br />
only partial. Local governments can do<br />
a lot to influence all the intermediate<br />
outcomes shown in Exhibit 1, but there<br />
is much outside the local government’s<br />
control. For example, a student’s success<br />
in school is a product of many things,<br />
not just the efforts of the school system.<br />
Local governments can increase the<br />
chances of student success by forming<br />
partnerships with other organizations<br />
to influence factors that are outside<br />
the school’s control. For example, if<br />
students come to school distracted<br />
by hunger, they are less likely to<br />
succeed in their studies. Some schools<br />
have partnered with social service<br />
organizations to provide “wraparound”<br />
services that equip students to learn<br />
at school by addressing food, shelter,<br />
clothing, and other basic needs. This<br />
is an example of how equity can be<br />
put into practice for students from<br />
a disadvantaged socioeconomic<br />
background: the local government<br />
Prosperity, individuals fulfilling their<br />
human potential, and a thriving community<br />
Students graduate<br />
Students read<br />
at grade level<br />
Access to<br />
quality education<br />
Education<br />
Safety of the<br />
transportation system<br />
People can get to<br />
where they need to go<br />
Access to quality<br />
transportation<br />
infrastructure<br />
Mobility<br />
removes barriers to learning like<br />
inadequate food, shelter, or clothing.<br />
Finally, at the top of Exhibit 1, we<br />
have ultimate outcomes. For instance,<br />
if students graduate from school<br />
ready for college and/or a career (the<br />
intermediate outcome), they are better<br />
positioned to achieve prosperity (the<br />
ultimate outcome). While success at<br />
the intermediate outcomes increases<br />
the odds of success in the ultimate<br />
outcomes, it does not guarantee it.<br />
This means a local government’s role<br />
in the ultimate outcome is at times<br />
indirect. Decomposing outcomes helps<br />
a local government practice “pragmatic<br />
idealism” because it shows how the ideal<br />
of successful outcomes for all can be<br />
positively influenced by local government<br />
action. At the same time, it respects<br />
different views of what is fair with<br />
respect to equality of outcomes versus<br />
opportunities and the government’s<br />
role in each, including where the role is<br />
limited. With this method, it is possible to<br />
decompose outcomes and opportunities<br />
by geographic area, socioeconomic class,<br />
race, or any other relevant categories to<br />
see if opportunities are evenly available<br />
and how that may be affecting outcomes.<br />
1<br />
GFOA’s research on fairness and how it is defined is available<br />
at gfoa.org/fairness. Part 3 of the series is particularly relevant<br />
to this discussion.<br />
2<br />
This is shown by moral foundations theory. You can learn<br />
more about this at gfoa.org/perspectives and gfoa.org/<br />
materials/ bridging-political-divides-in-local-government.<br />
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PART TWO<br />
Symbols<br />
Versus<br />
Substance<br />
Symbols versus substance is<br />
a dilemma whenever local<br />
governments try to mobilize<br />
on a big, complex issue, like<br />
applying an equity lens to<br />
budgeting. Symbolism is necessary to<br />
get broad agreement to move forward.<br />
Take a phrase like “the budget is a moral<br />
document.” This phrase highlights the<br />
consequences of budgetary choices, and<br />
their impact on the extent to which the<br />
community thrives. It makes the case<br />
that an equity lens should be applied to<br />
budgeting so everyone thrives. Symbols<br />
attract people because everyone can<br />
interpret the symbol’s meaning in a<br />
way that closely matches their own<br />
preferences and moral intuitions. For<br />
example, two individuals can agree<br />
that it is a good thing for a budget to<br />
be “moral,” but they will likely have<br />
different ideas about what the details<br />
of a “moral” budget would look like.<br />
These differing interpretations make<br />
implementation challenging. We know<br />
that different definitions of fairness can<br />
create conflict. We have observed that<br />
when people in local government talk<br />
about “equity,” they often don’t agree<br />
about what that means. And we know<br />
that local governments can benefit<br />
greatly by coming to an agreement on<br />
what “equity” means. Below are a few<br />
examples of definitions from cities in<br />
the What Works Cities CBER program:<br />
City of Columbia, South Carolina.<br />
Equity is creating and maintaining<br />
an environment that embraces the<br />
diversity of Columbia’s residents and<br />
empowers them to engage policymakers<br />
and influence service delivery and<br />
the distribution of resources to create<br />
a city where all residents can overcome<br />
historical barriers to their success<br />
Symbols attract people because everyone can interpret the<br />
symbol’s meaning in a way that closely matches their own<br />
preferences and moral intuitions.<br />
and fully participate in Columbia’s<br />
economic vitality and growth.<br />
Salt Lake City, Utah. Equity in Salt<br />
Lake City is acknowledging and<br />
addressing history and current<br />
disparities experienced by our<br />
residents, businesses, neighborhoods,<br />
and visitors. Salt Lake City provides<br />
access to resources and opportunities<br />
that support everyone in overcoming<br />
barriers to their success so that our<br />
community today, and generations<br />
tomorrow, can thrive.<br />
City of Denver, Colorado. Equity<br />
is a systemic endeavor, achieved<br />
through the advancement of policies<br />
and practices, resulting in equitable<br />
opportunities and outcomes where race/<br />
ethnicity and other social identities<br />
can no longer be used to predict life<br />
outcomes, and outcomes for all groups<br />
are improved, centering on those who<br />
are underrepresented and have been<br />
historically disadvantaged.<br />
You’ll notice that Denver’s definition<br />
places a focus on outcomes, while the<br />
other two cities’ definitions emphasize<br />
equality of opportunity. It is worth<br />
noting that Denver’s definition is<br />
focused on race/ethnicity and other<br />
social identities, while the other cities’<br />
definitions are not. The point here is<br />
not to suggest that any one of these<br />
definitions is better than another, but<br />
rather to show that “equity” can be<br />
defined quite differently.<br />
For example, it is probably not a<br />
coincidence that Denver, as a more<br />
progressive/liberal city than Columbia<br />
or Salt Lake City, brings equitable<br />
outcomes into its definition, while<br />
the other two focus on equality of<br />
opportunity. 1 We’ve noticed this same<br />
20
difference in definitions between other<br />
cities, depending on their differing<br />
ideological leanings. It could be that<br />
the extent to which race/ethnicity is<br />
featured in the definition is a product<br />
of local circumstances. In Salt Lake<br />
City, the poverty rate among Black<br />
residents (36 percent) is much higher<br />
than White residents (13 percent) and<br />
higher than Hispanic residents (28<br />
percent). However, Black people make<br />
up a small portion of the population<br />
(2 percent) compared to White people<br />
(64 percent) or Hispanic people (21<br />
percent). This means that there are far<br />
more impoverished White people than<br />
any other ethnic group, which may have<br />
influenced Salt Lake City’s definition,<br />
making it more focused on class<br />
disparities than race. 2<br />
These nuances make it important<br />
to define what “equity” means in<br />
your community. Doing so provides<br />
the opportunity for people in local<br />
government to discuss the demographic<br />
and income characteristics of their<br />
communities and their implications for<br />
equity in budgeting. It also gives them<br />
the common understanding needed<br />
to navigate potential tensions around<br />
fairness.<br />
The definition can also be used to<br />
guide the budget process. Columbia<br />
and Salt Lake City first identified the<br />
programs they funded through their<br />
budget. Then they used their definitions<br />
of equity as the basis to evaluate the<br />
extent to which programs were helping<br />
achieve the municipality’s equity goals.<br />
In this way, the budget becomes a bridge<br />
between symbolism (idealism) and<br />
substance (pragmatism). It reflects<br />
the community’s shared values and<br />
aspirations, while remaining grounded<br />
in the details of service delivery and<br />
constrained by fiscal realities.<br />
PART THREE<br />
Breadth Versus Depth<br />
Imagine the following scenario:<br />
you’ve established a clear definition<br />
of equity that your elected officials<br />
support unanimously and<br />
enthusiastically. You’ve hired a<br />
chief equity officer who has successfully<br />
deployed training across the organization<br />
to recognize bias and elevate awareness of<br />
disparities. You’ve set the stage perfectly.<br />
Now you roll out the budget process,<br />
emphasizing equity, and eagerly await<br />
a wave of inspired and game-changing<br />
proposals from departments to arrive<br />
on your desk. Instead, the proposals<br />
resemble last year’s proposals. They’re<br />
the same types of proposals your<br />
departments usually produce—maybe<br />
this time with a narrative that loosely<br />
links their proposed spending to your<br />
equity objectives. (This is an instance of<br />
symbolism displacing substance.)<br />
What went wrong? The issue could<br />
be what we’ll refer to as “breadth versus<br />
depth.” There’s a tension in going<br />
broad in pursuit of equity-enhancing<br />
proposals versus going deeply into what<br />
it would take to evolve the programs and<br />
services you offer to help disadvantaged<br />
and historically marginalized<br />
populations become better off.<br />
Going broad seems practical and<br />
easy. You add a question to the budget<br />
request, business case, and decision<br />
package forms: “How does this proposal<br />
impact equity?” Or perhaps you roll out<br />
a checklist, helping guide departments<br />
to self-reflect. The result? Too often,<br />
familiar budget proposals from<br />
departments are attached to flimsy<br />
appeals toward equity. This is not what<br />
you’re striving to accomplish.<br />
One larger U.S. city from our research<br />
described how its library department<br />
proposed a decision package for new<br />
carpeting and shelving throughout<br />
the main branch. A similar proposal<br />
There’s a tension in going broad in pursuit of equity-enhancing<br />
proposals versus going deeply into what it would take to evolve<br />
the programs and services you offer to help disadvantaged and<br />
historically marginalized populations become better off.<br />
©<strong>2023</strong> JING JING TSONG C/O THEISPOT.COM<br />
1<br />
To judge how liberal or conservative a city might be, we<br />
looked at 2020 presidential election results. We found that<br />
Denver voted almost 80 percent Democratic. Salt Lake<br />
County voted just over 50 percent Democratic. Columbia<br />
sits on the edge of two counties and the combined results<br />
suggest a slight Democratic leaning. So, though all cities<br />
ultimately voted Democratic, the overwhelming win for<br />
the Democrats in Denver suggests Denver is a much more<br />
liberal city.<br />
2<br />
Salt Lake City, Utah Poverty Rate by Race, Welfare Info<br />
(welfareinfo.org/poverty-rate/utah/salt-lake-city#by-race).<br />
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SPECIAL SECTION | BUDGETING FOR EQUITY<br />
had been on the table the year before.<br />
Checking the “yes” box on the proposal<br />
request form section for “equity impact,”<br />
the department described how the carpet<br />
and shelving would spruce up the first and<br />
second floors, equitably serving readers<br />
of both nonfiction and fiction. This was<br />
not the game-changing, opportunity<br />
enhancing, disparity-reducing proposal<br />
the budget office had hoped for.<br />
So, if breadth doesn’t yield the proposals<br />
we need, what does depth look like?<br />
Let’s illustrate with the experiences<br />
of a different city from our research<br />
(we’ll refer to it as “the City”), showing<br />
how it navigated the tension of breadth<br />
and depth. The City had established a<br />
foundation for racial justice and equity,<br />
including compelling data on disparities<br />
throughout the community. It first rolled<br />
out a series of simple questions as part of<br />
the budget process:<br />
• How does this proposal advance the<br />
City’s equity goals?<br />
• Which geographic areas do these<br />
enhancements or reductions impact?<br />
• How will this proposal affect<br />
(negatively or positively) historically<br />
disadvantaged communities and/or<br />
underrepresented groups? How have<br />
you worked to mitigate negative impact?<br />
• Who was engaged to develop this<br />
proposal?<br />
What the City learned was that, though<br />
these questions provided some insight,<br />
its departments needed to think<br />
more deeply about their proposals.<br />
Departments were asked to look across<br />
their inventory of programs and identify<br />
the best opportunities for an in-depth<br />
reimagining of how a given program<br />
could enhance equity.<br />
Exhibit 2 illustrates the basic process.<br />
First was a program analysis that<br />
included an inventory of all the City’s<br />
programs, complete with the costs<br />
and revenues of each. This included<br />
evaluating the programs’ alignment with<br />
the City’s equity goals. Second was to<br />
ask how the City could better achieve its<br />
equity priorities. Third was to propose<br />
budget allocations to the places needed<br />
to make positive change. Fourth was<br />
to adopt a budget that reflects these<br />
decisions. This progression is what we<br />
mean by “depth.”<br />
The tools and processes deployed by<br />
the City favor deeper study into how<br />
programs can be changed to enhance<br />
equity. Let’s consider the problem of<br />
homelessness, a complex challenge<br />
with no easy answers. Addressing it<br />
will require thoughtful action across<br />
government departments. Going<br />
deeper into program evaluation gives<br />
departments the opportunity to think<br />
about how their actions can contribute<br />
to the solution.<br />
The City’s code compliance program<br />
was one piece of the puzzle to addressing<br />
homelessness. Homeless encampments<br />
create public health risks due to<br />
unsanitary conditions. The conventional<br />
code enforcement approach would<br />
be rooted in punitive measures. By<br />
diving deeper into the program, the<br />
City realized that if the goal was to<br />
increase public health and safety of<br />
homeless encampments, then a humane<br />
and necessary step was to offer relief to<br />
people who live in the encampments. A<br />
program proposal was made to provide<br />
additional relief to homeless people<br />
(such as additional water), especially<br />
during inclement weather. This would<br />
make the encampments more livable<br />
and sanitary, thus preventing or at least<br />
mitigating potential code violations<br />
stemming from unsanitary conditions.<br />
Of course, there is more to addressing<br />
homelessness. Encampments are<br />
far from a permanent solution.<br />
Encampments can infringe on the<br />
rights of private property owners by<br />
producing large amounts of litter, debris,<br />
needles, and more, causing hazardous and<br />
unsafe conditions. Enabling permanent<br />
or long-term encampments would raise<br />
serious questions of fairness. Why would<br />
some property owners be required to<br />
bear the burden of an encampment while<br />
others wouldn’t? As we have discussed,<br />
views on “what’s fair” are a big point of<br />
tension in budgeting for equity. People will<br />
not support a system they feel is unfair.<br />
If property owners feel unfairly burdened<br />
by the City’s approach to homelessness,<br />
the City will likely lose their support. The<br />
consequences might include, for instance,<br />
voting against the current office holders or<br />
moving out of the community. Therefore,<br />
the code enforcement budget also<br />
included a proposal for the City to conduct<br />
removal and cleanup for homeless<br />
encampments on private property.<br />
This example is a glimpse into<br />
how a budget process could begin<br />
to address homelessness in a more<br />
EXHIBIT 2 | BUDGETING APPROACH THAT PROGRESSES FROM BREADTH TO DEPTH<br />
Program Analysis:<br />
Current Service<br />
Levels and Costs<br />
What do we do?<br />
How much does it cost?<br />
What is the impact of the<br />
program on priorities?<br />
Strategic Planning<br />
and Council Priorities<br />
What should we be doing<br />
better to meet strategic<br />
goals/priorities?<br />
What do we need to do to<br />
meet equity goals?<br />
Proposed<br />
Changes to Budget<br />
What should we do more of?<br />
What should we do<br />
less of or not at all?<br />
What is a new program<br />
we need to offer?<br />
Biennial Budget<br />
Program Equity Analysis Racial Equity Action Plans Equity Analysis of Proposals<br />
22
©<strong>2023</strong> JING JING TSONG C/O THEISPOT.COM<br />
comprehensive way. The conversation<br />
could go further to address how<br />
people living in encampments could<br />
be directed to programs designed to<br />
end homelessness, outside of code<br />
enforcement. Program reviews center<br />
the budgeting discussion on the results<br />
produced by government. This allows<br />
for a thoughtful discussion of how<br />
programs can be rethought, revised, or<br />
reformed to support equity. Ultimately,<br />
program changes are translated to lineitem<br />
detail (will the recommendation<br />
require more staff, more equipment,<br />
or supplies to put the change in to<br />
operation and achieve the result?) for<br />
a complete budget recommendation.<br />
If your goal is game-changing budget<br />
proposals, then depth over breadth is<br />
the key. To emphasize depth, consider<br />
the following.<br />
The social problems that budgeting<br />
for equity is intended to address are<br />
often complex and took generations<br />
to develop into their current forms.<br />
Attempting to solve these issues in a<br />
budget cycle is like trying to build an<br />
airplane while in flight. Simple, broadbased<br />
budget questionnaires become<br />
an attractive but cursory alternative.<br />
Instead, budgeting can be preceded by<br />
a dedicated planning cycle that makes<br />
time for deeper exploration of the<br />
problems budgeting for equity hopes<br />
to address.<br />
Going broad is often mistaken for being<br />
comprehensive. A truly comprehensive<br />
review of a local government’s spending<br />
is probably impossible and certainly<br />
isn’t sustainable. 1 A local government<br />
will be better off focusing its limited<br />
time and analytical capacity on a<br />
smaller number of areas, where it can<br />
do the most good with the resources<br />
available. This includes a smaller<br />
number of issues (like homelessness)<br />
and a smaller portion of budget<br />
proposals (like those that can make a<br />
material difference in homelessness).<br />
1<br />
The best historical example of an attempt at comprehensive<br />
review of government spending is zero-base budgeting<br />
(ZBB). GFOA has never found an example of a true<br />
“textbook” implementation of ZBB; all local governments<br />
GFOA has found that claim to do ZBB have used<br />
the “textbook” ideal as inspiration, but the practical<br />
implementation falls far short of the comprehensive ideal.<br />
Even these truncated versions of ZBB tend to be used<br />
for limited periods of time, however, like helping a local<br />
government get through a serious financial crisis. (gfoa.org/<br />
materials/zero-base-budgeting)<br />
PART FOUR<br />
Idealism Versus Pragmatism<br />
The stakes of budgeting for<br />
equity are high. And anytime<br />
the stakes are high, emotions<br />
can run high as well. Add<br />
to this the tensions we’ve<br />
discussed and a polarized political<br />
environment, and you have a recipe for<br />
high conflict. Conflict is not necessarily<br />
bad; some conflict usually is needed for<br />
change. Idealism is needed to embolden<br />
the spirit to advance big ideas and to<br />
take on the conflicts that come along<br />
with big ideas. Pragmatism is necessary<br />
for putting those ideas into practice<br />
and for resolving conflicts in a way<br />
that brings along as many people as<br />
possible. This is “pragmatic idealism.”<br />
Pragmatic idealism exemplifies the<br />
tension inherent in budgeting for equity<br />
(pragmatism versus idealism) and how<br />
to manage the tension (combine the best<br />
of both pragmatism and idealism without<br />
overemphasizing either).<br />
Effective idealism produces a<br />
vision that brings people together. The<br />
vision addresses what it would look<br />
like to have a thriving community for<br />
everyone. A compelling vision invites<br />
other people and organizations to get<br />
involved in making the vision a reality<br />
and keeps participants inspired. The<br />
City of Pueblo, Colorado, provides an<br />
example of what effective community<br />
visions look like. The city was planning<br />
how to use its American Rescue Plan<br />
Act (ARPA) funding from the federal<br />
government. It established seven areas<br />
in which the city might look to make<br />
an impact (youth, small businesses,<br />
infrastructure, and more). The city also<br />
defined more specific goals under each<br />
area. For example, “quality childcare”<br />
was a goal for youth. Community<br />
members were involved in defining<br />
this vision and the goals for each area<br />
and deciding how funding would be<br />
distributed. Equity was one of the<br />
criteria the city used with community<br />
members to determine where to direct<br />
the funding.<br />
Effective pragmatism is needed to<br />
find the interventions that make a real<br />
and lasting difference in the lives of<br />
community members. This is because<br />
changing people’s lives through social<br />
policy is difficult and often fails. Take,<br />
for example, mathematics education<br />
in primary and secondary schools. A<br />
review of 155 math programs in the U.S.<br />
Department of Education’s Institute<br />
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of Educational Sciences’ What Works<br />
Clearinghouse shows that fewer than<br />
20 (12 percent) of those programs have<br />
proven positive or potentially positive<br />
effects. Literacy does better, but only<br />
23 percent of programs in the database<br />
have positive or potentially positive<br />
effects. Switching to a different field,<br />
justice, the National Institute of Justice’s<br />
CrimeSolutions database shows that,<br />
of about 650 programs, about 90 (only<br />
14 percent) have proven effective. The<br />
statistics show that making an impact<br />
through public policy is difficult—<br />
although making an impact might be<br />
harder than these numbers suggest.<br />
The evaluations that produce these<br />
statistics are often based on pilot projects<br />
or small-scale demonstrations. Scaling<br />
up successful pilots to serve a larger<br />
number of people is a common point of<br />
program failure. 1<br />
If local governments are to have<br />
any chance of realizing a vision for<br />
a thriving community, they need to<br />
apply a rigorous approach to what<br />
works and what doesn’t. Here are<br />
three crucial practices in this vein.<br />
where there are no viable substitutes for<br />
the services these facilities provided.<br />
The city also used data to direct its efforts<br />
for grass and tree maintenance to make<br />
sure all public areas in all neighborhoods<br />
were adequately maintained. And rather<br />
than applying the same approach to each<br />
neighborhood, services were customized<br />
to the needs of each neighborhood. This<br />
helps ensure all residents can be proud of<br />
their neighborhood.<br />
Talk to people in communities. Though<br />
structured data from sources like calls<br />
for service is important, it may not<br />
capture everything people care about.<br />
Low-income or minority communities<br />
may have less trust in government than<br />
other groups and may therefore be less<br />
willing to provide information (by making<br />
calls for service, for example). City<br />
officials must engage directly with people<br />
Take the Next Step<br />
about their concerns. This could include<br />
engaging with the people government<br />
services are intended to help so they can<br />
better understand the problems they<br />
face and co-design the solutions. It could<br />
also include designing the planning and<br />
budget process to better meet the needs of<br />
communities.<br />
We’ve seen what effective idealism<br />
and pragmatism look like. We also need to<br />
know what to guard against when it comes<br />
to ineffective idealism and pragmatism.<br />
Ineffective idealism is dogmatic.<br />
Dogma is not subject to compromise or<br />
questioning, which means it can’t gain<br />
consensus. Something that can’t be<br />
questioned can’t be evolved and adapted<br />
over time. How might one recognize where<br />
idealism is slipping into dogma? One way<br />
is to watch out for clichés that try to give<br />
the impression of wisdom but only replace<br />
important nuances with false clarity.<br />
Learn more about the benefits of rethinking public engagement and how to put it into practice<br />
at gfoa.org/rethinking-public-engagement.<br />
Define the problem clearly. People tend to<br />
jump to solutions without taking the time<br />
to properly diagnose the problem. This can<br />
result in suboptimal or even completely<br />
wrong solutions. A simple example might<br />
be found in mobility goals. Conventional<br />
mobility strategies in some communities<br />
might be centered on the automobile.<br />
However, a diagnosis of the problem might<br />
reveal that low-income communities rely<br />
more on public transportation or walking.<br />
This realization would lead to very<br />
different mobility strategies. (You can find<br />
a full discussion of this topic in GFOA’s<br />
report, “Defining the Problem: The Missing<br />
Piece to Local Government Planning.”)<br />
Gather data. Because human judgment<br />
is highly imperfect, defining a problem<br />
or designing a solution based only on<br />
judgment will rarely get the best results.<br />
For example, the City of Toledo, Ohio, used<br />
data from sources like calls for service<br />
and foot traffic into facilities to recognize<br />
where reductions in the city budget would<br />
have an adverse impact on historically<br />
underserved neighborhoods. It<br />
determined that closing a library branch or<br />
recreation center would have a particular<br />
impact in a low-income neighborhood<br />
Idealism is needed to embolden the spirit to advance big ideas and<br />
to take on the conflicts that come along with big ideas. Pragmatism<br />
is necessary for putting those ideas into practice and for resolving<br />
conflicts in a way that brings along as many people as possible.<br />
©<strong>2023</strong> JING JING TSONG C/O THEISPOT.COM<br />
24
Let’s take a saying that is sometimes<br />
used to support putting an equity lens on<br />
budgeting: “Equity is fairness, equality is<br />
sameness.” This seeks to establish equity<br />
(equality of outcomes) 2 as the singular<br />
definition of fairness and equality as,<br />
at best, a counterfeit form of fairness.<br />
However, most people don’t agree with<br />
that. GFOA has run multiple polls asking<br />
people to define “fairness.” Equity<br />
(equality of outcomes) received around<br />
25 percent to 33 percent support as the<br />
definition of fairness across all polls,<br />
while equality (people should be treated<br />
the same) was the clear winner with just<br />
over half. 3 These results are consistent<br />
with broader psychological research into<br />
how people define fairness. 4 Further,<br />
a little thought experiment will easily<br />
expose this cliché as false. Imagine if you<br />
were to ask someone: do the following<br />
propositions represent fairness?<br />
• Human life should be valued<br />
equally, so we should have the same<br />
emergency response times in all<br />
geographic areas of the community.<br />
• Equal work should receive equal<br />
pay, which should be reflected in our<br />
human resources practices.<br />
• All citizens should be equal before the<br />
law, so we should eliminate unequal<br />
outcomes in sentencing for the same<br />
crime, based on race.<br />
Do you think they’d agree these<br />
conditions are fair? They probably would.<br />
Of course, this doesn’t mean equity is not<br />
fair. It does, however, mean that fairness<br />
is a multifaceted, nuanced concept, and<br />
there is more to it than just equity.<br />
These are not just semantics. If most<br />
people’s primary definition of fairness<br />
is something other than equity (when<br />
defined as equality of outcomes), it<br />
is probably not wise to declare their<br />
definition of fairness invalid. As an<br />
example of real-world dangers of these<br />
kinds of clichés, we might consider<br />
“defund the police.” Surveys from the<br />
summer of 2020 show that a rather small<br />
percentage of people (around 15 percent<br />
to 25 percent) supported abolishing<br />
the police entirely. 5 But a dogmatic<br />
framing of “defunding” impeded or even<br />
prevented productive conversations<br />
about practical opportunities for more<br />
cost-effective ways than traditional law<br />
enforcement to achieve certain public<br />
safety goals. In the same way, a dogmatic<br />
approach to budgeting for equity that<br />
seeks to enshrine one definition of<br />
equity (equality of outcomes) as the sole<br />
definition of fairness risks marginalizing<br />
other, more widely held views of<br />
fairness and thereby sowing the seeds<br />
of divisiveness, which will hamper<br />
effective budget deliberations.<br />
To illustrate how this could manifest in<br />
local governments, we observed in some<br />
of the 11 cities we worked with that city<br />
staff felt uncomfortable with budgeting<br />
for equity and did not participate as fully<br />
in the implementation as city leaders<br />
would have preferred. One possible<br />
explanation is that some staff felt they<br />
were being asked to step out of the<br />
traditional nonpartisan, non-ideological<br />
role of the public servant and were<br />
uncomfortable with that.<br />
Ineffective idealism could also<br />
manifest itself, seeking to look good<br />
rather than to do good. Governments<br />
are, understandably, concerned about<br />
perceptions. But equity cannot be mainly<br />
about perceptions because it would risk<br />
not making a difference in people’s lives.<br />
An approach to equity that is centered<br />
on perceptions misses the opportunity<br />
to engage with the tensions inherent in<br />
equity. A dose of pragmatism can help<br />
here, by identifying clear and tangible<br />
goals for equity, clear indicators of<br />
whether those goals are being met, and<br />
monitoring those indicators over time.<br />
Pragmatism has its dark side, too.<br />
Ineffective pragmatism is technocracy,<br />
or domination by the views of technical<br />
experts. The first problem with this is<br />
that technical experts may be out of<br />
touch with the concerns of the people<br />
they are supposed to be helping. This<br />
might lead to solutions that don’t work,<br />
are too complex to be sustainable, or<br />
address the problem but create new<br />
problems. A classic example is public<br />
assistance programs for unemployed<br />
people that cut benefits starting with the<br />
first dollar a participant in the program<br />
receives from a job. This policy may be<br />
well-intentioned as a way to make good<br />
use of taxpayer dollars, but it creates a<br />
clear disincentive to work.<br />
Using data about the community’s<br />
needs can help avoid some of these<br />
problems, but data is often imperfect.<br />
Co-designing solutions with the people<br />
whom the government is trying to help<br />
could, at least, partially overcome the<br />
limits of data, but at worst, the technocrat<br />
thinks they know best and eschews<br />
direct input from community members.<br />
Another problem is that technocrats<br />
overlook things like trust, fairness,<br />
ethics, and virtue. At best, they are<br />
seen as “soft” concerns because they<br />
are not easily quantified, or they may<br />
be ignored entirely. These concerns<br />
could not be more central to budgeting<br />
for equity. As we have seen, fairness<br />
and equity are intertwined, and a<br />
nuanced understanding of each is<br />
necessary. Virtue is necessary because<br />
pursuing equity requires empathy<br />
and understanding for disadvantaged<br />
community members. Trust is required<br />
for productive conversations on<br />
how to reallocate resources to help<br />
disadvantaged community members.<br />
Fairness, virtue, and trust are all<br />
characteristics of ethical conduct of<br />
public finances. 6<br />
1<br />
For more on scaling and the challenges involved, see: John<br />
List, The Voltage Effect: How to Make Good Ideas Great and<br />
Great Ideas Scale (Currency: 2022).<br />
2<br />
To demonstrate that “equity” is often defined as equality of<br />
outcomes, consider for example, in a 2020 campaign video,<br />
Kamala Harris said, “Equitable treatment means we all end<br />
up in the same place.” Though she wasn’t directly referring<br />
to local government budgeting, it is a well-publicized<br />
example of how equity is defined as equality of outcomes<br />
by prominent people in American society. Another<br />
conspicuous example is the widely shared depictions of<br />
equity that show children looking over a fence at a baseball<br />
game. These pictures define equity in terms of equality of<br />
outcomes: everyone sees over the fence. GFOA’s research<br />
into fairness also shows that politically liberal or left-leaning<br />
people tend to, on average, define fairness more in terms of<br />
equality of outcomes than politically conservative or rightleaning<br />
people. See gfoa.org/fairness.<br />
3<br />
These polls were conducted across multiple GFOA channels<br />
and events, with variations in the ways different forms of<br />
fairness were described and the order in which the options<br />
were presented. For example, equity, in one poll, was<br />
described as “people are given what they need.” The other<br />
options were equality (the most popular—“you are treated<br />
equally”) and proportionality (“getting back what you put<br />
in”). Another poll asked people to define what they think<br />
“equity” means, posing it as equality of opportunity versus<br />
equality of outcome. Equality of opportunity was the clear<br />
favorite at almost 80 percent.<br />
4<br />
For example, developmental psychologists Christina<br />
Starmans, Mark Sheskin, and Paul Bloom reviewed the<br />
research on fairness in children and concluded that “people<br />
prefer fair inequality over unfair equality.” See: Christina<br />
Starmans, Mark Sheskin, and Paul Bloom, “Why people<br />
prefer unequal societies,” Nature Human Behaviour, 2017.<br />
5<br />
For example, in a June 11, 2020, only 24 percent of<br />
respondents believed that “we need to defund police<br />
and reinvent our approach to public safety.” All other<br />
respondents (59 percent) believed change should be made<br />
within the current system. These attitudes were consistent<br />
across people who live in cities, suburbs, towns, and rural<br />
areas, and along racial lines. A late June to early July 2020<br />
Gallup poll showed little support for “abolishing police<br />
departments” (15 percent support across all racial groups).<br />
6<br />
See the GFOA Code of Ethics at gfoa.org/ethics.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 25
SPECIAL SECTION | BUDGETING FOR EQUITY<br />
PART FIVE<br />
Proven<br />
Techniques<br />
The tensions we have described<br />
in this paper require a<br />
different approach to<br />
budgeting. The conventional<br />
approach is often a win-lose<br />
game, where stakeholders position<br />
themselves to get their piece of the<br />
proverbial pie—in other words, to come<br />
out on top in a competition for resources.<br />
But the local government budget will<br />
never be sufficient to give everyone<br />
what they want, so the long-run result<br />
is financial strain and alienation of the<br />
“losers” in the competition for resources.<br />
A successful and sustainable<br />
approach to budgeting for equity needs<br />
to be based on some other model than a<br />
win-lose game—like GFOA’s Financial<br />
Foundations Framework. Based on Nobel<br />
Prize-winning research, 1 the Financial<br />
Foundations Framework lays out five<br />
pillars for financial decision-making, as<br />
shown in Exhibit 3. (Learn more about<br />
the Framework at gfoa.org/financialfoundations.)<br />
In this section, we will outline<br />
an approach to budgeting for equity<br />
that is consistent with the Financial<br />
Foundations Framework. Exhibit<br />
4 outlines the four elements of the<br />
budgeting for equity process, each of<br />
which are described below.<br />
Gain Commitment<br />
Budgeting for equity is a departure<br />
from the traditional way of budgeting<br />
in governments. The traditional way<br />
has several advantages that account for<br />
its popularity and staying power, 2 so a<br />
new method demands an intentional<br />
strategy for convincing people to try<br />
something different.<br />
Step 1: Articulate a compelling vision.<br />
A compelling vision attracts people<br />
to the idea of budgeting for equity and<br />
builds the excitement needed to try<br />
doing it in a new way.<br />
EXHIBIT 3 | FINANCIAL FOUNDATIONS FRAMEWORK<br />
Pillar 1<br />
ESTABLISH A<br />
LONG-TERM<br />
VISION<br />
Pillar 2<br />
BUILD TRUST<br />
AND OPEN<br />
COMMUNICATION<br />
EXHIBIT 4 | A PROCESS FOR BUDGETING FOR EQUITY<br />
Gain Commitment<br />
Articulate a compelling vision PILLAR 1<br />
Define equity PILLAR 1<br />
Discover your critical equity issues PILLAR 2, PILLAR 3<br />
Establish goals and measures PILLAR 2, PILLAR 3<br />
Program Budgeting<br />
Turn the Curve Planning<br />
Develop Turn the Curve plan PILLAR 3<br />
Low or no cost ideas<br />
Pillar 3<br />
USE<br />
COLLECTIVE<br />
DECISION-<br />
MAKING<br />
Inventory programs<br />
Find programs with highest leverage to achieve equity goals PILLAR 4<br />
Determine programs to expand, keep or cut* PILLAR 4, PILLAR 5<br />
Ideas that cost money<br />
Allocate Resources<br />
Use planning to inform budget guidance and proposals PILLAR 4, PILLAR 5<br />
Decide which proposals are most valuable and allocate money PILLAR 5<br />
*Cutting low priority programs frees up money for higher impact spending<br />
Pillar 4<br />
CREATE<br />
CLEAR<br />
RULES<br />
Pillar 5<br />
TREAT<br />
EVERYONE<br />
FAIRLY<br />
26
©<strong>2023</strong> JING JING TSONG C/O THEISPOT.COM<br />
Step 2: Define equity. Because fairness is<br />
a nuanced concept, the term “equity” is<br />
often used in an imprecise way. Working<br />
together, local government employees<br />
should define what equity means for their<br />
community, while doing their best to<br />
manage the inherent tensions. Fairness<br />
is essential for people to have trust in<br />
the budget process. Think of trust as the<br />
oil that allows the process to run. Trust<br />
is necessary to navigate the difficult<br />
decisions the community will face in how<br />
to allocate resources.<br />
“Polarity Management” 3 is a technique<br />
for recognizing and balancing tensions<br />
by helping participants combine the<br />
best of different perspectives without<br />
overemphasizing any of them specifically.<br />
Polarity Management has a great deal<br />
of potential for navigating tensions<br />
related to budgeting for equity. For<br />
example, some communities may have<br />
historical circumstances that contribute<br />
to present-day inequities, which might<br />
create a tension between looking to the<br />
past versus looking to the future. Polarity<br />
Management can help find a balancing<br />
point as part of a definition of equity that<br />
has broad support.<br />
Step 3: Discover your critical equity<br />
issues. Examine demographic and<br />
socioeconomic data about your<br />
community to discover where there are<br />
disparities in the opportunities available<br />
to—or outcomes experienced by—people<br />
of a different race, socioeconomic class,<br />
or other characteristics relevant to your<br />
community.<br />
Step 4: Establish goals and measures.<br />
The beauty in budgeting, if there is such<br />
a thing, is in turning a grand ideal like<br />
equity into real, measurable results by<br />
way of programs and projects planned<br />
down to the line item. How does this<br />
happen? Anyone who has assembled a<br />
piece of IKEA furniture can appreciate<br />
that it helps to have words to go with<br />
the pictures. In the same way, the more<br />
we can articulate our equity goals, the<br />
more successful we’ll be in budgeting,<br />
implementing, and accomplishing them.<br />
Montgomery County, Maryland,<br />
provides an example of establishing<br />
measurable equity goals. This county of<br />
more than one million people, just north of<br />
Washington, D.C., is among the wealthiest<br />
counties in America. By any aggregate<br />
measure of well-being—income,<br />
education, and public health—life in<br />
Montgomery County is good. Hidden<br />
within the aggregate data, though,<br />
are tens of thousands of residents<br />
living in poverty, failing in school, and<br />
suffering chronic illness.<br />
Montgomery County’s goals are not<br />
unusual. They include thriving youth<br />
and families, safer neighborhoods,<br />
and a greener county. Where the<br />
county diverges from the norm is<br />
in the indicators of progress toward<br />
the goals. Instead of measuring<br />
population-wide averages, the county<br />
measures racial gaps, specifically in<br />
student achievement, employment,<br />
and life expectancy. The reason for<br />
focusing on disparities is not because<br />
outcomes for all groups must be equal,<br />
but because understanding disparities<br />
(who is impacted and why) allows<br />
governments to design strategies that<br />
increase access, opportunity, and<br />
support for disadvantaged groups.<br />
Program Budgeting<br />
Mario Cuomo, the late governor of New<br />
York, famously said, “You campaign in<br />
poetry. You govern in prose.” He could<br />
have gone on to say that you budget in<br />
particulars.<br />
The local government budget<br />
has traditionally been divided into<br />
departments. Departments are useful<br />
for day-to-day management of services,<br />
but it is often unclear what services a<br />
department provides. This is where<br />
programs come in. A program describes<br />
a set of related activities or tasks<br />
intended to produce a desired result for<br />
constituents. Generally, a program is<br />
broader than a line item or task but more<br />
detailed than a department or entire<br />
function, but also different. Examples<br />
of programs include residential<br />
building inspections, snow and ice<br />
removal, code enforcement, open space<br />
preservation, or financial reporting.<br />
A budget that is based on programs<br />
shows what the government does, how<br />
much it costs to provide the programs,<br />
Understanding disparities (who is impacted and why) allows<br />
governments to design strategies that increase access,<br />
opportunity, and support for disadvantaged groups.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 27
SPECIAL SECTION | BUDGETING FOR EQUITY<br />
and the fees and charges associated<br />
with recovering costs for the programs.<br />
A program budget supports budgeting<br />
for equity because the government<br />
can more easily identify the services<br />
that are the most powerful levers for<br />
achieving equity goals. This then forms<br />
the basis for developing criteria for how<br />
to allocate funding.<br />
Step 1: Inventory your programs.<br />
A program inventory is a list of all the<br />
programs offered by the government.<br />
Below is an example of a partial<br />
inventory of programs in the planning,<br />
building, and code enforcement<br />
function:<br />
• Public hearing support planning and<br />
zoning issues building construction<br />
inspections<br />
• Business license review and<br />
compliance home occupation<br />
inspections<br />
• Building construction plan review<br />
work without permits<br />
• Grading and drainage plan review<br />
business licensing<br />
• Building construction and permitting<br />
site plan review<br />
Ideally, a government will inventory<br />
all its programs. If that isn’t possible,<br />
perhaps because of time or resource<br />
constraints, it is possible to inventory<br />
the programs only within the functional<br />
areas that are most relevant to your<br />
equity goals. You can learn more about<br />
the details behind creating a program<br />
inventory in GFOA’s “The Challenges and<br />
Promise of Program Budgeting.”<br />
Step 2: Find programs with the highest<br />
leverage for achieving equity goals.<br />
While some programs are more<br />
important than others, which are which?<br />
Salt Lake City, Utah, and the City of<br />
Columbia, South Carolina, illustrate how<br />
programs can be prioritized. Both cities<br />
developed a set of criteria to evaluate<br />
programs. Each city had two criteria<br />
related to equity: equity “process” and<br />
equity “outcomes.”<br />
Equity process judges the extent to<br />
which programs were based on a clear and<br />
accurate analysis of the community’s<br />
needs. Equity outcomes judge a program’s<br />
potential impact on the city’s equity goals.<br />
Both criteria bring key ideas from the<br />
“gain commitment” element of Exhibit 4<br />
into budgeting.<br />
Each program in Salt Lake City and<br />
Columbia was judged against these<br />
criteria using a 0 through 4 rating scale,<br />
where 4 is the best score and 0 the worst.<br />
The best score on equity outcomes:<br />
“The program reaches diverse residents<br />
and helps them overcome historical<br />
barriers to their success and participate in<br />
Columbia’s economic vitality and growth.”<br />
The best score on the equity process:<br />
“Program design and decisions reflect<br />
EXHIBIT 5 | RATIONALE FOR SALT LAKE CITY’S CIVILIAN RESPONSE TEAM<br />
Traditional Public Safety Call-for-Service Model<br />
CRST/Social-Work Diverted Call-for-Service Model<br />
Homelessness Calls<br />
Mental Health Calls<br />
Emergency Calls<br />
Non-Emergency Calls<br />
Sworn Response<br />
Phone Report<br />
Online Report<br />
Homelessness Calls<br />
Mental Health Calls<br />
Emergency Calls<br />
Non-Emergency Calls<br />
MH/Social Services<br />
Sworn Response<br />
Phone Report<br />
Online Report<br />
Civilian Response<br />
EXHIBIT 6 | SCORING MATRIX FOR SALT LAKE CITY CIVILIAN RESPONSE TEAM BUDGET PROPOSAL<br />
Mandate Reliance Cost Recovery<br />
Community<br />
Benefit<br />
Equity Impact –<br />
Process<br />
Equity Impact –<br />
Outcome<br />
Economic<br />
Development<br />
Environment &<br />
Sustainability<br />
Infrastructure<br />
0 No mandate<br />
Other public sector<br />
entities provide this<br />
service<br />
Program does not<br />
currently generate<br />
revenue<br />
Less than 25%<br />
of community<br />
benefiting<br />
No relationship to<br />
equity impact(s)<br />
No relationship to<br />
equity impact(s)<br />
Meets 2 or less<br />
of Economic<br />
Development<br />
metrics<br />
Meets 2 or less<br />
of Environment<br />
& Sustainability<br />
metrics<br />
Meets 2 or less of<br />
the infrastructure<br />
metrics<br />
2 Self mandate<br />
Other private sector<br />
entities provide this<br />
service<br />
Program recovers<br />
deep understanding of disparities in the<br />
city via prior program evaluation, data<br />
analysis, and community engagement.”<br />
The evaluation also included<br />
other considerations that were not<br />
necessarily related to equity but are<br />
nonetheless important for making<br />
good decisions about how to allocate<br />
resources among programs. Some<br />
examples of criteria that were common<br />
to both Salt Lake City and Columbia<br />
include:<br />
• Reach into the population: do many<br />
people benefit, or just a few?<br />
• Demand: is the need for this service<br />
increasing or declining?<br />
• Reliance: is the city the sole possible<br />
provider of this service? Or can other<br />
entities better provide this service?<br />
All the criteria together form the basis<br />
for clear rules on how resources will be<br />
allocated.<br />
Step 3: Determine which programs<br />
to expand, keep, or cut. There is a<br />
strong case to keep or perhaps expand<br />
programs that score well on criteria<br />
like those used by Salt Lake City<br />
and Columbia. The formation and<br />
expansion of Salt Lake City’s Civilian<br />
Response Team is a good example. The<br />
Civilian Response Team program was<br />
created to be a public safety response to<br />
low-hazard, non-emergency, policerelated<br />
calls for service. The intent is to<br />
supplement traditional police response<br />
with responders who have different skill<br />
sets that are a better fit for certain types<br />
of calls, as illustrated in Exhibit 5.<br />
As we can see in Exhibit 6, the<br />
Civilian Response Team scored highly<br />
on many of the city’s criteria. It also<br />
received the lowest score on several<br />
criteria. Rarely will a local government<br />
find the perfect program that addresses<br />
all the criteria equally well. The job of<br />
the budget is to find the programs that<br />
have the greatest potential and weigh<br />
trade-offs among these options.<br />
Just like any other local government,<br />
Salt Lake City and Columbia must<br />
balance their budgets within revenue<br />
constraints. This could mean that<br />
expanding programs need to be<br />
balanced out with cuts in other areas.<br />
Cuts can be targeted to programs that<br />
don’t score well against the criteria.<br />
EXHIBIT 7 | TURN THE CURVE PLANNING<br />
Source: Clear Impact<br />
How are we doing on the data?<br />
What is our action plan<br />
to turn the curve?<br />
What works to<br />
turn the curve?<br />
There are many ways to fund ideas<br />
for new or expanded programs. For<br />
example, the City of Pueblo, Colorado,<br />
wanted to fund $1.5 million for 40<br />
equity-enhancing opportunities, so<br />
they identified $1.6 million in resource<br />
reallocation and revenue-generating<br />
opportunities from 71 programmatic<br />
recommendations. To enhance revenue,<br />
the city expanded municipal snow and<br />
ice removal services to additional paying<br />
customers, generating $100,000. Another<br />
idea included placing solar panels on cityowned<br />
facilities. To reduce costs, public<br />
hearings for planning and zoning issues<br />
moved strictly to web-based meetings.<br />
Though each of these examples are<br />
modest, 71 of them added up to a big<br />
impact.<br />
Turn the Curve Planning<br />
Programs cover the breadth of what a<br />
local government does. However, to find<br />
the most leverage to achieve equity goals,<br />
a local government may need to go deeper<br />
than a program inventory. A limitation of<br />
a program inventory is that it starts with<br />
what the government is already doing—it<br />
lists the services that are being provided<br />
now. But these programs may not be the<br />
offerings that have the highest possible<br />
leverage for achieving the government’s<br />
goals. Recall that improving people’s lives<br />
via public policy is difficult. The starting<br />
point for making a positive difference is to<br />
define the problem correctly.<br />
Turn the Curve is a planning method<br />
that starts with data, probes for root<br />
causes, and identifies evidence-based<br />
actions. This method was originated by<br />
5<br />
4<br />
1<br />
Turn the Curve<br />
3<br />
2<br />
What is the story<br />
behind the curve?<br />
Who are the partners<br />
who have a role to play<br />
in turning the curve?<br />
Mark Friedman in his book, Trying Hard<br />
Is Not Good Enough, 4 and is overviewed<br />
in GFOA and International City/County<br />
Management Association’s “Defining<br />
the Problem: The Missing Piece to Local<br />
Government Planning.” There are five<br />
steps in Turn the Curve planning, as<br />
shown in Exhibit 7.<br />
If we look back to Exhibit 4, we see<br />
that program budgeting may lead to the<br />
realization that the government doesn’t<br />
know if a given program really does<br />
make a difference, thereby prompting<br />
the government to develop a Turn the<br />
Curve plan for that program. As Exhibit 4<br />
also shows, a government could engage<br />
in Turn the Curve planning to figure out<br />
the best way to achieve its equity goals,<br />
independent of program budgeting.<br />
What is the story behind the curve?<br />
Who are the partners who have a<br />
government to develop a Turn the Curve<br />
plan for that program. As Exhibit 4 also<br />
shows, a government could engage in<br />
Turn the Curve planning to figure out<br />
the best way to achieve its equity goals,<br />
independent of program budgeting.<br />
Step 1. How are we doing on the data?<br />
Turn the Curve planning starts by<br />
charting out a baseline. A baseline is<br />
a multiyear display of data with two<br />
parts: a historical part that shows where<br />
we’ve been, and a forecast part that<br />
shows where we are headed if we stay<br />
on our current course. The baseline<br />
shown in Exhibit 8 is from a city with a<br />
growing housing affordability problem.<br />
Baselines allow us to define success<br />
as doing better than the baseline—or<br />
“turning the curve.”<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 29
SPECIAL SECTION | BUDGETING FOR EQUITY<br />
Step 2. What is the story behind the curve<br />
of the baseline? What are the causes and<br />
the forces at work? Why does the trend<br />
look the way it does? Friedman calls this<br />
the epidemiology part of the work. As the<br />
saying goes, “a problem well-defined is a<br />
problem half-solved.”<br />
Often, the causes behind inequity are<br />
multifaceted and deep-rooted. For the city<br />
with declining housing affordability, the<br />
facts behind the curve include factors<br />
such as restrictive zoning laws, high<br />
construction costs, limited access to<br />
credit, and weak tenants’ rights. If not<br />
for ample land availability, low property<br />
taxes, and a robust homebuyer education<br />
program, housing affordability would be<br />
even worse.<br />
One critical step in understanding the<br />
story behind the curve is to disaggregate<br />
the data and reveal the role of race,<br />
geography, and other factors that impact<br />
housing affordability. Another is to<br />
look for bright spots to learn from, such<br />
as people living in decent, affordable<br />
housing with little or no government help.<br />
Step 3. Who are the partners with a role<br />
to play in turning the curve? Most curves<br />
related to equitable outcomes cannot<br />
be turned by local government acting<br />
on its own. Local governments should<br />
cast a wide net for partners. Partners<br />
for tackling housing affordability might<br />
include developers, urban planners,<br />
banks, churches, other governments,<br />
business groups, nonprofits,<br />
neighborhood associations, universities,<br />
advocates, media, foundations, and<br />
consultants.<br />
EXHIBIT 8 | BASELINE FOR HOUSING AFFORDABILITY<br />
Step 4. What works to turn the curve?<br />
Ideas for turning the curve should flow<br />
from the story behind it. For example,<br />
if one cause of the housing burden is a<br />
shortage of housing supply, then what are<br />
some ways to increase supply?<br />
The search for answers should cover<br />
research, best practices from other<br />
places, experience, and professional<br />
judgment. The list of potential solutions<br />
should range from low-cost/no-cost<br />
strategies (zoning law changes) to<br />
“blank check” options (construction of<br />
subsidized low-income units).<br />
Step 5. What is our action plan to turn the<br />
curve? The basic notion of an action plan<br />
is who does what, when, and how.<br />
The problem is that too many<br />
plans jump to solutions without fully<br />
understanding the problem. Evaluate<br />
and prioritize the solutions from Step 4<br />
of Turn the Curve planning using a set<br />
of criteria, which might include impact,<br />
feasibility, and equity. Next, fit the<br />
best solutions together into a coherent,<br />
cascading strategy. Finally, document<br />
each milestone and action step to provide<br />
a detailed road map for implementation.<br />
The city in our example generated 35<br />
“what works” ideas and prioritized 13 of<br />
them for its action plan. They include<br />
gap financing to turn the upper floors of<br />
commercial buildings into affordable<br />
housing, exploring an inclusionary<br />
zoning program, and hiring a fair housing<br />
ombudsperson.<br />
The action plan might suggest which<br />
programs to expand, create, or eliminate,<br />
which has implications for the budget.<br />
Percent of Rental Households Earning Below $49,999 Annually Paying More than 30% of Income of Housing<br />
75%<br />
70<br />
65<br />
60<br />
66%<br />
62%<br />
63%<br />
62%<br />
Data Source: American Community Survey<br />
65%<br />
66% 66%<br />
67% 67%<br />
68%<br />
2010 2015 2020<br />
Current Actual Value Trend Labels Forecast<br />
Allocate resources<br />
Even with strong commitment, clear goals,<br />
and detailed plans, budgeting for equity<br />
can be stifled by the traditional budget<br />
process, which is designed to preserve<br />
status quo spending patterns, minimize<br />
conflict, and stop or slow change.<br />
Transforming the budget process is beyond<br />
the scope of this article, but there are steps<br />
local governments can take to give equity<br />
leverage in budget decision-making.<br />
Step 1. Use planning to inform budget<br />
guidance and proposals. In their book<br />
The Price of Government, 5 David Osborne<br />
and Peter Hutchinson suggest that<br />
budgeting should be an exercise in<br />
purchasing results, not funding line<br />
items. In the same way that they would<br />
issue a request for proposal (RFP) to buy<br />
a good or service from a private company,<br />
local government leaders should issue<br />
a request for results (RFR) to specify to<br />
departments what they are looking for<br />
in the budget. Turn the Curve planning<br />
can be translated into this kind of<br />
budget guidance, giving departments<br />
specifications, and even detailed<br />
instructions, that they are expected to<br />
incorporate into spending proposals.<br />
Step 2. Make decisions about which<br />
proposals are most valuable. Decisionmaking<br />
is both art and science. Start with<br />
the science: develop a rubric for scoring<br />
budget proposals that gives points for<br />
alignment with the guidance, program<br />
performance, strength of evidence,<br />
efficient use of resources, and other<br />
important factors. For the art, convene a<br />
team to review all the budget proposals<br />
pertinent to each equity goal and advise<br />
about how well they collectively fit<br />
together into a complete, coherent<br />
approach and where there may be gaps,<br />
overlaps, or other shortcomings.<br />
1<br />
Elinor Ostrom was awarded the Nobel Memorial Prize in<br />
Economic Sciences in 2009. Her work focused on how<br />
human beings come together to solve social dilemmas<br />
similarly to the way in which a resource held in common<br />
should be managed. GFOA’s Financial Foundations<br />
Framework is based on her work.<br />
2<br />
The classic piece supporting this is: Aaron Wildavsky,<br />
“A budget for all seasons? Why the traditional budget lasts,”<br />
Public Administration Review, 1978.<br />
3<br />
Barry Johnson, Polarity Management: Identifying and<br />
Managing Unsolvable Problems (H R D Press: 2014).<br />
4<br />
Mark Friedman, Trying Hard Is Not Good Enough<br />
(BookSurge Publishing: 2009).<br />
5<br />
David Osborne and Peter Hutchinson, The Price of<br />
Government: Getting the Results We Need in an Age of<br />
Permanent Fiscal Crisis (Basic Books: 2006).<br />
30
©<strong>2023</strong> DAVIDE BONAZZI C/O THEISPOT.COM<br />
PART SIX<br />
Summary<br />
Budgeting for equity holds<br />
great promise for helping<br />
local governments make their<br />
communities better places to<br />
live for all people. It can be the<br />
bridge from a set of ideals to actual results,<br />
even though it can seem like a rope bridge<br />
across an unfriendly river, with planks<br />
missing here and there. That’s because<br />
equity is a new and nuanced entrant in the<br />
fiercely competitive contest called local<br />
government budgeting and planning.<br />
In the fights over what is fair and who<br />
gets what, there are tensions borne of<br />
ideology, self-interest, and impatience.<br />
We have described four such tensions<br />
inherent to budgeting for equity:<br />
• Equality of opportunities versus<br />
equality of outcomes<br />
• Symbols versus substance<br />
• Breadth versus depth<br />
• Idealism versus pragmatism<br />
When we approach a bridge, getting to<br />
the other side is usually the goal—but<br />
When we approach a bridge,<br />
getting to the other side<br />
is usually the goal—but<br />
managing the tensions of<br />
budgeting for equity requires<br />
meeting in the middle.<br />
managing the tensions of budgeting<br />
for equity requires meeting in the<br />
middle. Whether it’s agreeing on what<br />
equity means in your community,<br />
balancing inspiring slogans with<br />
substantive planning, prioritizing<br />
time and resources, or settling for less<br />
than everything you want, there are<br />
ways to make budgeting for equity an<br />
affirming and effective endeavor.<br />
Rope bridges aren’t so scary when<br />
you take them step by step. That’s<br />
where the process comes in. We have<br />
outlined four proven techniques for<br />
implementing budgeting for equity:<br />
Gain commitment. Identify disparities<br />
in your community and establish<br />
goals to lift up those who have been<br />
disadvantaged.<br />
Program budgeting. Break your<br />
budget down and examine how each<br />
program can contribute to achieving<br />
your equity goals.<br />
Turn the Curve planning. Define the<br />
problems underlying persistent<br />
disparities so that you have the insight<br />
needed to find effective solutions.<br />
Allocate resources. Change your<br />
budgeting from funding line items<br />
to purchasing results by giving<br />
departments clear expectations and<br />
instructions to guide their budget<br />
proposals.<br />
We’ve shown you the ropes—the steps<br />
are yours to take.<br />
Shayne Kavanagh is senior manager<br />
of research for GFOA. Andrew Kleine<br />
is senior director at EY-Parthenon<br />
Government & Public Sector, Ernst<br />
& Young LLP. Chris Fabian is chief<br />
executive at ResourceX. Erik Fabian is<br />
chief operating officer at ResourceX.<br />
The authors would like to thank Results<br />
for America, without which this article<br />
would not be possible. They would also<br />
like to acknowledge the hard work and<br />
dedication of the public servants in all<br />
the 11 cities they worked with as part of<br />
this project.<br />
Learn More<br />
Learn more about the Rethinking Budgeting<br />
initiative at gfoa.org/rethinking-budgeting.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 31
32
CALIBRATION TRAINING<br />
From<br />
Guesswork<br />
to<br />
Informed<br />
Judgment<br />
©<strong>2023</strong> AAD GOUDAPPEL C/O THEISPOT.COM<br />
Using Calibration Training<br />
for Better Decision-Making<br />
BY SHAYNE KAVANAGH, DOUG HUBBARD, PHILIP MARTIN, AND ROBERT WEANT<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 33
34
CALIBRATION TRAINING<br />
©<strong>2023</strong> AAD GOUDAPPEL C/O THEISPOT.COM<br />
The job of a local government finance officer is to help elected officials<br />
and other decision-makers make better decisions. This involves<br />
helping elected officials make sense of uncertain information and<br />
situations—which requires us to express uncertainty clearly, especially<br />
for assumptions that might underlie financial plans and budgets.<br />
To help, GFOA worked with Hubbard Decision Research (HDR) and<br />
40 GFOA member volunteers to go through what is known as<br />
“calibration training.” The objective of calibration training is to prepare<br />
people to express their estimates of uncertainty in quantitative terms,<br />
using only their own judgment and without relying on outside data.<br />
Quantified estimates of uncertainty are desirable, and special training<br />
is necessary to make them.<br />
WHY DO WE NEED TRAINING TO<br />
QUANTIFY UNCERTAINTY?<br />
Let’s start with why quantified<br />
estimates of uncertainty are desirable.<br />
Uncertainty is a key element of risk,<br />
which could be defined as the downside<br />
of uncertainty. Finance officers help<br />
decision-makers manage the financial<br />
risk of their decisions. But as Peter<br />
Bernstein put it in Against the Gods:<br />
The Remarkable Story of Risk, 1 “Without<br />
numbers, there are no odds and<br />
no probabilities; without odds and<br />
probabilities, the only way to deal with<br />
risk is to appeal to the gods and the<br />
fates. Without numbers, risk is wholly<br />
a matter of gut.”<br />
Bernstein is advocating for<br />
quantifying uncertainty (and, thereby,<br />
risk) by using odds and probabilities.<br />
He cautions against our gut instincts<br />
because people are not wired to think<br />
about risk correctly. One reason for<br />
that is what psychologists call the<br />
“overconfidence bias.” This means that<br />
we are overconfident in our predictions<br />
and tend to underestimate uncertainty.<br />
We can illustrate this with data from a<br />
calibration training experiment GFOA<br />
conducted (see Exhibit 2).<br />
Exhibit 2 provides a comparison of<br />
how well the group of GFOA volunteers<br />
thought they did on making a prediction<br />
versus how well they actually did, before<br />
they went through calibration training.<br />
For instance, if we look at the horizontal<br />
axis and find the 0.8 mark, this is the<br />
point where someone believes their<br />
forecast has an 80 percent chance of<br />
being correct. We can then look upward<br />
until we intersect the 0.8 mark on the<br />
vertical axis, which is on the green line.<br />
This is the point of perfect calibration:<br />
if you say your forecasts have an 80<br />
percent chance of being correct, and<br />
your forecasts are, in fact, correct 80<br />
percent of the time. Any point on the<br />
green line is perfect calibration.<br />
Percent Correct<br />
EXHIBIT 1 | UNQUANTIFIED VERSUS QUANTIFIED ESTIMATES<br />
Unquantified estimate<br />
Next year’s total revenue will be<br />
somewhere around $20 million.<br />
I think the new sales tax law will likely<br />
pass by the start of our next fiscal year.<br />
We also see a red line on Exhibit 2; this<br />
is data from participants before they took<br />
the calibration training. If we revisit 0.8<br />
on the horizontal axis, we see the red line<br />
meets the vertical axis at 0.68. In other<br />
words, the uncalibrated person believed<br />
their forecasts had an 80 percent chance<br />
of being correct but are actually correct<br />
only 68 percent of the time; this is<br />
overconfidence bias. Anytime the red<br />
line is below the green line, it represents<br />
overconfidence. The dotted gray<br />
lines represent allowable error in our<br />
measurement of the participants in the<br />
training—we can’t expect our tests to be<br />
a perfect measure of accuracy.<br />
With this in mind, we can see that<br />
the participants are not overconfident<br />
when assessing their chances at 50 or 60<br />
percent. This is because the participants<br />
are highly uncertain and are, in essence,<br />
flipping a coin when estimating if they<br />
will be correct or not. In fact, because<br />
the red line is above the green line, our<br />
participants were underconfident: they<br />
thought they were flipping a coin; but,<br />
Quantified estimate<br />
There is a 90 percent chance that<br />
next year’s revenue will be between<br />
$19 million and $21 million.<br />
I give an 80 percent chance that the<br />
new sales tax law will pass by the<br />
start of our next fiscal year.<br />
EXHIBIT 2 | RESULTS OF “PRETEST” OF CALIBRATION TRAINING PARTICIPANTS<br />
100%<br />
90%<br />
80%<br />
70%<br />
60%<br />
GFOA Participants: Binary Calibration Curve<br />
Before Training<br />
Perfect Calibration<br />
Allowable Error<br />
50%<br />
50% 60% 70% 80% 90% 100%<br />
Expected Percent Correct<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 35
CALIBRATION TRAINING<br />
in fact, they had better information about<br />
the correct answer than they thought they<br />
did. But as soon as the participants believed<br />
their estimate has a reasonable chance of<br />
being right, overconfidence crept in.<br />
Mitigating or eliminating overconfidence<br />
bias is why calibration training is<br />
necessary. Quantifying your estimates<br />
of uncertainty is not simply a matter<br />
of replacing words such as “likely” or<br />
“probable” with numbers like “80 percent”<br />
or “4 in 5 chance.” We need to take steps to<br />
make the numbers as accurate as possible.<br />
Ideally, we would use data to come up with<br />
our estimates of uncertainty. For example,<br />
if your annual hotel tax forecast has been<br />
within +/– 5 percent of actual revenue for<br />
each of the last ten years, then it is a good<br />
bet that next year’s forecast will be within<br />
that range as well (assuming your forecast<br />
method remains substantively similar). But<br />
the data for estimating uncertainty is often<br />
unavailable or incomplete, and there isn’t<br />
the time and/or resources to get more data.<br />
In this case, the estimator will be forced to<br />
rely on their judgment, at least in part.<br />
Calibration training moves the<br />
participants closer to the green line.<br />
Exhibit 3 shows results from training with<br />
an added blue line. We can see that, at all<br />
points, the blue line is closer to the green<br />
line and is even within the gray lines at a few<br />
points, which indicates perfect calibration.<br />
HOW DOES CALIBRATION<br />
TRAINING WORK?<br />
Calibration training helps people<br />
recognize overconfidence bias and<br />
mitigate it. It does this by providing<br />
immediate feedback on the quality of<br />
a high volume of predictions made by<br />
the participant. In other words, the<br />
participants make a lot of predictions and<br />
then find out how well they did right away.<br />
Rapid feedback is essential to learning.<br />
The predictions that participants<br />
make come in the form of difficult “trivia<br />
questions,” where it is highly unlikely that<br />
the participants know the right answer<br />
(without looking it up).<br />
These questions were asked in two<br />
formats. One format was true/false, where<br />
participants picked either true or false as<br />
their answer and then assigned a level of<br />
confidence to their answer. For example, a<br />
question might be: “True or false? A gallon<br />
of oil weighs less than a gallon of water.”<br />
Though you may not know the exact weight<br />
of either, you may recall that oil floats on<br />
water; therefore, oil probably weighs less.<br />
For that reason, you predict the statement<br />
is true and give your answer a high level of<br />
confidence (90 or even 100 percent).<br />
Other questions might be harder. For<br />
example, “Mars is always farther away<br />
from Earth than Venus.” Imagine you<br />
After one half-day of calibration training, participants get<br />
much closer to 90 percent correct for their range questions.<br />
This prepares them to develop ranges for situations they<br />
might encounter in their work life, such as a range of<br />
potential yields for a revenue source.<br />
Percent Correct<br />
EXHIBIT 3 | RESULTS OF “POST-TEST” OF CALIBRATION TRAINING PARTICIPANTS<br />
100%<br />
90%<br />
80%<br />
70%<br />
60%<br />
GFOA Participants: Binary Calibration Curve<br />
Before Training<br />
After Training<br />
Perfect Calibration<br />
Allowable Error<br />
50%<br />
50% 60% 70% 80% 90% 100%<br />
Expected Percent Correct<br />
have no idea, so you guess true.…but<br />
you rate your confidence at 50 percent,<br />
which indicates you basically flipped a<br />
coin to get your answer. Most questions<br />
are somewhere in between, where<br />
the participant has some idea of the<br />
correct answer but is not highly certain.<br />
Participants usually overstate their<br />
confidence at the start of the training and<br />
learn to be more circumspect about their<br />
predictions as the training progresses. By<br />
answering many questions and getting<br />
feedback, participants learn to more<br />
accurately assess the chance that they are<br />
correct. This prepares them to develop<br />
real-life predictions, like whether some<br />
important event will come to pass (for<br />
example, whether a major retailer in the<br />
community will close in the next year).<br />
In the other format of the trivia<br />
questions, participants are asked to define<br />
a range where they are 90 percent sure<br />
the correct answer lies within the range.<br />
For example, “What is the wingspan, in<br />
feet, of a Boeing 737 aircraft (the type<br />
of plane used by Southwest Airlines)?”<br />
Unless you are an aeronautical engineer,<br />
you probably don’t know the exact answer<br />
and would need to make a projection.<br />
You are not making a wild guess because<br />
you have information to go on. You may<br />
have been a passenger on such a plane<br />
or have seen it in pictures, so you have<br />
an idea of how big it is. However, it will<br />
still be a highly uncertain forecast for<br />
you. Picking a single number, like “75<br />
feet” is of limited use because it doesn’t<br />
express your uncertainty and the degree<br />
of risk that you might be wrong, so the<br />
calibration training asks participants to<br />
express their forecasts as a 90 percent<br />
confidence range. Put another way, they<br />
pick a high and a low value where they are<br />
90 percent confident that the value will be<br />
in between. For example, they might say,<br />
“I’m 90 percent confident that the<br />
wingspan is between 65 and 100 feet.”<br />
As it turns out, the actual wingspan is<br />
113 feet. Making the range too narrow<br />
is a common problem for participants;<br />
this is overconfidence bias in action.<br />
When participants first try forecasting<br />
90 percent confidence ranges for a large<br />
number of trivia questions, the correct<br />
answer falls outside of their ranges for<br />
around half of their estimates. If they<br />
are truly “90 percent confident,” then<br />
the correct answer should fall outside of<br />
36
EXHIBIT 4 | 90 PERCENT CONFIDENCE INTERVAL SHOWN AS A BELL CURVE<br />
5% 90%<br />
5%<br />
Rather than estimating the blue portion, many people find it easier to estimate each green portion separately.<br />
Percent Correct<br />
EXHIBIT 5 | PERCENT CORRECT OVER SUCCESSIVE PRACTICE ROUNDS<br />
100%<br />
80%<br />
60%<br />
40%<br />
20%<br />
0<br />
A B C D E F<br />
their ranges in only 10 percent of their<br />
forecasts (as in, 90 percent of the forecasts<br />
should be correct). After one half-day of<br />
calibration training, participants get much<br />
closer to 90 percent correct for their range<br />
questions. This prepares them to develop<br />
ranges for situations they might encounter<br />
in their work life, such as a range of<br />
potential yields for a revenue source.<br />
Participants do not learn purely through<br />
trial and error. They also learn techniques<br />
to help them make better predictions. For<br />
example, they learn to estimate each side<br />
of their ranges separately. When people<br />
think of a “90 percent confidence range,”<br />
they tend to generate both ends of the<br />
range simultaneously. Considering each<br />
side separately, however, causes people to<br />
slow down and give more consideration to<br />
their estimate (see Exhibit 4). Looking at<br />
Test<br />
Past Objective Allowable Team<br />
one side of the range at a time reframes the<br />
questions from “90 percent of the time the<br />
correct answer will be in this range” to: 1)<br />
“Only five percent of the time the correct<br />
answer will be higher than my upper<br />
value”; and 2) “Only five percent of the time<br />
will the correct answer be lower than my<br />
low value.” (The five percent on either side<br />
of the range adds up to 10 percent—a 100<br />
percent minus 10 percent is 90 percent<br />
for your 90 percent confidence interval.)<br />
Five percent is only 1 out of 20! When<br />
participants consider that the correct<br />
answer can only go beyond a given side of<br />
their interval 1 out of 20 times, it causes<br />
them to adjust that side of their interval.<br />
In Exhibit 5, we can see how<br />
participants improved as they completed<br />
multiple rounds of feedback and<br />
incorporated the ideas from the training<br />
in their estimates. The graph focuses on<br />
the range questions, and the “percent<br />
correct” means the proportion of times<br />
the value fell within the 90 percent<br />
confidence interval that the participant<br />
defined. By the sixth round, the<br />
participants were quite close to the gray<br />
line, which is the allowable error.<br />
Finally, some readers may wonder why<br />
the “objective” in Exhibit 5 (the green line)<br />
is only 90 percent correct instead of 100<br />
percent correct. This is because scoring<br />
100 percent on the test is easy—just<br />
make all your ranges infinitely wide. For<br />
example, you might set your range for<br />
the wingspan of a 737 aircraft between 1<br />
and 1 million feet. You are guaranteed to<br />
be “correct.” However, such wide ranges<br />
do not have much, if any, practical use<br />
in real-life estimation problems. The<br />
training aims to create balance, with<br />
ranges narrow enough to focus in on the<br />
90 percent most likely possible values<br />
but still wide enough to not fall victim to<br />
overconfidence bias.<br />
APPLICATIONS OF CALIBRATION<br />
TRAINING<br />
In this section, we’ll discuss three possible<br />
applications of calibration training for the<br />
work of the finance officer. We invite you<br />
to also consider other applications.<br />
First, it equips finance officers to<br />
communicate uncertainty in their<br />
forecasts and estimates. Research shows<br />
that people prefer advisors who quantify<br />
their uncertainty but are still confident. 2<br />
To illustrate, a revenue forecast might be<br />
presented in these ways:<br />
• “I’m 75 percent certain that revenues<br />
will increase by at least one percent<br />
next year.”<br />
• “I’m 90 percent certain that revenues<br />
will be between $50 million and $55<br />
million next year.”<br />
Our examples omit hedging language like<br />
“maybe,” “I’m not sure, but…,” and so on.<br />
The statements come across as confident,<br />
even though expressed as a probabilistic<br />
likelihood.<br />
We can also use the second bullet<br />
to illustrate overconfidence bias.<br />
Overconfidence causes people to make<br />
their ranges too narrow, often by around<br />
50 percent. 3 Revisit the second example<br />
and imagine that the person who made<br />
that estimate has calibrated. In contrast,<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 37
CALIBRATION TRAINING<br />
Pro Tip For Communicating Uncertainties<br />
Probabilities like 90 percent are an abstract<br />
concept and can be difficult to grasp for<br />
people who aren’t accustomed to thinking<br />
in probabilities. Research suggests that<br />
ratios are easier for people to grasp. 6<br />
For example, rather than saying, “I’m<br />
90 percent certain revenues will be…,”<br />
one could say, “There is a 9 in 10 chance<br />
revenues will be….”<br />
an overconfident estimator might say,<br />
“I’m 90 percent certain that revenues will<br />
be between $51 million and $54 million.”<br />
This is a range of only $3 million,<br />
compared to the $5 million range given<br />
by the calibrated estimator. In other<br />
words, the overconfident estimator has<br />
left less room for error and increased<br />
the chance of a bad decision. Calibration<br />
training helps you reach intervals that<br />
are of the right size, given your degree of<br />
certainty for the question at hand.<br />
For many applications in public<br />
finance, the government needs to settle<br />
on a single number. For example, you<br />
can’t put a range of possible revenues<br />
in your budget—but you can use the<br />
range to assess the risk you’re taking<br />
on by adopting any given number for<br />
your budget. The GFOA book Informed<br />
Decision-Making through Forecasting: A<br />
Practitioner’s Guide, 4 provides several<br />
case examples of how local governments<br />
have applied ranges when presenting<br />
forecasts. To summarize one application,<br />
the range of possible future revenues<br />
could be presented to the governing<br />
board, with the midpoint of the range<br />
considered the single most likely<br />
outcome. If the board were to adopt<br />
an expenditure budget equal to this<br />
midpoint, they give themselves 1:1 odds<br />
(or a 1 in 2 chance) of a deficit. This is<br />
because there is a 50 percent chance of<br />
revenues being less than (or more than)<br />
the midpoint of the estimate.<br />
Many elected boards wouldn’t like<br />
those odds and would prefer to give<br />
themselves a better chance of avoiding<br />
a deficit at the end of the year. In one<br />
of our case studies, the finance officer<br />
facilitated a conversation about the odds<br />
the elected board would prefer. The board<br />
landed on a spending plan that provided<br />
2-1 odds (or a 2 in 3 chance) of producing<br />
a surplus, which was more aligned with<br />
the board’s goal of building up reserves<br />
after a recent natural disaster. So, they<br />
landed on a single number for the budget<br />
but were also fully aware of the degree<br />
of risk that number represented. After<br />
a few years, when the reserves had been<br />
replenished, the board opted for lower<br />
odds of budgetary surplus (though still<br />
better than 1 in 2) by picking a higher<br />
number for the expenditure budget.<br />
You can download a spreadsheet to<br />
help you with the process described in<br />
this paragraph as part of an online article<br />
published by GFOA titled “Silicon Valley<br />
Bank and Stress Tests: What Can Local<br />
Governments Learn?” 5 After looking at<br />
the spreadsheet, you will probably be able<br />
to think of other applications for inserting<br />
subjective estimates of probabilities into<br />
larger quantitative models.<br />
The second practical application of<br />
calibration training is that it helps the<br />
finance officer avoid the “illusion of<br />
communication” when discussing risks.<br />
The illusion of communication is when<br />
people use vague terms to communicate<br />
uncertainty, such as “likely,” “probably,”<br />
and more. The problem is that people<br />
often have very different numbers in<br />
mind when asked to quantify these terms.<br />
To illustrate, one study of military<br />
intelligence examined a set of standard<br />
terms that intelligence officers were<br />
supposed to use to describe their<br />
certainty of military threats. 7 The order<br />
from most to least certain was: 1) “highly<br />
likely,” 2) “likely,” 3) “probable,” and 4)<br />
“unlikely.” When the intelligence officers<br />
were asked to quantify their uncertainty,<br />
the results exposed these standardized<br />
terms as worthless. For example, it<br />
turned out that some intelligence officers<br />
thought “highly likely” meant anything<br />
with more than a 50 percent chance of<br />
occurring, while others thought it meant<br />
a chance of 90 percent or more. “Likely”<br />
and “probable” meant essentially the<br />
same thing, given the quantities the<br />
officers assigned. And the range variation<br />
in the quantitative definitions the officers<br />
came up with resulted in some officers<br />
using “probable” (the term intended to<br />
describe the second lowest chance) to<br />
describe the same percent chance that<br />
other officers described as “highly likely”<br />
(the term for the highest chance). You can<br />
see this illustrated in Exhibit 6.<br />
EXHIBIT 6 | FREQUENCY WITH WHICH MILITARY INTELLIGENCE OFFICERS<br />
ASSIGNED QUANTITATIVE VALUES TO SUBJECTIVE DESCRIPTIONS OF RISKS<br />
The blue bars represent how often a given quantitative measure (such as, 20%) was believed to describe what a<br />
given subjective term (such as “unlikely” meant). The higher the bar, the more frequent the belief.<br />
Highly Likely<br />
Likely<br />
Probable<br />
Unlikely<br />
10% 20% 30% 40% 50% 60% 70% 80% 90%<br />
©<strong>2023</strong> AAD GOUDAPPEL C/O THEISPOT.COM<br />
38
EXHIBIT 7 | A CONVENTIONAL RISK MATRIX<br />
RISK<br />
PROBABILITY<br />
Frequent 5<br />
Occasional 4<br />
Remote 3<br />
Improbable 2<br />
Extremely<br />
Improbable 1<br />
RISK SEVERITY<br />
Catastrophic A Hazardous B Major C Minor D Negligible E<br />
5A 5B 5C 5D 5E<br />
4A 4B 4C 4D 4E<br />
3A 3B 3C 3D 3E<br />
2A 2B 2C 2D 2E<br />
1A 1B 1C 1D 1E<br />
The illusion of communication is not<br />
limited to military intelligence. Many local<br />
governments have probably fallen into the<br />
same trap by using the popular “heat map”<br />
style of risk matrix, as shown in Exhibit 7.<br />
It is easy to imagine the same problem with<br />
the terms on either axis of Exhibit 7. This<br />
is not just a theoretical problem. Research<br />
into how these kinds of risk matrices affect<br />
real-life decisions has concluded that<br />
“[qualitative] risk matrices should not be<br />
used for decisions of any consequence.” 8<br />
Calibration training prepares the<br />
finance officer to replace vague terms with<br />
meaningful, quantified, and calibrated<br />
estimates of uncertainty. For example, you<br />
could imagine a version of Exhibit 7 where<br />
the two axes are replaced by ranges of<br />
percent likelihood that the risk will occur<br />
and a potential dollar loss on the other.<br />
There are also other presentation methods<br />
that quantify risks into probabilities as a<br />
fundamental design feature. One example<br />
is called a “loss exceedance curve.” You can<br />
see examples applied to cyber security risk<br />
in the GFOA report Cyber Risk Savvy. 9<br />
The third practical application of<br />
calibration training is that it hones<br />
our intuitions about chance and<br />
prepares us to think probabilistically.<br />
According to The Great Mental Models<br />
project: 10 “Successfully thinking in<br />
shades of probability means roughly<br />
identifying what matters, coming up with<br />
a sense of the odds, doing a check on our<br />
assumptions, and then making a decision.<br />
We can act with a higher level of certainty<br />
in complex, unpredictable situations.<br />
We can never know the future with exact<br />
precision. Probabilistic thinking is an<br />
extremely useful tool to evaluate how the<br />
world will most likely look so that we can<br />
effectively strategize.”<br />
The benefits of probabilistic thinking<br />
are measurable. For example, one study<br />
showed that exposing participants to<br />
probabilistic training was associated<br />
with as much as a 50 percent increase<br />
in the accuracy of their predictions. 11<br />
Having a general idea how a revenue might<br />
perform is one thing. However, being<br />
able to examine the question of revenue<br />
yield from multiple vantage points and<br />
think about how new information might<br />
cause you to adjust your probabilistic<br />
expectations can be much more powerful.<br />
CONCLUSION<br />
Public finance officers deal with<br />
uncertainty and risk across many<br />
domains of public finance, including<br />
forecasts, rainy day funds, insurance, and<br />
more. The ability to think probabilistically<br />
enhances a finance officer’s ability to<br />
make savvier decisions about risk and<br />
uncertainty. Calibration training hones<br />
probabilistic thinking skills. Even better,<br />
it provides a basis for communicating<br />
quantified probability estimates to<br />
others. These skills are essential for<br />
helping the finance officer guide their<br />
local government in testing assumptions<br />
in an uncertain world. This allows the<br />
finance officer to be a bona fide decision<br />
leader—someone who doesn’t only make<br />
good decisions themselves but can also<br />
help others make wise decisions. 12<br />
Shayne Kavanagh is senior manager<br />
of research in GFOA’s Research and<br />
Consulting Center. Doug Hubbard<br />
is chief executive officer of Hubbard<br />
Decision Research. Philip Martin is chief<br />
operating officer of Hubbard Decision<br />
Research. Robert Weant is senior analyst<br />
at Hubbard Decision Research.<br />
GFOA’s “Budget Officer as<br />
Decision Architect” (Jason Riis<br />
and Jared Peterson, GFOA,<br />
February <strong>2023</strong>) offers a complete<br />
discussion of the finance officer’s<br />
role in helping their governments<br />
make better decisions. The ideas<br />
in this article support the skills<br />
needed to be a decision architect.<br />
READ THE ARTICLE:<br />
gfoa.org/materials/gfr0223-<br />
decision-architect<br />
1<br />
Peter L. Bernstein, Against the Gods: The Remarkable<br />
Story of Risk… (Wiley: 1998).<br />
2<br />
Celia Gaertig and Joseph P. Simmons, “Do people<br />
inherently dislike uncertain advice?” forthcoming,<br />
Psychological Science, 2017 (available at SSRN: ssrn.<br />
com/abstract=3041566).<br />
3<br />
Jack B. Soll, and Joshua Klayman, “Overconfidence<br />
in interval estimates,” Journal of Experimental<br />
Psychology: Learning, Memory, and Cognition, 30,<br />
2004.<br />
4<br />
Shayne Kavanagh and Daniel W. Williams, Informed<br />
Decision-Making through Forecasting: A Practitioner’s<br />
Guide, GFOA, January 2017.<br />
5<br />
Shayne Savage, Sam Savage, and Matthew<br />
Raphaelson, “Silicon Valley Bank and Stress Tests:<br />
What Can Local Governments Learn,” GFOA (gfoa.org/<br />
silicon-valley-bank-and-stress-tests-what-can-localgovernments-learn).<br />
6<br />
Chip Heath and Karla Starr, Making Numbers Count:<br />
The Art and Science of Communicating Numbers, (Avid<br />
Reader Press/Simon & Schuster: 2022).<br />
7<br />
Richards J. Heuer, The Psychology of Intelligence<br />
Analysis, Center for the Study of Intelligence, CIA, 1999.<br />
8<br />
Philip Thomas, Reidar Bratvold, and J. Eric Bickel,<br />
“The Risk of Using Risk Matrices,” SPE Economics and<br />
Management, 6(02), 2013.<br />
9<br />
Shayne Kavanagh, Rob Roque, and Teri Takai, “Cyber<br />
Risk Savvy,” GFOA, January 2022.<br />
10<br />
The Value of Probabilistic Thinking: Spies, Crime, and<br />
Lightning Strikes, Mental Modes, fs blog, Farnam Street<br />
Media.<br />
11<br />
In Smarter Faster Better: The Transformative Power<br />
of Real Productivity (Random House Publishing: 2016),<br />
author Charles Duhigg discusses the results obtained<br />
by the “Good Judgment Project” in their forecast<br />
experiments.<br />
12<br />
Decision leader is a term from: Don A. Moore and Max<br />
H. Bazerman, Decision leadership: empowering others<br />
to make better choices (Yale University Press: 2022.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 39
40
THE ROLE OF A CITY ECONOMIST<br />
A Key Role<br />
Why economists offer an essential skill set to local governments<br />
BY DEEPAYAN DEBNATH, MATTHEW LUE, ALEX TABB, AND MARK MACK<br />
©<strong>2023</strong> AAD GOUDAPPEL C/O THEISPOT.COM<br />
Local governments<br />
often spend<br />
thousands (if not<br />
millions) of dollars<br />
on research. In<br />
many instances,<br />
cities hire<br />
traditional analysts<br />
from diverse<br />
backgrounds to perform accounting,<br />
budgeting, and financial policy analysis—<br />
and still, they often need to hire consulting<br />
firms to conduct research.<br />
The field of economics teaches a<br />
data-driven approach to problem-solving<br />
that can be lacking in other disciplines.<br />
Examples of municipal governments<br />
with “in-house economists” suggest that<br />
their skills and training enhance a city’s<br />
proficiency in analyzing policy and reduce<br />
its dependence on consulting firms. For<br />
instance, upon hiring an economist, the<br />
City of Columbia, Missouri, performed an<br />
in-house cost-of-service study for their<br />
water utility. Based on this study, they were<br />
able to adopt a water rate increase in the<br />
FY23 budget. In this case, the city not only<br />
reduced its consulting expenses, but the<br />
finance department collaborated with the<br />
Department of Water and Light to develop<br />
an ongoing relationship and the work was<br />
finished promptly. This example highlights<br />
how economists can be especially helpful<br />
to cities that manage utilities, airports,<br />
parking, and other business-like activities.<br />
Economics in governmental<br />
budgeting and fiscal policy analysis<br />
“Economics” and “finance” are often<br />
seen as synonymous; however, they<br />
are not quite the same. While both are<br />
concerned with the distribution and<br />
movement of money and assets, finance<br />
fundamentally refers to the techniques<br />
used to manage money and resources,<br />
whereas economics is the broader study<br />
of decision-making. In the context of local<br />
government, the finance department<br />
serves two key roles: maintaining<br />
balance sheets and budgeting. An<br />
accounting team is vital to performing<br />
the former, but including an economist<br />
can bring academic rigor to the latter<br />
by improving accuracy in the budget<br />
process and expanding the applications<br />
of traditional budgeting functions<br />
throughout the city, resulting in a more<br />
data-driven approach to decision-making.<br />
An economic division can add valuable<br />
input for fact-based decision-making.<br />
Economists have a widely applicable<br />
skill set that makes them valuable<br />
as in-house consultants for policy<br />
analysis and quantitative projects of<br />
any sort. Economists have a competitive<br />
advantage over traditional analysts<br />
when it comes to forecasting revenue. 1<br />
This skill set can be leveraged to help<br />
accountants with tasks such as building<br />
the demographic and retail sales tables<br />
needed for the annual comprehensive<br />
financial report (ACFR). Because<br />
of this, many cities have already<br />
established an economic division or<br />
added duties that are traditionally<br />
performed by an economist.<br />
A vital role of the finance department<br />
is keeping track of the organization’s<br />
finances to meet federal regulations<br />
and credit rating agency targets.<br />
Organizations often need more<br />
than basic accounting expertise to<br />
ensure that they fully understand the<br />
decisions they make. This principle<br />
is doubly important in the context<br />
of public finance, where staff are<br />
entrusted with the financial resources<br />
of their neighbors. Finance officers<br />
have an obligation to make data-driven<br />
decisions, pursue sound objectives,<br />
and operate efficiently. Economists are<br />
trained to perform these tasks and are<br />
equipped with the skill set needed to<br />
execute them.<br />
Lessons learned from privatesector<br />
economists<br />
The private sector has embraced a<br />
research-based approach to decisionmaking.<br />
For instance, the economics<br />
team at Wal-Mart informs the<br />
organization’s staffing, stocking, and<br />
promotional decisions with time-series<br />
forecasting models. 2 Economists at<br />
Google, Uber, Amazon, and other tech<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 41
THE ROLE OF A CITY ECONOMIST<br />
giants use the firms’ vast troves of<br />
data to answer strategic questions<br />
regarding everything from marketing to<br />
budgeting and even anti-trust lawsuits.<br />
Their economists operate as one of the<br />
critical components for enterprise-level<br />
planning and management. They also<br />
act as a medium through which many<br />
departments work together to meet their<br />
organization’s strategic goals.<br />
In some cases, the public sector is less<br />
likely to adopt quantitative methods<br />
like those discussed in this article, but<br />
some private-sector approaches can<br />
be useful to local government. Robust<br />
forecasting and analysis, for example,<br />
are essential to a city’s financial health,<br />
and greater collaboration among city<br />
departments and the finance office can<br />
improve financial management, even if<br />
it works well already.<br />
Balancing the priorities of<br />
departments, agencies, and enterprises,<br />
along with the values of residence<br />
and other constituencies, like local<br />
business interests, can be challenging.<br />
A dedicated economic division or a staff<br />
economist can help introduce better<br />
empirical tools that can be used for<br />
informed decision-making and help<br />
effectively employ and integrate these<br />
ideas across the entire government.<br />
While economists typically shy away<br />
from direct policymaking, they readily<br />
provide input and prepare useful<br />
predictions and what-if scenarios. City<br />
managers or the mayor can work with an<br />
economist to evaluate their priorities,<br />
justify their decisions, and implement<br />
policies.<br />
An example of use tax, water rate<br />
increase, and adult-use marijuana<br />
sales tax<br />
Instead of just defining what use tax is,<br />
an economist, in collaboration with the<br />
finance director at the City of Columbia,<br />
conducted an in-depth forecasting of the<br />
additional use tax revenue and specified<br />
how that would be used in public safety<br />
and infrastructure. Unlike in 2018,<br />
in 2022, the citizens embraced the<br />
detailed information and voted “yes”<br />
to a use tax. 3 (See Exhibit 1.) Since it<br />
was passed the city’s sales tax revenue<br />
is anticipated to increase annually by<br />
$5 million.<br />
Columbia’s economist collaborated<br />
closely with the city’s Department of<br />
Water and Light to develop a water utility<br />
revenue-expenditure forecasting model,<br />
which was extensively used to analyze<br />
several alternative rate structures.<br />
During the process, the economist<br />
regularly consulted with the city council<br />
to ensure that the rate structure was<br />
congruent with the diverse needs of<br />
the populace. The council adopted the<br />
EXHIBIT 1 | VOTERS APPROVED A CITY OF COLUMBIA, MISSOURI, USE TAX<br />
rate change with the FY23 budget, and the<br />
subsequent revenue is expected to increase<br />
by $1 million annually. 4<br />
When the State of Missouri legalized<br />
adult-use marijuana in 2022, the City<br />
of Columbia reached out to the City of<br />
Boulder, Colorado, to learn from their<br />
experience in 2014. The economic analyst<br />
estimated that Columbia might collect<br />
an additional $400,000 to $1 million in<br />
revenue annually in the form of a three<br />
percent selective sales tax on recreational<br />
marijuana. The estimate was subsequently<br />
used to design a spending agenda for the<br />
new revenue, which was later approved by<br />
the voters. 5<br />
The broader role of a city economist<br />
Simple forecasting methods and budget<br />
analysis are sufficient for smaller<br />
municipalities, but growing cities<br />
should treat the data available to them<br />
with the same reverence as private<br />
organizations. Larger populations bring<br />
higher revenue and expenditures, more<br />
extensive administration, and more<br />
sophisticated projects and services. All<br />
of this requires greater accountability to<br />
these constituencies, which often means<br />
more frequent budget and policy reports<br />
that go beyond the normal subject matter to<br />
include analyses of the city’s social<br />
and economic trends.<br />
In larger cities, such as Chicago, Illinois, 6<br />
the Office of Budget and Management<br />
serves as a central hub for the data from<br />
departments, enterprises, and agencies<br />
that comprise local administration. No one<br />
step can be taken to immediately improve<br />
the depth and breadth of a city’s analysis;<br />
this sort of evolution takes time and effort.<br />
One step that can be taken, however,<br />
is adding staff who are responsible for<br />
pursuing this change. An economist<br />
can develop interdepartmental ties and<br />
enhance the capabilities of the budget<br />
office beyond just producing a budget.<br />
Consider an unpopular policy change<br />
such as a utility rate hike or a tax<br />
increase. Both will almost certainly be<br />
met with some resistance—which is not<br />
unwarranted. People may ask several<br />
reasonable questions, including why is<br />
this necessary, how will it affect us, what<br />
will this achieve, is it fair, and how do<br />
we budget for this? Traditionally, local<br />
governments would spend significant<br />
42
time and money hiring consultants to<br />
answer these questions.<br />
A dedicated economist can apply<br />
their skillset to present this data<br />
intuitively and craft a coherent story<br />
from it that accurately reflects reality.<br />
In pursuing the strategic goal of greater<br />
transparency, the economist at the<br />
City of Columbia created a dashboard to<br />
represent the city’s monthly sales tax<br />
revenue. 7 An economist can provide<br />
forecasting and what-if scenario<br />
analyses to make more confident<br />
assertions about the future and manage<br />
expectations in a scientific manner.<br />
Questions that are financial in nature<br />
can go unanswered because of a lack<br />
of in-house expertise. For example:<br />
what happens if the airport moves from<br />
free parking to a paid system? How<br />
would a new parking pricing scheme<br />
affect congestion downtown? What<br />
are the most effective options to offset<br />
financial loss due to a decline in tax<br />
revenue collection? What are the total<br />
costs and benefits of expanding public<br />
health services? How do socioeconomic<br />
factors vary across the city, and does<br />
the chosen funding allocation reflect<br />
the corresponding priorities?<br />
The wide range of topics for which<br />
a government might use economic<br />
consultation means that having an<br />
in-house economist can produce faster<br />
and less expensive recommendations.<br />
Municipalities have extensive<br />
inventories of data, and connecting<br />
these data sources can push the<br />
boundaries of what types of questions<br />
can be answered. Having an existing<br />
relationship with an expert on empirical<br />
analysis can help governments channel<br />
good ideas into innovative applications.<br />
Another, less obvious benefit is that city<br />
economists can act as a bridge between<br />
departments. Establishing a permanent<br />
economic consultant with a widely<br />
applicable skillset opens the door to new<br />
The above photo is of the downtown parking structure operated by the City of Columbia, Missouri.<br />
There is always potential to increase parking revenue by implementing a variable rate structure.<br />
A city economist can perform the analysis required to implement such rate structures.<br />
relationships, greater transparency, and<br />
new projects among departments.<br />
This collaborative aspect goes beyond<br />
city limits. A wider network of dedicated<br />
economic analysts can facilitate<br />
inter-city collaboration and help local<br />
governments adapt more effectively in<br />
a rapidly evolving world. For instance,<br />
the data sharing between Columbia and<br />
Boulder produced a sound and useful<br />
estimate for Columbia’s future marijuana<br />
tax revenue. Be it an innovative<br />
methodology, a best practice, or simply<br />
sharing a government’s experience<br />
and data, collaboration between<br />
governments is beneficial and a natural<br />
extension of an economist skillset.<br />
Size matters<br />
Smaller governments often face fewer<br />
policy-related decisions than larger<br />
organizations, so the impact of an inhouse<br />
economist is likely diminished in<br />
smaller municipalities. Based on the<br />
preliminary experience observed, the<br />
impact of an in-house economist is most<br />
valuable in fast growing communities<br />
and/or those with populations greater<br />
than 100,000. As cities grow, the need<br />
to expand the depth and breadth of<br />
financial reporting and policy analysis<br />
will grow hand-in-hand. Citizens,<br />
businesses, and city administrations<br />
can benefit from greater transparency,<br />
insightful analysis, and decisionmaking<br />
that is rooted in an objective<br />
analysis that methodically ties a city’s<br />
policies to its strategic goals.<br />
Deepayan Debnath, who has a Ph.D. in<br />
Agricultural Economics, is an economist<br />
for the City of Columbia, Missouri.<br />
Matthew Lue is finance director for<br />
the City of Columbia. Alex Tabb is an<br />
economic analyst for the City of Columbia.<br />
Mark Mack is a senior manager in GFOA’s<br />
Research and Consulting Center.<br />
1<br />
Economist at the City of Columbia uses time series econometrics ARIMA model to forecast monthly sales tax. (app.powerbigov.us/<br />
view?r=eyJrIjoiZGIyODk2ZWUtODQzNS00YTVlLTkxYzctNzA1ZDUxYmMzMDdhIiwidCI6ImM5MzMwZTA2LTY4YTAtNDE3NC04NviGE5LTI3MWIwZDViODgxMiJ9)<br />
2<br />
Data + AI Summit 2022 North America/Virtual sessions on YouTube are available at databricks.com/session_na21/demand-forecasting-platform-at-scale-that-drives-operational-efficiency-reduceswaste-at-walmart.<br />
3<br />
The text of Prop One is available at como.gov/wp-content/uploads/2021/12/Ordinance-6.pdf.<br />
4<br />
The City of Columbia’s adopted FY<strong>2023</strong> budget is available at como.gov/wp-content/uploads/2022/10/FY-23-Adopted-Budget-FINAL-DRAFT-9-28-22.pdf.<br />
5<br />
Learn more about the City of Columbia’s Prop 1 marijuana tax at como.gov/wp-content/uploads/<strong>2023</strong>/02/Marijuana-Tax-Report.pdf.<br />
6<br />
See the City of Chicago’s data portal at https://data.cityofchicago.org/.<br />
7<br />
See a government data portal at app.powerbigov.us/<br />
view?r=eyJrIjoiZGIyODk2ZWUtODQzNS00YTVlLTkxYzctNzA1ZDUxYmMzMDdhIiwidCI6ImM5MzMwZTA2LTY4YTAtNDE3NC04NGE5LTI3MWIwZDViODgxMiJ9.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 43
44
FISCAL MAPPING<br />
Map the Way to<br />
Smarter Funding<br />
BY AMELIA VAUGHN AND ED HARRINGTON<br />
©<strong>2023</strong> MICHAEL AUSTIN C/O THEISPOT.COM<br />
As a government finance<br />
official, have you ever<br />
been asked, “How much do<br />
we spend on children and<br />
youth?” This is a question<br />
that advocates—and<br />
lawmakers—are pushing<br />
to answer, but they usually<br />
can’t answer it by themselves. Children’s<br />
Funding Project Chief Executive Officer<br />
Elizabeth Gaines was able to address<br />
this concern early in her career, during<br />
the time when she was fighting to secure<br />
Tobacco Master Settlement Agreement<br />
dollars for young people in her home<br />
state of Missouri. After creating a fiscal<br />
map—an analysis of all public funding<br />
currently available for children and<br />
youth—she convinced lawmakers to<br />
invest a dedicated $20 million to youth<br />
development programs.<br />
Even though government budget<br />
documents are public, it can be<br />
challenging to find and analyze the<br />
details and synthesize all the fiscal<br />
data into an accurate and meaningful<br />
summary. Funding streams from<br />
almost all departments of a city or<br />
county’s organizational chart support<br />
children, youth, and families in some<br />
way. Most of our budgeting systems do<br />
not easily lend themselves to answering<br />
complex questions about a government’s<br />
collective investments in a specific area.<br />
Yet, knowing the answer is imperative<br />
for making informed and aligned<br />
budgeting decisions to support better<br />
outcomes within our communities.<br />
This is where fiscal maps can help—<br />
and where your position and expertise<br />
as a government finance officer are<br />
essential. As a knowledgeable financial<br />
leader, you are best equipped to extract<br />
key funding details from the myriad of<br />
complex budget documents and distill<br />
that data into a format that lawmakers,<br />
advocates, and community members<br />
can use and understand.<br />
What is a fiscal map?<br />
A fiscal map is a user-friendly tool that<br />
government officials, advocates, and<br />
community members can use to analyze<br />
public spending. While the fiscal maps<br />
we do focus on spending for children,<br />
finance officers can use fiscal maps<br />
to scour budgets for spending on any<br />
population or service area. At its core,<br />
a fiscal map shows the characteristics<br />
and intended purposes of funding<br />
streams, including the specific types<br />
of services supported or age ranges and<br />
populations eligible to receive funding.<br />
A fiscal map looks at the funding<br />
landscape at a certain point in time and<br />
answers a fundamental question: who<br />
(level of government/specific agency)<br />
invests how much (appropriated/<br />
obligated amount of money) and in<br />
what (specific age groups/types of<br />
programs and services)? You can think<br />
of these maps as another opportunity<br />
to engage in GFOA’s Rethinking<br />
Budgeting Initiative by offering new<br />
ways to help communities improve<br />
their budget information.<br />
A fiscal map can make your work<br />
as a finance officer more meaningful<br />
and effective by providing clear,<br />
readily available answers to common<br />
questions like these:<br />
• How much of our total budget<br />
supports children and youth?<br />
• How does our community fund a<br />
specific service, like child care?<br />
• Do we spend more money on positive<br />
youth development or deeper<br />
interventions after problems occur?<br />
• What federal grants are we<br />
accessing—and which ones are we<br />
not accessing, but should? (For<br />
additional information about federal<br />
funding in fiscal maps, check out the<br />
sidebar, “Federal Funding Streams<br />
for Children and Youth Services.”)<br />
Most importantly, a fiscal map<br />
positions you—the primary expert<br />
on your locality’s budget—to help<br />
policymakers with their decisions to<br />
invest more in our youngest generation.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 45
FISCAL MAPPING<br />
EXHIBIT 1 | POUGHKEEPSIE CHILDREN’S CABINET FISCAL MAP FOR FY19<br />
A sample fiscal map dashboard<br />
Source: Poughkeepsie Children’s Cabinet, Poughkeepsie Children’s Cabinet Fiscal Map-FY19<br />
Understanding the fiscal<br />
mapping process<br />
Advocates—including government<br />
officials and local leaders—come to us at<br />
Children’s Funding Project for coaching<br />
or to produce a fiscal map when they<br />
are interested in improving how their<br />
communities, cities, counties, towns,<br />
and states fund services for infants,<br />
toddlers, children, and youth. The fiscal<br />
map can provide a comprehensive view<br />
of all funding available for children and<br />
youth over multiple years to show how<br />
investments have changed over time.<br />
Alternatively, the fiscal map can offer a<br />
quick snapshot of the funding available<br />
for a specific service area, like early<br />
childhood care and education. The latter<br />
can be useful as precursory research<br />
needed to mount a campaign for new<br />
funding or to help lawmakers quickly<br />
determine how to allocate new funding.<br />
To kick off the fiscal mapping process,<br />
a group of core decision makers convene<br />
and determine the scope of the fiscal<br />
map, based on the community’s goals.<br />
This core group usually includes leaders<br />
from local government, children’s<br />
cabinets, and other community-based<br />
organizations. Then, we determine the<br />
best avenue for collecting data based<br />
on the leadership group’s relationships<br />
with budget holders. When finance<br />
officers are part of the fiscal map<br />
initiative and core decision-making<br />
group from the start, they offer a fast<br />
track to data collection, which often is<br />
the most challenging part of preparing<br />
an accurate and complete fiscal map.<br />
(See Exhibit 1.)<br />
The fiscal map translates this budget<br />
data into tools (presented as a robust<br />
spreadsheet and/or an interactive<br />
dashboard that help users view and sort<br />
the funding data) that a community<br />
can use to meet its goals for funding<br />
children and youth services. The data<br />
categorizes each funding stream by two<br />
types of variables:<br />
1. Administrative characteristics,<br />
such as the administering agency,<br />
typical local recipient of the funding,<br />
funding cycle, and whether there<br />
are provisions for coordinating with<br />
another funding stream. These<br />
characteristics help a locality<br />
understand the flow of funding<br />
into the community and provide<br />
information on how to better<br />
Federal Funding Streams for<br />
Children and Youth Services<br />
The Federal Funding Streams for Children<br />
and Youth Services database helps<br />
communities find federal funding available<br />
to states, tribal areas, counties, cities,<br />
towns, school districts, and local nonprofit<br />
organizations to support children and youth.<br />
This database, published by Children’s<br />
Funding Project in May <strong>2023</strong>, catalogs the<br />
purposes and key characteristics of more<br />
than 280 federal funding programs—funded<br />
across 12 federal agencies—that support<br />
children and youth from ages 0 to 24 years.<br />
Finance officers can search the database<br />
by a specific funding stream name or<br />
by descriptive characteristics such as<br />
the age range the grant serves, specific<br />
services or programs the funding<br />
supports, and the level of intervention<br />
offered. Finance officers can use the<br />
database to support their fiscal mapping<br />
efforts in a variety of ways:<br />
• Track federal investments in categories<br />
over time.<br />
• Learn about funding streams that are<br />
available for specific service types or<br />
age groups.<br />
• Identify the federal funding streams<br />
a community currently receives to<br />
include in a fiscal map.<br />
• Identify new federal funding sources<br />
the community could access to support<br />
its goals.<br />
In the fall, we will release an updated<br />
version of the database that will include<br />
new functionality allowing users to search<br />
for federal funding available in each state.<br />
Use the Database<br />
Find federal funding that supports programs<br />
or services for youth in your community<br />
at childrensfundingproject.org/federalfunding-streams<br />
46
align current funding, including<br />
potentially blending or braiding<br />
funding streams.<br />
EXHIBIT 2 | ADDITIONAL ANALYSIS TO PUT THE FISCAL MAP DATA INTO CONTEXT<br />
2. Descriptive characteristics, such as<br />
the services those funds support,<br />
eligibility criteria for recipients of the<br />
funds, or desired outcomes. These<br />
characteristics provide a childcentered<br />
view of the budget. This view<br />
illuminates where the potential needs<br />
for additional funding exist and can<br />
be used for advocacy for a specific<br />
service area or age group.<br />
As the fiscal map report is developed,<br />
the project’s core decision-makers can<br />
include additional pieces of analysis<br />
that put the fiscal map data into context<br />
with the community’s population,<br />
demographics, and other identifying<br />
characteristics. (See Exhibit 2.) These<br />
additional components could include:<br />
• A per capita estimate of the amount<br />
invested per child, potentially even<br />
across age groups;<br />
• Percent of the total budget invested in<br />
children and youth compared to the<br />
percent of children and youth in the<br />
community’s population;<br />
• Or a view of how federal relief funding<br />
or other historic investments in<br />
the community affect the funding<br />
landscape at a given point in time.<br />
Depending on the scope, starting a fiscal<br />
map takes from four months (for a quick<br />
map) to 12 months (for a comprehensive<br />
map). Even though the process is time<br />
intensive, once you have a map, it is<br />
easier to update it annually. Mainly, this<br />
requires updating the dollar amounts<br />
and adding any new funding streams—<br />
tasks that finance officers can support<br />
to make data collection more efficient<br />
and accurate.<br />
As a finance officer, your involvement<br />
in creating the initial fiscal map will<br />
save time in the long term, especially<br />
if you must regularly provide analyses<br />
on investments for grant reporting<br />
requirements or to support the work<br />
of a children’s cabinet and/or other<br />
local groups. Additionally, a fiscal map<br />
makes content from complex budget<br />
documents more accessible to nonexperts.<br />
Above all, it provides a bridge to<br />
inform policymakers, public officials,<br />
and the community about the work you<br />
Additional information such as a per capita estimate of the amount invested per child puts a<br />
fiscal map into context with a community’s population.<br />
Source: New Orleans Mayor’s Office of Youth and Families, Youth Spend 2022: New Orleans Investments in Youth and Children<br />
do and offers an important starting<br />
point for deeper conversations about<br />
how a community’s policy goals and<br />
needs show up in its budget.<br />
Building a movement of<br />
transparent, accessible<br />
budget data<br />
In 2022 alone, Children’s Funding<br />
Project worked with 31 communities<br />
and states interested in supporting<br />
additional services for children and<br />
youth. When communities and states do<br />
not have sufficient funding to support<br />
children and youth, they can’t improve<br />
the systems and supports that children<br />
and youth need to thrive. Fiscal<br />
maps represent the first step toward<br />
improving outcomes for kids by making<br />
budget data more accessible and<br />
transparent. Once a place knows what it<br />
currently invests, then it can determine<br />
how much money it needs to meet its<br />
goals, strategize how to better align<br />
existing resources, and raise additional<br />
funding if necessary. (See Exhibit 3.)<br />
Some of our community partners—<br />
such as New Orleans, Louisiana, and<br />
Denver, Colorado—have a history of<br />
fiscal mapping with a small team.<br />
Now they are considered pioneers in<br />
the child and youth field for having,<br />
updating, and sharing this budget data<br />
for public use. For instance, Children’s<br />
Funding Project created the first<br />
edition of the fiscal map for the New<br />
Orleans Mayor’s Office of Youth and<br />
Families in 2020. During the entire<br />
project, a deputy director of the office<br />
collaborated with us to learn the fiscal<br />
mapping process and connect us to the<br />
appropriate budget holders for data. The<br />
deputy director knew the key people<br />
to involve and the general funding<br />
streams to include, while we knew how<br />
to categorize and analyze the data.<br />
The mayor endorsed the release of the<br />
fiscal map and promised to make it a<br />
part of the city’s annual budget process.<br />
Since then, the office has released two<br />
additional iterations of the fiscal map<br />
that the New Orleans team updated<br />
on its own. Additionally, the fiscal<br />
map is publicly available, and other<br />
organizations and community members<br />
have used it to advocate for additional<br />
funding to support the city’s youth<br />
master plan efforts. The city’s annual<br />
investments in children and youth have<br />
increased from $40 million in 2020 to<br />
$53 million in 2022.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 47
FISCAL MAPPING<br />
“The fiscal map helped us understand<br />
where the public dollar is being invested<br />
for young people and what percentage<br />
of that money is in positive youth<br />
development versus punitive lanes,”<br />
said Karen Evans, executive director<br />
of the New Orleans Children and Youth<br />
Planning Board, which collaborated<br />
with the city’s Office of Youth and<br />
Families on the fiscal map. “The fiscal<br />
map journey helped us answer some<br />
questions and helped us think about<br />
where our resources are going, and<br />
how we then take that knowledge and<br />
advocate for additional funding.”<br />
To help other communities realize<br />
the benefits of fiscal mapping that New<br />
Orleans and Denver experienced, we<br />
began working with an initial cohort<br />
on child and youth fiscal mapping in<br />
2022 to develop a publicly accessible<br />
and unified national database of<br />
public spending for kids by state. The<br />
first year of the cohort included 15<br />
state partners that worked with us to<br />
standardize the process for tracking and<br />
documenting state-level spending on<br />
services and programs for children and<br />
youth. Each state partner team created<br />
a comprehensive fiscal map with us<br />
that includes federal and state funding<br />
for individuals ages 0-24 years for<br />
fiscal years 2019-2021. The partners<br />
committed to make the final fiscal<br />
maps publicly available, to use the data<br />
for strategic public financing, and to<br />
continue the process of fiscal mapping<br />
past the cohort’s pilot year.<br />
Another goal of the state-level cohort<br />
is to inspire a similar movement and<br />
database of unified local fiscal map data<br />
to make it easier for local leaders to see<br />
how their peers in other jurisdictions<br />
fund their goals for kids. Additionally,<br />
an existing state map provides a list<br />
of all the potential funding streams<br />
available in the state. Local leaders can<br />
use the state fiscal map to determine<br />
how much of those funds land in<br />
their local area. Then leaders and<br />
advocates can add additional, locally<br />
sourced funds to the map to create a<br />
comprehensive picture of funding in a<br />
community. This is another area where<br />
finance officers are essential and can<br />
help their local fiscal map team follow<br />
the flow of funding to the local level.<br />
It’s important to keep in mind that<br />
while a single fiscal map report is<br />
compelling, a community needs to pair<br />
its fiscal map with additional public<br />
financing strategies to realize true<br />
impact. Fiscal mapping shows a state<br />
or community what it currently invests,<br />
but it also begs a big question: what<br />
next? We are working with past and<br />
current partners to leverage their fiscal<br />
map data in several ways:<br />
Advocates from Whatcom County, Washington, used a fiscal map to identify funding available for early childhood care<br />
and educational support in the county. Building on information from the fiscal map, the group launched a successful<br />
campaign that resulted in an estimated $10 million in annual funding for high-quality, affordable childcare, mental<br />
and behavioral health services and housing programs for vulnerable infants, toddlers, and preschool-age children.<br />
• Aligning current funding streams to<br />
make better use of existing funding<br />
to support children and youth.<br />
For example, Oakland Thrives, in<br />
California, is aligning its fiscal map<br />
data with a ten-year plan to improve<br />
the health and well-being of Oakland’s<br />
children and families, using it to<br />
prioritize areas of funding and<br />
strategies for reauthorizing several<br />
local voter-approved children’s funds.<br />
• Identifying potentially untapped<br />
grants or funding opportunities to<br />
pursue by comparing their fiscal<br />
maps to our recently released Federal<br />
Funding Streams for Children and Youth<br />
Services database.<br />
• Partnering with children’s cabinets<br />
and finance officers to automate<br />
future data collection through<br />
data sharing agreements or budget<br />
software. The Minnesota Children’s<br />
Cabinet has been particularly<br />
successful in partnering with the<br />
state’s Office of Management and<br />
Budget to collect fiscal mapping<br />
data through budget software.<br />
• Promoting legislation, executive<br />
orders, and/or data sharing<br />
agreements to codify the practice<br />
of fiscal mapping, like New Orleans<br />
has done.<br />
• Determining the funding needed to<br />
meet a specific goal and the funding<br />
methods available to generate<br />
additional revenue. For instance,<br />
advocates from Whatcom County,<br />
Washington, worked with us on<br />
a fiscal map to identify funding<br />
available for early childhood care,<br />
education, and support in the county.<br />
Building on the information from<br />
the fiscal map, the local group then<br />
launched a campaign to create a<br />
dedicated source of funding for<br />
children in the county. The effort<br />
succeeded when Whatcom voters<br />
approved the Healthy Children’s Fund<br />
in November 2022. The fund will raise<br />
an estimated $10 million annually<br />
to fund high-quality, affordable<br />
childcare, mental and behavioral<br />
health services, and housing<br />
programs for vulnerable infants,<br />
toddlers, and preschool-age children.<br />
48
EXHIBIT 3 | SCOPE OF CHILDREN’S FUNDING PROJECT FISCAL MAPS<br />
Source: Children's Funding Project<br />
• Transparency. GFOA members<br />
can help advocate for more budget<br />
transparency because it is a<br />
good thing. The intention is not<br />
to take money from one program<br />
and give it to another, but to<br />
support evidence-based decisionmaking<br />
and civic engagement.<br />
• Time. The time required will vary<br />
depending on the goals and scope<br />
of the fiscal map. The first year is<br />
always the most time intensive. Once<br />
you set the people and processes to<br />
update annually, though, you get the<br />
benefits of expediency and data over<br />
time. It also is worth consulting your<br />
champions and project managers to<br />
see if they have tried to complete a<br />
fiscal map in the past. Lots of places<br />
have, but the data often ends up<br />
incomplete or is not kept up to date.<br />
How to get involved in<br />
fiscal mapping<br />
Working with government staff across the<br />
country, we know that many offices are<br />
understaffed and overburdened. You may<br />
even be reading this and thinking that a<br />
fiscal map sounds great in theory, but it<br />
feels overwhelming. But with the right<br />
partnerships, you can create a useful and<br />
meaningful fiscal map even with limited<br />
resources. In fact, a local children’s cabinet<br />
or advocacy group may have already<br />
approached you for fiscal map data. These<br />
partners are well suited to manage the<br />
fiscal map project while you provide direct<br />
access to financial information. This is an<br />
opportunity to serve your constituents—<br />
it’s the reason you were elected or<br />
appointed—and help people understand<br />
how their governments spend their money<br />
to provide services they care about.<br />
Whether you lead the process or<br />
simply contribute valuable data, your<br />
participation ensures the fiscal map is<br />
accurate, complete, and useful. You will<br />
also need help and the right conditions.<br />
Below is a list of who and what you<br />
need to support a successful fiscal map<br />
for your state or local government:<br />
• Champion. A champion is a government<br />
leader or appointed coordinating body<br />
that can make a fiscal map a unified<br />
priority. Do you have a children’s<br />
cabinet, or has your governor or<br />
mayor declared children and youth<br />
issues a priority? If so, ask that<br />
leader to advocate for the fiscal map.<br />
You and your fellow GFOA members<br />
also can champion the project and<br />
promote its value and importance.<br />
• Project Manager. The project<br />
manager sets the goals and scope<br />
of the fiscal map and compiles,<br />
analyzes, and disseminates the<br />
final data. Your office of families<br />
and youth (if your community has<br />
one) and/or a strong intermediary<br />
or advocacy organization can<br />
serve this purpose. GFOA members<br />
can advise the project manager<br />
throughout the process by<br />
providing data and reviewing final<br />
deliverables. Your assistance with<br />
collecting data is critical—without<br />
data, there is no fiscal map!<br />
• Readiness. If the fiscal map is going<br />
to succeed—and function as more<br />
than a static report—your community<br />
needs a desire to use the data. You,<br />
along with your champions and<br />
project managers, must determine<br />
if your local leaders and advocates<br />
are prepared to use the fiscal map<br />
data to shape future budget decisions<br />
and for planning and advocacy.<br />
Because a fiscal map requires data<br />
and input from all child- and youthserving<br />
agencies, it can unify disparate<br />
government departments under the<br />
common vision of improving services<br />
for your community. Most importantly,<br />
you don’t have to tackle this effort alone.<br />
The Children’s Funding Project is here<br />
to advise and guide you through the<br />
process. If you’re ready to reach a new<br />
level of leadership and make your budget<br />
documents more accessible, reach out<br />
to us at childrensfundingproject.org.<br />
We can discuss what initiatives may<br />
be underway in your area, explore<br />
the potential for starting a new fiscal<br />
map, and connect you with tools and<br />
resources to support you along the way.<br />
Amelia Vaughn is co-director of research<br />
capacity at Children’s Funding Project.<br />
GFOA member Ed Harrington is former<br />
controller for the City and County of<br />
San Francisco and board member for<br />
Children’s Funding Project.<br />
Children’s Funding Project is a nonprofit<br />
social impact organization that helps<br />
communities and states expand<br />
equitable opportunities for children<br />
and youth through strategic public<br />
financing. For more information, go to<br />
childrensfundingproject.org.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 49
50
CRUSHING ASSUMPTIONS<br />
Crushing Assumptions<br />
in Two Simple Steps<br />
BY SUSAN ROBERTSON<br />
©<strong>2023</strong> ANNA GODEASSI C/O THEISPOT.COM<br />
Can past experience stand in<br />
the way of new ideas? How to<br />
break the curse of knowledge<br />
and unlock visionary thinking.<br />
When we think about<br />
famous visionary<br />
thinkers, we<br />
subconsciously assume<br />
they have some magic<br />
characteristic that the<br />
rest of us don’t have or<br />
cannot achieve. But<br />
in reality the only magic they have is an<br />
intuitive understanding of how to avoid<br />
some very common creative thinking<br />
blocks. One of those blocks is the curse<br />
of knowledge (a cognitive bias) or mental<br />
shortcut that all humans share.<br />
Stuck inside the box: the curse<br />
of knowledge<br />
You’ve almost certainly heard the term<br />
“thinking outside the box.” And you’ve<br />
probably (at some point in your career)<br />
been asked to think outside the box. But<br />
without any understanding of why the<br />
box is there or how it was created, it’s<br />
hard to know how to break out of it. The<br />
reality is that we each create our own<br />
“box” through this curse of knowledge.<br />
To understand this concept, imagine<br />
for a moment that your task is to think<br />
of new ideas for salad dressing. Try to<br />
come up with a few in your mind right<br />
now—don’t skip ahead!<br />
Chances are, the ideas that came to<br />
your mind were incremental variations<br />
of existing flavors or ingredients. You<br />
may have thought of fruit-flavored<br />
dressing or spicy chipotle dressing. Or<br />
perhaps dressing that is flavored like<br />
your favorite cocktail or dessert. All<br />
interesting ideas if you are only looking<br />
for ideas that don’t change the current<br />
nature of salad dressing or the way it’s<br />
currently manufactured, packaged,<br />
sold, or used. The task was to find new<br />
ideas for salad dressing. That challenge<br />
was not limited simply to new flavors,<br />
but your brain likely limited your<br />
thinking to mostly just new flavors.<br />
Here’s why incremental ideas tend<br />
to be the first (and sometimes the only)<br />
kind of ideas to emerge. All humans rely<br />
on past knowledge to subconsciously<br />
try to shortcut problem-solving. We<br />
instantly—and subconsciously—call<br />
on everything we know from the past<br />
to come up with solutions for the new<br />
problem. While this ability to call on<br />
past learning is an incredibly useful<br />
trait in many situations (it’s one of<br />
the reasons we’re at the top of the food<br />
chain), when you’re looking for new<br />
ideas and solutions, it actually becomes<br />
a significant barrier. It limits your<br />
thinking to nothing apart from slight<br />
variations on what already exists.<br />
The minute you saw the words “salad<br />
dressing,” your brain made a bunch of<br />
instantaneous assumptions that you’re<br />
likely not aware of. Those assumptions<br />
were probably things like:<br />
• Salad dressing comes in a bottle.<br />
• It’s liquid.<br />
• It’s stored in the refrigerator.<br />
• It’s used on lettuce.<br />
• Salad is eaten from a bowl or plate.<br />
• Salad is eaten with a fork.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 51
CRUSHING ASSUMPTIONS<br />
The nature of the ideas that arise after crushing<br />
the embedded assumptions is dramatically<br />
different from the ideas that came before.<br />
Using the salad dressing challenge<br />
again, now assume one of the above<br />
“facts” doesn’t have to be true. What<br />
ideas could you come up with then? You<br />
might think of ideas like:<br />
• Salad dressing that you heat in the<br />
microwave (not cold).<br />
• Dressing for fruit or for meat (not used<br />
on lettuce).<br />
• A powder whose full flavor is<br />
activated when it contacts the<br />
moisture of the lettuce (not liquid).<br />
• Salad dressing in the form of a wrap,<br />
so you can eat the salad on the go<br />
(salad isn’t served on a plate).<br />
• Salad dressing in the form of an edible<br />
skewer (salad isn’t eaten with a fork).<br />
As you can see, the nature of the ideas<br />
that arise after crushing the embedded<br />
assumptions is dramatically different<br />
from the ideas that came before. That’s<br />
because your brain is no longer limiting<br />
your creativity with artificial guardrails<br />
that may not actually exist and that you<br />
weren’t even consciously aware of.<br />
Interestingly, the more expertise<br />
you have in an area, the more of<br />
these limiting assumptions you have<br />
subconsciously embedded in your<br />
thinking. So, as an expert in your<br />
field, you likely have many embedded<br />
assumptions that you’re not aware of, but<br />
that are likely impeding your creative<br />
thinking in a significant way.<br />
The cure: Assumption Crushing<br />
Fortunately, there is an antidote to<br />
the curse of knowledge. Assumption<br />
Crushing is a technique that involves<br />
consciously surfacing and challenging<br />
our hidden assumptions.<br />
ASSUMPTION CRUSHING STEP 1:<br />
Bring your subconscious assumptions<br />
to the surface by generating a long list of<br />
statements that start with things like:<br />
• Well, in our business, everyone knows...<br />
• We have to....<br />
• Our product or service is/does/has....<br />
• Well, of course….<br />
• We could never....<br />
Be sure to list some obvious, superficial,<br />
or seemingly trivial “facts,” observations,<br />
processes, and more. Sometimes<br />
breaking the obvious ones can lead to<br />
the most innovative ideas. For example,<br />
the fact that salad dressing is liquid<br />
seems fairly trivial. But breaking<br />
that assumption led to some truly<br />
breakthrough ideas.<br />
ASSUMPTION CRUSHING STEP 2:<br />
Once you’ve come up with a long list, pick<br />
one point that may not have to be true,<br />
and start thinking of new ideas based<br />
on breaking that rule. Then pick another<br />
and do it again and again. You’ll amaze<br />
yourself with the innovative ideas you<br />
come up with.<br />
Remember that the curse of knowledge<br />
is based on experience and expertise.<br />
Many people often assume that the best<br />
way to get new thinking, new ideas,<br />
and new solutions is to bring together<br />
a bunch of experts on the topic. But the<br />
reality is that all those experts will have<br />
a very similar set of subconscious mental<br />
frameworks. (They’ll all have essentially<br />
the same curse of knowledge.) A better<br />
way to generate new ideas is to invite<br />
a few experts, and then several other<br />
people with different experiences,<br />
knowledge, and perspectives. Those<br />
non-experts will help force the experts to<br />
confront and overcome the curse.<br />
The curse of knowledge is a formidable<br />
adversary that exists in our brains all the<br />
time and hinders our visionary potential.<br />
By embracing Assumption Crushing,<br />
we can shatter the chains that confine<br />
our thinking and unlock the path to<br />
visionary breakthroughs.<br />
Susan Robertson is a creative thinking<br />
expert with more than 20 years of<br />
experience speaking and coaching in<br />
Fortune 500 companies.<br />
©<strong>2023</strong> ANNA GODEASSI C/O THEISPOT.COM<br />
52
The Alliance for Excellence in School Budgeeng is<br />
for school districts interested in GFOA's Best<br />
Praccces in School Budgeeng. As part of the<br />
Smarter School Spending iniiaave, the Alliance first<br />
met in 2015 and includes a diverse group of districts<br />
from across the United States. Member districts<br />
range in size from several hundred students to<br />
several hundred thousand students, represennng a<br />
broad range of student performance and other key<br />
demographics as well.<br />
Join the Alliance<br />
in Chicago this fall!<br />
The Alliance for Excellence in School Budgeeng Fall Meeeng,<br />
November 2-3, in Chicago, Illinois, is a workshop-style<br />
conference that features case studies, best praccce examples,<br />
and important networking opportuniies with peer<br />
organizaaons.<br />
Scan for featured topics and event registraaon.
54
AFTER ACTION REVIEWS<br />
Positive Change<br />
in Action<br />
How to Build Trust and Expertise with After Action Reviews<br />
BY JAKE MAZULEWICZ<br />
©<strong>2023</strong> CHRIS GASH C/O THEISPOT.COM<br />
Do you lead your team to<br />
learn primarily from<br />
successes or from<br />
failures?<br />
Many leaders argue<br />
that their teams are<br />
just too busy to spend time discussing<br />
why a successful project went well. They<br />
just wrap up quickly and then dive into<br />
the next project.<br />
So, the unspoken insights and<br />
unwritten lessons learned from that<br />
project rarely get shared or discussed.<br />
Often, they just get forgotten in the frenzy<br />
of working on project after project.<br />
Would you hire an engineer to build<br />
you a bridge if all that engineer ever<br />
studied was how bridges collapse? Would<br />
you hire a recruiter to find you a job if<br />
all that recruiter ever studied was how<br />
people get fired?<br />
The best leaders help their teams learn<br />
regularly from their successes, not just<br />
occasionally from their failures.<br />
But learning from success happens<br />
automatically—doesn’t it?<br />
AFTER ACTION REVIEW<br />
Soldiers perform complex, dynamic,<br />
and often dangerous missions, and they<br />
want to learn as much as they can from<br />
each one. In the 1980s, leaders in the<br />
U.S. Army realized that they needed a<br />
practical way to help soldiers share the<br />
unspoken insights and unwritten lessons<br />
they learned from their missions. They<br />
realized that sharing tribal knowledge<br />
and applying tacit skill were key to<br />
winning wars. And since it was the<br />
Army, they developed a process—a<br />
non-punitive, semi-structured, postjob<br />
team debrief called an after action<br />
review (AAR).<br />
After action reviews have proven so<br />
wildly effective that every branch of<br />
the military now uses them. And for<br />
some units like flight crews and special<br />
operations forces, AARs are almost a<br />
religion. They’ve been called “one of the<br />
most successful organizational learning<br />
methods yet devised.”<br />
The process of leading a basic AAR is<br />
simple. Soon after your team completes<br />
a project, gather them in a private space<br />
for about 30 minutes, and ask these four<br />
questions:<br />
1. What did we set out to do?<br />
2. What did we actually do?<br />
3. How did it turn out the way it did?<br />
4. What will we do differently next time?<br />
WHY USE THESE QUESTIONS?<br />
Have you ever had a discussion<br />
degenerate into a fact-free “war of<br />
opinions?” That’s the fate you’ll suffer<br />
if you start a debrief by asking for<br />
opinions. True, questions three and<br />
four are subjective, and do indeed ask<br />
for opinions. But notice that questions<br />
one and two are much more fact-based.<br />
It may seem silly to ask, “What did we<br />
intend to do in this job?” But different<br />
people have different goals for the same<br />
job. The accountant on your team may<br />
have intended to maximize revenue.<br />
The safety specialist on your team<br />
may have intended to reduce the risk<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 55
AFTER ACTION REVIEWS<br />
The best leaders help their teams learn regularly from<br />
their successes, not just occasionally from their failures.<br />
of injuries. The team leader may have<br />
wanted to finish the job ahead of schedule<br />
and under budget. So always start your<br />
after action reviews by getting facts with<br />
questions one and two before getting<br />
opinions with questions three and four.<br />
“What went well, and what went<br />
badly?” This may seem like a great<br />
question for a debrief. After all, it cuts<br />
straight to the point, right? Here’s the<br />
problem. This question nudges us to<br />
discuss blame, not improvements. And<br />
blame stops learning in its tracks. Look<br />
at the four after action review questions.<br />
There’s no hint of fault, failure, or blame<br />
in any of them. That’s intentional. After<br />
action reviews focus on learning, not<br />
blame. Make sure you keep that focus in<br />
every AAR you lead.<br />
Soldiers are fond of sayings like “no<br />
mission plan ever survives contact<br />
with reality” or “the planning is more<br />
valuable than the plan.” And in reality,<br />
the percentage of complex missions that<br />
go exactly according to plan is nearly<br />
zero percent. Soldiers and other experts<br />
in complex, dynamic systems know that<br />
in any given job, there’s always a gap<br />
between what we plan to do and what we<br />
actually do. Notice how question one asks<br />
about the plan. Some call this “work as<br />
imagined.” Question two asks about the<br />
actual job; some call this “work as done.”<br />
When you lead your after action reviews,<br />
use questions one and two to explore this<br />
critical gap, but not eliminate it.<br />
THREE COMMON MISTAKES<br />
AND HOW TO AVOID THEM<br />
1. Successes versus failures<br />
Some leaders do AARs only for accidents<br />
or errors. If you do that, your team will<br />
quickly associate AARs with failure. And<br />
they’ll give short, vague answers to get<br />
it over with as fast as possible. So, lead<br />
about 80 percent or more of your AARs for<br />
successful projects. That way, your team<br />
will learn to trust the process and value<br />
the results.<br />
2. Now versus later<br />
Unspoken insights and lessons learned<br />
are the most valuable things a team can<br />
discuss in an after action review. Those<br />
unspoken ideas have a half-life of hours<br />
or less. So, if you wait a day or more to<br />
lead your AAR, much of the priceless,<br />
unspoken wisdom will already have<br />
been lost, perhaps forever. So, lead the<br />
AAR as soon as the project wraps.<br />
3. Leader versus facilitator<br />
Most leaders like to answer questions,<br />
and that’s usually a good thing—but not<br />
in an after action review. If you give in to<br />
the temptation to answer the questions,<br />
you’ll shut your team down until the<br />
only person talking is you. So, in an<br />
after action review, remember that the<br />
leader is the person who talks the least.<br />
Choose your AAR leaders accordingly.<br />
If you want a low-cost, low-risk way<br />
to build trust and expertise on your<br />
team, you will likely never find a more<br />
practical method than leading after<br />
action reviews.<br />
Jake Mazulewicz, Ph.D. previously<br />
served as a firefighter, an EMT, and a<br />
military paratrooper, and is now the<br />
director at JMA, LLC.<br />
©<strong>2023</strong> CHRIS GASH C/O THEISPOT.COM<br />
56
Are you up for a<br />
challenge?<br />
GFOA is seeking outstanding examples<br />
of effeccve communicaaon of financial<br />
informaaon, following the principles<br />
outlined in our report Fiscal Fluency<br />
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Deadline to enter: January 15, 2024<br />
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OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 57
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In Practice<br />
FINANCE | ACCOUNTING | PERSPECTIVES | INTERVIEWS<br />
FINANCE<br />
CITY OF ISSAQUAH, WASHINGTON<br />
Contribution Versus Collaboration<br />
BY KATIE LUDWIG<br />
The City of Issaquah,<br />
Washington, has a mission:<br />
to “enhance lives through<br />
public service.” Its vision is to<br />
“be a progressive, customerfocused,<br />
sustainable organization that<br />
values its employees and is committed<br />
to innovative solutions.” City staff<br />
support the mission and vision by<br />
living out the city’s “SALMON values”:<br />
S ustain trust. We make trust the<br />
foundation of our relationships and<br />
cultivate it daily.<br />
A ct with integrity. We hold ourselves<br />
accountable to the highest standards<br />
in all we say and do. Our actions are<br />
consistently respectful, direct, honest,<br />
and transparent.<br />
L ead with respect. As selfless leaders,<br />
we take the initiative to engage others<br />
and create the momentum to accomplish<br />
the city’s vision for the interest of all<br />
stakeholders.<br />
M aster communication. We sustain<br />
an effective, compassionate, and<br />
approachable team environment<br />
through our actions and words, while<br />
understanding that there are different<br />
communication styles.<br />
O wn your actions. We are accountable<br />
for our actions while actively supporting<br />
each other to create an atmosphere<br />
that leverages our strengths as well as<br />
encouraging employee growth.<br />
‘N gaged. We are enthusiastic, focused,<br />
dedicated, and productive employees<br />
who are proactive in our service to the<br />
community.<br />
While these values don’t explicitly<br />
mention collaboration, Dale Markey-<br />
Crimp and Susie Monsell in the city’s<br />
Finance Department believe it is<br />
essential to their work.<br />
Markey-Crimp, Issaquah’s citywide<br />
performance measurement and<br />
management program analyst, has<br />
worked for the city for two years.<br />
“My role has shifted a lot since I’ve been<br />
with the City of Issaquah,” she said.<br />
“I came in as a management analyst for<br />
performance and budget, and worked very<br />
closely with Susie on the budget the first<br />
summer and fall that I was on staff. My<br />
role has shifted over time to really focus<br />
more on performance with a lens on how<br />
performance and data-driven storytelling<br />
supports departments in making the case<br />
for their budgets. Probably the bulk of my<br />
role is around performance measurement<br />
and management across all departments,<br />
data analysis and data visualization,<br />
program evaluation and improvement,<br />
and then data-driven storytelling.”<br />
Markey-Crimp explained that she<br />
works closely with both the Finance<br />
Department and the Executive Office.<br />
“I sit within Finance and meet most<br />
regularly with our finance director,<br />
although I would say a lot of my work<br />
is ‘side quests’, and most of those side<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 59
IN PRACTICE | FINANCE<br />
quests come from the Executive Office.<br />
In addition to performance, I do a lot<br />
of project management, and even with<br />
performance, a lot of those projects come<br />
from the Executive Office, even though<br />
they’re often used within the context of<br />
our budget.”<br />
Monsell is the city’s budget manager.<br />
Her role is focused on developing,<br />
maintaining, and monitoring the budget<br />
and assisting departments on budgetrelated<br />
matters, including budget<br />
amendments. She started with the city in<br />
April 2019 as budget analyst. “I’ve been<br />
in and around the city’s budget for four<br />
and a half years, and it has changed a lot.<br />
One of the biggest changes is that when<br />
I started, we had an annual budget, and<br />
we now have a biennial budget.” Monsell<br />
also coordinates the development of the<br />
city’s capital improvement plan, which<br />
alternates every other year with the<br />
development of the operating budget.<br />
WHY IS COLLABORATION<br />
IMPORTANT?<br />
Monsell sees her role as supporting the<br />
departments in achieving their goals.<br />
“More often than not, my role is doing<br />
something on behalf of someone else. My<br />
role is to build the budget, maintain it, get<br />
it through city council, and more, but it’s<br />
not the Finance Department’s budget. It’s<br />
not the budget manager’s budget. It’s the<br />
entire city’s budget. So much of what the<br />
city wants to be able to do—whether it’s<br />
continuing to provide the same services<br />
or providing a new program—becomes<br />
reality through the budget process, so<br />
I think of my role as a supporter of these<br />
other functions,” she said.<br />
Markey-Crimp sees her role in a<br />
similar light. “My work at its essence<br />
is understanding and sharing how the<br />
city is performing on the promises it’s<br />
made to the community. I can’t do that<br />
without working with departments<br />
because it is their work that we’ve made<br />
promises to the community about. For<br />
me, collaboration often means really<br />
understanding the work of all the people<br />
around me, so that I can help them tell<br />
their story—which hopefully leads back<br />
to more investment in their work. I can’t<br />
do my job without gaining the trust<br />
of my coworkers and getting them to<br />
want to come to the table with me,” she<br />
explained.<br />
Human connection,<br />
trust-building, and<br />
empathy-building need<br />
to be established before<br />
collaboration can occur.”<br />
DALE MARKEY-CRIMP<br />
CITY OF ISSAQUAH<br />
PERFORMANCE MEASUREMENT<br />
AND MANAGEMENT ANALYST<br />
“I am someone with significant control<br />
issues,” Monsell said. “I’m a details<br />
person, and being in Budget, I live and die<br />
by how accurate or detailed something<br />
is, and I want to be able to explain it down<br />
to the dollar. It’s often a challenge for me<br />
when working with other people on the<br />
budget or the capital improvement plan,<br />
that I find myself thinking, ‘Well, I know<br />
how I can do this better. I don’t have to<br />
deal with this other person. I can do this<br />
faster. I can do it better.’ But the problem<br />
is that once the budget is adopted, that’s<br />
the departments’ budget. They’re the ones<br />
who have to own the actual work. They<br />
have to make sure that they’re spending<br />
the dollars. They need to be aware of<br />
what’s in it, and they need to know what<br />
went into those decisions.”<br />
This realization has prompted Monsell<br />
to focus on developing a budget process in<br />
which department staff play a more active<br />
role. “Yes, I could probably put in their data<br />
faster, I could probably process it faster. I<br />
could make it look exactly the way I wanted<br />
it to look—but then I’m the only one who<br />
knows how it works,” Monsell explained.<br />
WHAT COLLABORATION IS<br />
AND WHAT IT ISN’T<br />
“Collaboration equals working together<br />
on something versus contributing to<br />
something,” Monsell said.<br />
Markey-Crimp agreed and lamented<br />
that sometimes collaboration can become<br />
a “false flag” and leave people feeling<br />
resentful when “collaboration” is really<br />
“I need you to do something for me, so<br />
I’m going to call this collaboration, and<br />
then it can be done to you,” she said.<br />
She explained that real collaboration<br />
involves “two or more parties coming to<br />
the table and seeing that time together,<br />
that product, whatever comes out of that as<br />
something that is mutually beneficial.”<br />
“I think that’s the challenge—when<br />
we’re not necessarily putting in the human<br />
connection work or building empathy to<br />
collaborate, and we’re looking for people<br />
to contribute to something,” Markey-<br />
Crimp said. “Sometimes contribution is<br />
appropriate. It’s just that when we call<br />
it collaboration, but what we want is<br />
contribution, we’re misleading people.”<br />
This dynamic can also negatively affect<br />
public engagement, according to Markey-<br />
Crimp. “I think there’s a similar thing we do<br />
with the public, where we come to the table<br />
and say, ‘Hey, we want you to collaborate<br />
with us on this idea, or this project, or this<br />
plan,’ but really, we’ve already formulated<br />
what we want,” she said. “I think that’s<br />
local government at its worst. Human<br />
connection, trust-building, and empathybuilding<br />
need to be established before<br />
collaboration can occur.”<br />
CHALLENGES TO COLLABORATION<br />
“It’s a challenge to find the right balance<br />
for coordination, collaboration, and<br />
connection in a remote or hybrid<br />
environment,” Monsell said. “I’m one of<br />
those rare people who, given the option,<br />
would love for things to go back to exactly<br />
the way they were before the pandemic.<br />
One of the main reasons this hybrid or<br />
remote environment is challenging to me<br />
is that I feel like interactions have become<br />
very transactional, and that it’s harder to<br />
feel that connection. I often find myself<br />
over-communicating and over-connecting,<br />
trying get back to some semblance of what<br />
that felt like before the pandemic.”<br />
Local governments need to encourage<br />
more spontaneous remote interactions,<br />
like picking up the phone and calling<br />
each other when they have questions,<br />
Markey-Crimp said. “I think there’s a lot<br />
of overscheduling that happens when<br />
we work in a hybrid environment that<br />
prevents that natural connection.”<br />
60
She went on to explain that without that<br />
connection, “you get to the table, and<br />
someone’s got a fully baked plan, and<br />
they’re asking you to contribute to it, not<br />
collaborate on it.”<br />
COLLABORATION IN ACTION<br />
Monsell shared how the city worked<br />
together on its capital improvement<br />
plan (CIP) this year as a good example of<br />
collaboration in action. “This is the third<br />
CIP I’ve been part of since I came to the<br />
city, and for each of the last three we’ve<br />
worked hard to build in more input from<br />
the departments, so it’s not just Finance<br />
saying, ‘All right, this is what we need.<br />
This is the ultimate product that we’re<br />
going to implement.’”<br />
This year, city staff collaborated to<br />
develop selection criteria for CIP projects.<br />
A group that included representatives<br />
from several departments developed<br />
the criteria and finalized the definitions<br />
and descriptions of each criterion. The<br />
group deliberated over several weeks<br />
about the criteria and how they relate to<br />
the city’s priorities. The purpose of this<br />
collaboration was twofold: to ensure that<br />
the plan would be approved by the city<br />
council and to make sure the city was<br />
effectively communicating the plan to<br />
the community.<br />
“Successful collaboration comes<br />
from psychological safety. It’s not<br />
just about doing the communicating;<br />
it’s about being in an environment in<br />
which communication can happen<br />
productively,” Markey-Crimp said.<br />
“I think Susie and I are pretty lucky.<br />
We maintain a lot of relationships<br />
across the organization where we feel<br />
like we can disagree in a way that<br />
doesn’t feel so painful that we can’t<br />
have the conversation. But it’s taken<br />
us a lot of time to get to that place, even<br />
with just some colleagues, and those<br />
are the places where the most magical<br />
collaboration happens.”<br />
Markey-Crimp’s work with the city’s<br />
Human Services team is another<br />
example of collaboration. “They are<br />
the leaders in our organization around<br />
performance measurement and<br />
management, and telling their story<br />
with data,” she said. “And it has led to<br />
some significant financial investments<br />
in the work that they’re doing. That<br />
happened because they’ve been so great<br />
about gathering data and demonstrating<br />
its impact, and coming up with new<br />
programs that are based on the analysis<br />
that they’ve done, so they keep coming to<br />
me for support.”<br />
Markey-Crimp credits the Human<br />
Services team with understanding their<br />
limits and reaching out for assistance.<br />
“From the start, they were able to<br />
acknowledge the boundaries of what they<br />
could do. They knew they needed to be<br />
able to do something differently, but they<br />
didn’t have the skills or knowledge to do<br />
it, and they were willing to acknowledge<br />
that,” she said. “I don’t think local<br />
government is always structured in a way<br />
that allows us to admit that and to look for<br />
help outside of our departments.”<br />
VISION<br />
We, as City of Issaquah employees, are committed to:<br />
The City of Issaquah will be a progressive, customer-focused, sustainable organization that values its employees and is committed to innovative solutions.<br />
MISSION<br />
We enhance lives through public service.<br />
SUSTAIN TRUST ACT WITH INTEGRITY LEAD WITH RESPECT MASTER COMMUNICATION OWN YOUR ACTIONS ’NGAGED<br />
We make trust the foundation<br />
of our relationships<br />
and cultivate it daily.<br />
We hold ourselves and each<br />
other accountable to the<br />
highest standards in all we<br />
say and do. Our actions are<br />
consistently respectful, direct,<br />
honest and transparent.<br />
As selfless leaders, we take<br />
the initiative to engage<br />
others and create<br />
momentum to accomplish<br />
the City’s vision for the<br />
interest of all stakeholders.<br />
We sustain an effective,<br />
compassionate and approachable<br />
team environment through our<br />
actions and words, while<br />
understanding that there are<br />
different communication styles.<br />
We are accountable for our actions<br />
while actively supporting each<br />
other to create an atmosphere that<br />
leverages our strengths, as well as<br />
encourages employee growth.<br />
We are enthusiastic, focused,<br />
dedicated and productive<br />
employees who are proactive in<br />
our services to the community.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 61
IN PRACTICE | FINANCE<br />
went and made those personal connections<br />
on the front end,” she explained.<br />
Issaquah’s citywide Strategic Plan outlines the city’s goals, which Dale Markey-Crimp strives to<br />
support through her work. “My work at its essence is understanding and sharing how the city is<br />
performing on the promises it’s made to the community,” she says.<br />
PRACTICAL ADVICE FOR<br />
OVERCOMING CHALLENGES<br />
TO COLLABORATION<br />
Take time to figure out the big picture<br />
and understand everyone’s role. Markey-<br />
Crimp and Monsell both emphasized<br />
that having a shared understanding<br />
of the overall goal is an important<br />
precursor to effective collaboration.<br />
“I always think about that Rumi<br />
poem about the elephant in the dark<br />
and how much of our work is that we<br />
all have our hands on one part of the<br />
elephant,” Markey-Crimp said. “I’m not<br />
even talking about the massive range of<br />
government work. I’m saying in a single<br />
project, we all have our hands on one<br />
part of the elephant, whether that be the<br />
plan and its goals, or the budget and its<br />
expenditures, or the implementation, or<br />
the performance and impact measuring.<br />
No project is just one of those things.<br />
We have to collaborate to do our work<br />
completely, but that requires everyone<br />
realizing that the elephant in the dark<br />
is not just the part they’re touching<br />
and that what we’re touching is not<br />
always the most important piece.”<br />
Local government staff are often<br />
juggling many different projects<br />
and priorities, so time is a precious<br />
commodity—but Markey-Crimp believes<br />
there is a value in colleagues taking<br />
the time to talk about what part of the<br />
elephant in the dark they are each<br />
touching so they can gain understanding<br />
and a sense of shared ownership. “I’ve<br />
been working on some data analysis<br />
around our procurement and payment<br />
processes, and there’s been some tension<br />
and some anecdotes that are turning into<br />
stories about where the bottlenecks are,<br />
from when we start negotiating a contract,<br />
all the way to when we pay someone for<br />
the work they do, and where those things<br />
are not moving as they should. It has a<br />
lot to do with this story, which precedes<br />
both of us, about ‘the black box of finance,’<br />
and a lot of that is because we don’t do a<br />
good job telling the story of what we do. I<br />
think it sets up an expectation that as an<br />
internal service we’re just an extension of<br />
their administrative team, and that our<br />
work is simply responsive to their need.”<br />
Markey-Crimp would like to see Finance<br />
staff—not directors and managers, but the<br />
staff members doing the work to process<br />
invoices and review contracts—going to<br />
speak to employees in other departments<br />
about what they do. “I don’t quite know<br />
why we don’t, except it seems like that’s a<br />
‘nice to have’ rather than essential. We’re<br />
taught that we’re too impossibly busy to do<br />
that, but we would be less busy spending<br />
our time emailing back and forth if we<br />
Develop shared expectations. In addition<br />
to understanding the big picture, Markey-<br />
Crimp also thinks developing shared<br />
routines and expectations can aid in<br />
collaboration. “One thing I’m noticing in a<br />
project I’m working on now is that we don’t<br />
have a clear and shared expectation,” she<br />
said, adding that Finance’s goal is to process<br />
invoices that come to them within two<br />
days—but staff in the other departments<br />
don’t know that, creating uncertainty and<br />
frustration surrounding the process. The<br />
situation would benefit if Finance and<br />
the departments worked together to set<br />
expectations for how they can work together<br />
moving forward, she said. “That takes a<br />
level of self-reflection and ownership, to be<br />
the one to offer a bit of vulnerability around<br />
why things haven’t worked well. That’s a<br />
hard thing to do as a human, and it’s even<br />
harder when you don’t have a pre-existing<br />
relationship with someone.”<br />
Earn trust by following up and following<br />
through. An important part of earning her<br />
colleagues’ trust is “following through on<br />
what I said I would do,” Monsell said. “It<br />
has to be a two-way street, so the people<br />
I’m asking for information, they know<br />
when they come to me for something,<br />
they’re going to get the same kind of<br />
response time back.”<br />
Monsell also mentioned the importance<br />
of asking for more time to complete a project<br />
or task, if needed. “If you said, ‘I’ll get this to<br />
you on Tuesday, and we can continue this<br />
discussion then,’ and if you’re not able to<br />
do it by Tuesday—because things happen—<br />
then communicate that. It seems like such<br />
a simple thing, but it has been massive for<br />
me in building those relationships and<br />
getting what we all need.”<br />
Finance staff can build trust by listening<br />
to their colleagues and incorporating their<br />
feedback into processes, Monsell added. “As<br />
we go through these iterative processes—<br />
multiple budgets and multiple CIPs—we<br />
incorporate the feedback we hear from the<br />
departments.”<br />
Ask open-ended questions. One of the<br />
strategies Monsell has found especially<br />
helpful in encouraging true collaboration<br />
is asking open-ended questions. “To me,<br />
that’s one of the big differences between<br />
collaborating and just contributing.<br />
Contributing is ‘I have this specific question<br />
62
for you. What’s the answer?’ Whereas<br />
with collaborating, it’s ‘What do you think<br />
about this? What am I missing? What else<br />
needs to go into this? Are you okay with<br />
this? Do you have any concerns?’ I get<br />
far better feedback when I do that; it’s far<br />
more collaborative. The other person feels<br />
like they’ve had a hand in building it just<br />
as much as I have,” she said.<br />
Markey-Crimp agrees that asking<br />
open-ended questions is an effective<br />
strategy for encouraging collaboration<br />
and believes it requires some humility<br />
and a willingness to be vulnerable. “You’re<br />
telling the other person, ‘I see you as an<br />
expert in this and I’m acknowledging my<br />
own shortcoming. I am not an all-knowing<br />
person.’ That’s maybe vulnerability<br />
with a lowercase v, but it is an act of<br />
vulnerability,” she said, adding that there<br />
is value in managers modeling this kind<br />
of vulnerability, helping others begin<br />
to realize they aren’t expected to know<br />
everything either. “When you give people<br />
opportunities to see others acknowledging<br />
the boundaries of their own expertise,<br />
that’s when collaboration happens.”<br />
Meet in person when you can. Monsell<br />
believes that working remotely can be<br />
isolating and lead to people becoming too<br />
internally focused.<br />
“When you’re working by yourself, for<br />
the most part, you have fewer meetings,<br />
fewer calls, and fewer interactions with<br />
other people. I had very few meetings<br />
when it wasn’t budget season, and I found<br />
myself becoming guilty of something<br />
that I resented in other people, which<br />
was when you’re trapped in that world all<br />
on your own and you are so focused on<br />
your work, your deliverables, and your<br />
responsibilities, it’s so easy to believe<br />
that what’s most important to you is<br />
the most important thing to everybody<br />
else, too,” Monsell said. To combat this,<br />
she tries to meet with people in person<br />
as often as possible. “Being able to see<br />
when someone is extremely busy, even<br />
without having to ask them, makes a huge<br />
difference,” she said.<br />
During the conversations about CIP<br />
selection criteria, about half the people<br />
participated remotely and half inperson,<br />
she added. “What we got from the<br />
people who were in the room was more<br />
collaborative than what we got from some<br />
of the remote folks because when you’re<br />
remote, it’s hard to know when to jump in.<br />
Once the budget is<br />
adopted, that’s the<br />
departments’ budget.<br />
They need to be<br />
aware of what’s in<br />
it, and they need to<br />
know what went into<br />
those decisions.”<br />
SUSIE MONSELL<br />
CITY OF ISSAQUAH<br />
BUDGET MANAGER<br />
You can’t just open your mouth to signal,<br />
‘Alright, I’m ready to say something now.’”<br />
Meeting with people in person is also<br />
necessary for trust and empathy to take<br />
root in the organization, Markey-Crimp<br />
said. “Part of sustaining trust is building<br />
empathy, and part of building empathy is<br />
knowing what the experience is for that<br />
person, day in and day out. When I meet<br />
with a colleague in person and they’re<br />
constantly bombarded with people<br />
walking by their office and asking them<br />
questions, that is useful context for me<br />
to have when I think about how to get that<br />
person’s time and attention,” she said.<br />
“It’s also important for me to be able to<br />
thank them when they are closing that<br />
office door to spend time with me. I can’t<br />
put enough emphasis on the importance<br />
of interpersonal connection. Now, that<br />
doesn’t mean that we meet in person<br />
every time. Clearly, we leverage the<br />
flexibility of the computer to do a lot of<br />
our work.”<br />
Know when it makes more sense to<br />
meet virtually. “Be intentional about<br />
connecting online when it is useful,”<br />
said Markey-Crimp. “Susie and I learned,<br />
when collaborating in the 2021 COVID<br />
era, is that when you are screen-sharing,<br />
looking at documents or financial data<br />
systems, it’s actually easier to do that<br />
over the computer than doing it in person.<br />
The last thing you want to do is lean<br />
over someone’s shoulder and breathe on<br />
them from behind while they show you<br />
something.”<br />
Avoid surprises by communicating<br />
consistently and intentionally. Monsell<br />
emphasized the importance of consistent<br />
communication and giving people<br />
advance notice. “One of the biggest things<br />
that I do now, when I have instructions<br />
coming out, or we’re launching data<br />
entry, is to be saying for months ahead<br />
of time, ‘By the way, we’re going be doing<br />
this in March, and you’re going be getting<br />
this from me in April.’ I feel almost like<br />
a nuisance, but it’s been so effective. By<br />
the time we get there, they’ve known this<br />
was coming for three months, and it’s not<br />
a surprise,” she explained.<br />
“I totally agree,” Markey-Crimp said.<br />
“I do the same thing around our annual<br />
performance data entry, and I send out a<br />
monthly email to all the data stewards.”<br />
Markey-Crimp added that she has<br />
found success in being very intentional<br />
about the purpose of a meeting and<br />
being prepared for it. She strives to cocreate<br />
the agenda with whoever will be<br />
attending the meeting with her. “I send<br />
my agendas for my quarterly meetings in<br />
advance and say, ‘Hey, look at this, this<br />
is what I want to do. Anything you want<br />
to add?’ Very rarely does anyone have<br />
anything they want to add, but at least<br />
I’m not showing up and surprising them.”<br />
Celebrate success and express thanks.<br />
“Setting people up for success is great,<br />
but let’s also celebrate them when they do<br />
the things successfully,” Markey-Crimp<br />
said. For example, when she sends out an<br />
email reminding people that something<br />
is due in two weeks, she includes a<br />
thanks to those who have already<br />
completed the assignment. “Wow, do a<br />
bunch of people try to accomplish it as<br />
soon as possible after they see that folks<br />
do want to see great work! You have to<br />
thank people when they do what you need<br />
them to.”<br />
Katie Ludwig is director of resource<br />
development in GFOA’s Research and<br />
Consulting Center.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 63
IN PRACTICE | ACCOUNTING<br />
ACCOUNTING<br />
Inside Stories #1<br />
Distinguishing Between Internal Cash Flows<br />
and Internal Resource Flows<br />
BY MICHELE MARK LEVINE<br />
As we often discuss, the Governmental<br />
Accounting Standards Board (which defines<br />
the generally accepted accounting standards<br />
for governments) uses a financial reporting<br />
model based on the financial accountability<br />
of elected officials. In government, financial statements can<br />
include any number of legally separate governmental entities<br />
in cases where elected officials of one government are<br />
financially accountable for the affairs of other governments. 1<br />
In this article (and in several future <strong>GFR</strong> articles), we’ll<br />
explore some of the complexities that arise from this<br />
special form of consolidation, termed a financial reporting<br />
entity. Some of the topics may seem straightforward when<br />
viewed in isolation, but submissions to GFOA’s Certificate<br />
of Achievement for Excellence in Financial Reporting<br />
Award program demonstrate that many governments<br />
struggle to properly account for these internal activities.<br />
For a refresher on when and how multiple governments<br />
should be included in a single financial reporting entity,<br />
please review the article, “Puzzling Pieces: Component Unit<br />
Identification, Classification, Disclosure, and Display,” in<br />
the April 2022 issue of <strong>GFR</strong> (available at gfoa.org/materials/<br />
gfr422-puzzling-pieces).<br />
Before we jump into the first topic of the series, one<br />
more refresher may be helpful: what is meant by the term<br />
reporting unit. Reporting units within a financial reporting<br />
entity do not have a one-to-one correspondence to the<br />
individual legally separate governmental entities in that<br />
financial reporting entity. A reporting unit may be a single legal<br />
governmental entity; however, it can also be simply a part of<br />
a legal entity, or even an aggregation of multiple legal entities.<br />
Specifically, a reporting unit may be:<br />
• A single legal entity such as general or special purpose<br />
government (for example, a primary government total, an<br />
individual discretely presented component unit, or DCPU).<br />
• A part of a government, such as:<br />
– Governmental activities reported in government-wide<br />
financial statements.<br />
– Business-type activities reported in government-wide<br />
financial statements.<br />
– An individual fund or segment (such as, a major<br />
governmental or enterprise fund in fund financial<br />
statements within the basic financial statements, or any<br />
individual fund in combining financial statements).<br />
– An aggregation or consolidation of individual funds (as in,<br />
total nonmajor governmental funds, total governmental<br />
funds, total internal service funds).<br />
• An aggregation or consolidation of governments (for example,<br />
a total of all the discretely presented component units of<br />
a primary government, an entity-wide total of a primary<br />
government and its component units).<br />
Generally, a reporting unit corresponds to a column displayed on<br />
a government’s statement of net position.<br />
©<strong>2023</strong> MICHAEL AUSTIN C/O THEISPOT.COM<br />
64
To account for and report internal activity properly, we must<br />
distinguish between intra-entity transactions 2 and other events<br />
that result in reportable resource flows (such as revenues and<br />
expenditures/expenses) between reporting units within a<br />
financial reporting entity, on one hand, and other intra-entity<br />
cash flows that occur when one reporting unit within the<br />
financial reporting unit simply receives or disburses cash<br />
related to activities that are properly reported entirely in another<br />
reporting unit, on the other hand.<br />
Transfers between funds, the interfund equivalent of<br />
nonexchange transactions, and payments for interfund services<br />
provided and used represent inflows of resources to the receiving<br />
fund and outflows to the paying fund. This would be the case if a<br />
parks department operating in a government’s general fund pays<br />
usage-based water fees to a water fund. Similarly, nonexchange<br />
payments by one government to another (for example, a primary<br />
government providing an operating subsidy to a discretely<br />
presented component unit transit authority) and exchange or<br />
exchange-like payments by one government to another (such<br />
as, the primary government paying a lump sum to the transit<br />
authority to provide monthly transit passes to its child welfare<br />
caseworkers) represent inflows and outflows of resources.<br />
In contrast, the initial inflow or outflow of cash through<br />
one fund—essentially, a conduit—when the cash is received<br />
or paid on behalf of a second fund that properly accounts for<br />
the underlying activities, should not be recorded as a revenue<br />
or expenditure/expense in that conduit fund. The use of one<br />
fund as a conduit for another generally occurs as a matter of<br />
convenience, when a general operating bank account associated<br />
with one fund is used for all or most activity of a government, or<br />
when analysis is required to properly identify the composition<br />
of cash flows (as in, when taxes levied for different purposes<br />
are received in a single account or payroll attributable to<br />
employees of all funds is initially paid through one account).<br />
In these cases, the payments or receipts should result in an<br />
interfund receivable and payable between the two funds, and a<br />
simultaneous resource inflow or outflow for the second fund.<br />
For example, assume that all cash from the state in which a<br />
county is located comes via electronic funds transfer into the<br />
county’s main operating bank account, which is associated<br />
with the county’s general fund. Further assume that the<br />
county receives $100,000, which is an unrestricted operating<br />
subsidy from the state for the county’s bus operations, which<br />
are accounted for in a transit enterprise fund. On the date of the<br />
receipt, the general fund would record:<br />
DR. Cash $100,000<br />
CR. Due to transit enterprise fund $100,000<br />
To record receipt of state grant revenue for transit operations on<br />
behalf of the transit fund<br />
On the same date, the transit fund would recognize its grant<br />
revenue and the amount due from the general fund.<br />
DR. Due from general fund $100,000<br />
CR. State transit operating grant revenue $100,000<br />
To record receipt by the county’s general fund of state transit<br />
operating grant revenue<br />
Notice that only the transit fund—the fund that is entitled to<br />
the grant—recognizes a resource flow (revenue). There is no<br />
The initial inflow or outflow of cash through<br />
one fund—essentially, a conduit—when the<br />
cash is received or paid on behalf of a second<br />
fund that properly accounts for the underlying<br />
activities, should not be recorded as a revenue<br />
or expenditure/expense in that conduit fund.<br />
resource flow in (no operating statement effect on) the general<br />
fund; only its balance sheet accounts are affected.<br />
Ultimately, the cash may be moved to the transit fund, in which<br />
case the general fund would record an entry that is the exact<br />
reverse of the one shown above (debit due to transit enterprise fund<br />
and credit cash), and the transit fund would debit cash and credit<br />
due from the general fund. It’s also possible that the general fund<br />
might use the cash to make payment on behalf of the transit fund,<br />
such as if payroll for transit employees is paid by the general fund.<br />
Assuming that the full $100,000 is used to pay transit salaries,<br />
the entries would be:<br />
On the date payroll, the general fund would record:<br />
DR. Due to transit enterprise fund $100,000<br />
CR. Cash $100,000<br />
To record transit employee payroll paid on behalf of the transit fund<br />
On the same date, the transit fund would recognize its payroll<br />
expenses and the reduction of the amount due from the general<br />
fund.<br />
DR. Payroll expense $100,000<br />
CR. Due from general fund $100,000<br />
To record payment by the county’s general fund of transit employee<br />
payroll<br />
Notice again that only the transit fund—the fund that is responsible<br />
for the payroll costs—recognizes the outflow of resources.<br />
Unfortunately, many governments incorrectly recognize<br />
inflows and outflows in the fund from or to which the initial<br />
cash flow occurs, rather than treating it as simply the cash<br />
conduit, effectively ”grossing-up” the reported resource flows<br />
in that fund. In our initial example, the entries might have<br />
been erroneously recorded as follows:<br />
Upon receipt of grant funds from state:<br />
DR. Cash $100,000<br />
CR. State grant revenue $100,000<br />
To record receipt of state grant revenue for public health and for<br />
transit operations in the transit fund<br />
Then, when the money is moved to the transit fund, these<br />
governments erroneously recognize transfers—other financing<br />
sources or other financing uses—which are resource flows in<br />
governmental funds:<br />
DR. Transfer to transit fund $100,000<br />
CR. Cash $100,000<br />
To record transfer of state grant revenue for public health and for<br />
transit operations in the transit fund<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 65
IN PRACTICE | ACCOUNTING<br />
Unfortunately, many governments incorrectly<br />
recognize inflows and outflows in the<br />
fund from or to which the initial cash flow<br />
occurs, rather than treating it as simply the<br />
cash conduit, effectively ”grossing-up” the<br />
reported resource flows in that fund.<br />
Interfund balances (“due to” and “due from”) and transfers<br />
are eliminated when fund financial statements are consolidated<br />
into government-wide financial statements, when the funds<br />
involved are reported in the same government-wide reporting<br />
unit (as in, both are governmental activities or both are<br />
business-type activities), or in the government-wide statements,<br />
when activity crosses between governmental and businesstype<br />
activities. The interfund services provided and used—the<br />
interfund equivalent of exchange or exchange-like transactions<br />
(such as, the transit fares paid for the child welfare case<br />
workers)—are not eliminated, as doing so would understate<br />
operating costs of the customer fund and understate operating<br />
revenue of the supplier fund.<br />
Now, what if the cash conduit reporting unit was not just in<br />
a different fund from the reporting unit to which the activity<br />
belongs, but the two are discrete entities within the financial<br />
reporting entity? This would be the case if, in the example<br />
above, the state transferred the transit subsidy to the county<br />
as before, but the county’s transit was operated by a transit<br />
authority that was a discretely presented component unit<br />
(DCPU) rather than an enterprise fund of the county. The<br />
answer here is substantively the same as when both parties<br />
were funds of the primary government, except that the county<br />
would report an amount payable to the transit authority (rather<br />
than an interfund “due to”) and the authority would report an<br />
amount receivable from the county (rather than an interfund<br />
“due from”). If the amounts are material, these payables and<br />
receivables should be reported separately from amounts<br />
payable to, or receivable from, parties external to the financial<br />
reporting entity in both the primary government’s and the<br />
DPCU’s reporting units. Eliminations between the primary<br />
government and the DPCUs, like what was described above<br />
for interfund activity, would be required only if a financial<br />
consolidated reporting entity-wide total were presented, which<br />
is fairly uncommon.<br />
Michele Mark Levine is director of GFOA’s Technical Services Center.<br />
By mis-recording in this manner, the general fund is reporting<br />
both an inflow (grant revenue) and an outflow (transfer out<br />
to transit fund), improperly “grossing up” activity reported by<br />
the fund. In addition to overstating both inflow and outflows<br />
in the general fund, this effectively reclassifies the operating<br />
subsidy provided by the state to look like an operating subsidy<br />
(transfer) from the county in the transit fund’s financial<br />
reporting.<br />
Instead of recognizing a transfer, the general fund in this<br />
example might have reduced the reported state grant revenue<br />
(for example, reversing the initial erroneous entry by debiting<br />
state grant revenue and crediting cash) when paying the<br />
transit fund. Then, if both transactions occurred in the same<br />
financial reporting period, the net effect would be the same as<br />
the illustration of the correct entries above. During the period<br />
between the cash receipt by the general fund and payment<br />
of funds over to the transit fund, however, the general fund’s<br />
revenue would be overstated, as would its assets, and the<br />
amount due to the transit fund would be understated, while the<br />
transit fund’s revenue and assets would both be understated.<br />
COMING UP<br />
Watch this space for more Inside Stories<br />
discussing other topics related to activities internal<br />
to a financial reporting entity or with related<br />
parties, such as accounting for certain complex<br />
financial activity with blended component units,<br />
joint ventures, and the appropriate reporting<br />
and disclosures when defined benefit pensions<br />
and other postemployment benefits (OPEB) are<br />
provided to employees of multiple reporting units<br />
within a financial reporting entity that represents<br />
as a single employer in a pension or OPEB plan.<br />
©<strong>2023</strong> MICHAEL AUSTIN C/O THEISPOT.COM<br />
66
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 67
IN PRACTICE | PERSPECTIVE<br />
PERSPECTIVE<br />
The Fiscal Cliff<br />
BY KATHERINE BARRETT AND RICHARD GREENE<br />
Over the summer of<br />
<strong>2023</strong>, the fiscal status<br />
of local governments<br />
and states appeared to<br />
be in reasonably good<br />
condition. Property values—especially<br />
for homes—were strong, so property<br />
taxes were holding up well, according<br />
to Farhad Omeyr, program director of<br />
research and data for the National League<br />
of Cities. And “to my surprise,” he said,<br />
“we weren’t seeing a plateauing of sales<br />
taxes.” Meanwhile, local governments<br />
were accumulating money in their<br />
rainy-day funds, at the same time, as<br />
inflation appeared to be slowing. There<br />
was growing hope that the economy,<br />
as a whole, might be heading for that<br />
much-hoped-for “soft landing.”<br />
That’s the good news. But don’t count<br />
on it lasting forever. A series of stresses<br />
and strains on towns, cities, and counties<br />
are unquestionably heading our way.<br />
Some of the biggest challenges will be felt<br />
when the huge sums of money that have<br />
been buttressing public-sector balance<br />
sheets begin to fall away. The American<br />
Rescue Plan Act (ARPA), including the<br />
State and Local Fiscal Recovery Fund,<br />
for example, contributed $350 billion<br />
to states, cities, counties, territories,<br />
and tribal governments. But that money<br />
needs to be obligated by the end of 2024<br />
and spent by December 31, 2026.<br />
At that point, it won’t be so much a<br />
question of if but when many places will<br />
be confronting a darker fiscal world,<br />
which William Glasgall, senior director<br />
of public finance at the Volcker Alliance<br />
and fellow at the Penn Institute for Urban<br />
Research, has described as a fiscal cliff.<br />
This cliff represents a combination<br />
of slowing revenues and cascading<br />
expenditures. Beverly Bunch, professor at<br />
the school of public management and policy<br />
at the University of Illinois and author of an<br />
upcoming report about the topic, predicts<br />
the advent of major spending issues<br />
“related to health access and affordability,<br />
including mental health and substance<br />
abuse; others associated with the aging<br />
of our population, including pensions;<br />
adaptation to change (like remote work);<br />
and continued economic development<br />
needs.”<br />
One of the biggest challenges faced on the<br />
expenditure side of the ledger is the specter<br />
of emergencies. While the pandemic may<br />
have been an unprecedented catastrophe,<br />
climate change appears to ensure that<br />
unpredictable expenses will continue to hit.<br />
Consider this summer’s national heat wave.<br />
Based on a study of the Commonwealth of<br />
Virginia, the Center for American Progress<br />
extrapolated those costs attributed to<br />
extreme heat, including emergency room<br />
visits and hospital admissions, and found<br />
©<strong>2023</strong> JAMES YANG C/O THEISPOT.COM<br />
68
NATIONAL GUARD / ALAMY STOCK PHOTO<br />
that they will likely add about $1 billion to<br />
healthcare costs, many of which are born<br />
by governments.<br />
The Town of Bluffton, South Carolina,<br />
which has a population of 27,000 and is<br />
located in the low country of the state,<br />
is carefully preparing for the inevitable<br />
ill effects of climate change. “The rising<br />
sea levels mean we have very high<br />
tides around us,” Chris Forster, Bluffton<br />
assistant town manager, said. “As the<br />
water levels rise, they hit the septic tanks,<br />
and when the tide goes back out, it affects<br />
the quality of the water.” The community<br />
used a study by the University of Florida<br />
to determine the costs of recovering<br />
from the damage to infrastructure when<br />
climate change-related events hit and has<br />
ensured that sufficient funds are available<br />
in the community’s rainy-day fund.<br />
This preparation for an uncertain future<br />
contributed to the town’s recent bond rating<br />
increase to AAA by Moody’s, Forster said.<br />
But many communities aren’t following<br />
Bluffton’s lead and will find themselves<br />
hard pressed to pay the bills when the<br />
next natural disaster hits. “We have to be<br />
prepared for these things,” Bunch said.<br />
“The question is only when and what<br />
magnitude.”<br />
Even absent infrastructure-destroying<br />
hurricanes, wildfires, tornadoes, and so<br />
on, another element pushing localities<br />
toward a fiscal cliff is the need for huge<br />
sums of money for roads, water, and<br />
buildings, beyond what is being supplied<br />
by the federal government through sources<br />
like the Infrastructure Act.<br />
Glasgall said: “The good news is that<br />
there is a lot of money in the infrastructure<br />
bill and the Inflation Reduction Act. But<br />
there’s still a big shortfall in necessary<br />
infrastructure maintenance dollars. State<br />
and local governments provide 80 percent<br />
of the funding for public infrastructure in<br />
the United States, and that’s out of their<br />
own taxes, fees, gasoline taxes, tolls,<br />
water charges, sewer charges, and so on.<br />
And more money is going to be necessary<br />
if we’re going to have a 21st century<br />
infrastructure. We need to be able to handle<br />
electric cars and trucks. And we have a lot<br />
of bridges and water plants out there that<br />
are at the end of their useful life.”<br />
Also, with a workforce shortage that’s<br />
ravaging the capacity of localities to deliver<br />
the services they’ve promised, it seems<br />
A series of stresses and strains on towns, cities,<br />
and counties are unquestionably heading our way.<br />
nearly inevitable that the cost of labor<br />
is going to rise. “The labor market is just<br />
so hot that wages are going up,” Emily<br />
Mandel, senior economist of Moody’s<br />
Analytics, said. “They’re already rising<br />
now, and given the private sector’s pace,<br />
there is going to continue to be a lot of<br />
competition for those workers.”<br />
As for the revenue side of the<br />
equation, growing pressures are also<br />
imminent. “The pace at which revenues<br />
have been going up is going to taper,”<br />
Mandel said. “It’s not sustainable. The<br />
economy is slowing from where it is<br />
today, based on interest rates being<br />
higher and the Federal Reserve doing all<br />
it can to slow down the economy.”<br />
And although the price of housing has<br />
been a robust driver of higher property<br />
taxes, “we’re already beginning to<br />
see some reductions in home values,”<br />
Mandel said. Of course, there will<br />
be a delay between softening prices<br />
and the actual reduction in property<br />
taxes because it’s not until homes are<br />
reevaluated that this impact will be<br />
seen. Mandel makes it clear that she’s<br />
not anticipating any kind of housing<br />
bust as we’ve seen in years past, “but<br />
we’re expecting a decline nonetheless.”<br />
What’s more, there’s a great deal<br />
of uncertainty about property taxes<br />
emanating from commercial real<br />
estate as downtowns suffer from the<br />
Above, downtown Montpelier, Vermont, is<br />
nearly submerged in floodwaters from the<br />
overflowing Winooski River after record rains<br />
fell on the northeastern region in July of this<br />
year, resulting in hundreds of rescues and<br />
forcing evacuation of thousands of people.<br />
introduction of remote work. “It’s going to<br />
be an adjustment process,” Mandel said,<br />
“and cities are going to have to rethink<br />
what to do when many of their office<br />
buildings aren’t so full.”<br />
Finally, though the states have been<br />
preparing themselves carefully by<br />
avoiding using federal one-time money on<br />
long-term expenditures, a number have<br />
made significant tax cuts. “So, they’ll be<br />
bringing in less money, particularly on<br />
the personal income side,” says Mandel.<br />
“No one is going to say we’re going to<br />
cut taxes and give less money to our<br />
localities, but that could be an impact of<br />
those cuts. Revenue growth has been so<br />
strong in recent years, and these tax cuts<br />
are so new that we haven’t even begun to<br />
see what’s going to turn out.”<br />
Katherine Barrett and Richard Greene are<br />
principals of Barrett and Greene, Inc., at<br />
greenebarrett.com. They are advisors to GFOA,<br />
senior advisors and columnists for Route<br />
Fifty, NAPA Fellows, senior advisors to the<br />
Government Finance Research Center at the<br />
University of Illinois, and senior advisors to the<br />
American Society for Public Administration.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 69
IN PRACTICE | PERSPECTIVE<br />
PERSPECTIVE<br />
Celebrating Sui Generis<br />
BY JUSTIN MARLOWE<br />
In December 2010, Meredith Whitney,<br />
the Wall Street analyst who famously<br />
predicted the financial crisis of 2007<br />
to 2008, appeared on 60 Minutes<br />
and declared that 50 to 100 major<br />
U.S. states and localities would default<br />
on their municipal bonds in the coming<br />
months. More than $60 billion flowed<br />
out of municipal bond mutual funds<br />
during the next few weeks in one of the<br />
largest sell-offs in market history.<br />
Fortunately, if a recent trend in<br />
the municipal market technology<br />
continues, these types of abrupt,<br />
market-wide dislocations might<br />
be a thing of the past. That’s both a<br />
challenge and an opportunity for state<br />
and local finance professionals.<br />
The famous “Meredith Whitney<br />
sell-off” is a wonderful illustration of<br />
what makes the municipal bond market<br />
fascinating to some and frustrating to<br />
others. Today there are roughly one<br />
million individual bonds sold by more<br />
than 50,000 individual issuers, backed<br />
by dozens of revenue streams and<br />
credit enhancements. That’s orders of<br />
magnitude more variety than corporate<br />
bonds, U.S. Treasuries, or other fixedincome<br />
investments. Simply put,<br />
each municipal bond is sui generis,<br />
the timeless Latin phrase to describe<br />
something that’s “of its own kind.”<br />
But none of that uniqueness was<br />
on the minds of investors who heard<br />
Meredith Whitney and ran for the exits.<br />
They sold shares in municipal bond<br />
mutual funds as fast as they could,<br />
presumably with limited knowledge of<br />
whether those funds held the specific<br />
bonds that might be headed for trouble.<br />
Critics say this type of sell-off<br />
illustrates one of the municipal market’s<br />
big flaws. Investors cannot keep track<br />
of hundreds or thousands of individual<br />
governments, especially when financial<br />
and other information about those<br />
governments can be difficult to acquire.<br />
Instead, critics argue, state and local<br />
governments ought to make investors’<br />
job easier by sticking to simple bond<br />
structures backed by robust, generic<br />
revenue streams. They believe such<br />
streamlining will produce lower cost<br />
of capital and better accountability for<br />
taxpayers. Market proponents say these<br />
eccentricities are unavoidable, given<br />
the countless variations in state statute<br />
and local policy. They believe the<br />
market is far from perfect, but it works<br />
well enough, all things considered.<br />
Fortunately for municipal bond<br />
investors, some recent advances in<br />
financial market technology are<br />
helping to split the difference between<br />
these views.<br />
Municipal bonds are at the core a<br />
retail market. People buy them to save<br />
for retirement, college, and other future<br />
financial needs. That’s why roughly 70<br />
percent of the $4 trillion in outstanding<br />
municipals are held, directly or<br />
indirectly, by individuals.<br />
That’s why there’s a massive<br />
investment advisory industry to help<br />
individual investors buy munis. For<br />
decades that industry’s go-to product<br />
has been mutual funds. Hundreds of<br />
mutual funds cater to muni investors,<br />
©<strong>2023</strong> JAMES YANG C/O THEISPOT.COM<br />
70
including nearly 100 funds focused on<br />
individual states to maximize investors’<br />
tax advantages.<br />
Mutual funds come with two big<br />
disadvantages, though. For one,<br />
investors don’t control what goes into<br />
the fund’s portfolio—that’s the portfolio<br />
manager’s job. And even more important,<br />
if everyone else sells their shares at<br />
once, the fund’s value can decline<br />
quickly. For proof, look no further than<br />
the Meredith Whitney episode.<br />
In a perfect world, individual<br />
investors could realize the tax benefits,<br />
safety, and sophisticated investment<br />
management of a mutual fund, but with<br />
more direct control over the portfolio’s<br />
composition and management strategy.<br />
In the real world, a “separately managed<br />
account” (SMA) achieves just that.<br />
An SMA is, in effect, a private mutual<br />
fund. High-net-worth individuals<br />
willing to invest seven or eight figures<br />
can hire a portfolio manager to manage<br />
their bonds like a mutual fund. They<br />
specify the investment goals, and the<br />
portfolio manager regularly buys and<br />
sells bonds to keep the portfolio aligned<br />
with those goals. It’s also common to see<br />
muni SMAs designed around particular<br />
themes like sustainability or social<br />
impact.<br />
Of course, this is easier said than<br />
done. A typical SMA portfolio manager<br />
tends to dozens or even hundreds of<br />
individual portfolios, each with its own<br />
time horizon, risk preference, and tax<br />
concerns. Those portfolios will hold<br />
some, but not all, of the same bonds.<br />
Some portfolios don’t overlap at all.<br />
Following thousands of individual<br />
bonds and how they interact is like a<br />
giant game of three-dimensional chess.<br />
That seems daunting, but it’s much<br />
more tractable with help from new<br />
financial technology. SMA portfolio<br />
managers today have powerful<br />
algorithms that can identify specific<br />
bonds that address a specific investment<br />
objective for a particular portfolio. Need<br />
an AA-rated, short duration bond from<br />
a rural North Carolina school district<br />
with excellent test scores? Today’s<br />
portfolio management systems will find<br />
bonds that fit the bill, scan the dozens<br />
of broker-dealers who might have those<br />
The far more important take-away is that the growth of<br />
SMAs means all municipal bonds can find a home.<br />
bonds to sell, reanalyze the portfolio,<br />
and then sell a different bond that no<br />
longer meets that investor’s objectives,<br />
all with just a few keystrokes. This type<br />
of integrated analytics and execution<br />
capability was unheard of in the<br />
municipal market until now.<br />
These technological breakthroughs<br />
have unleashed explosive growth in<br />
muni SMAs. Securities and Exchange<br />
Commission (SEC) data show that in<br />
January 2018, there were roughly $500<br />
billion (in <strong>2023</strong> dollars) of assets under<br />
management in individual investor<br />
muni SMAs. In January <strong>2023</strong>, it was a<br />
little less than $900 billion, and some<br />
estimates have it exceeding $1 trillion.<br />
In 2018, the ten firms with the highest<br />
muni assets under management in<br />
SMAs held around $150 billion (in <strong>2023</strong><br />
dollars). Today they hold $350 billion.<br />
That’s a 133 percent increase in just five<br />
years. Today, there are approximately<br />
4,200 investment advisors in the muni<br />
SMA business. That’s up from about<br />
3,600 in 2018. As expected, much of<br />
this growth has come at the expense of<br />
traditional mutual funds. Mutual funds<br />
held a little less than a trillion dollars<br />
in municipals at the end of 2018. At the<br />
end of 2022 they held $746 billion.<br />
What does this mean for state and<br />
local finance professionals? SMA<br />
portfolio managers need the most<br />
recent information possible about<br />
your financial position, fiscal policies,<br />
capital investment plans, and so<br />
forth. That means debt management<br />
fundamentals like reliable financial<br />
reporting and proactive investor<br />
relations are more important than ever.<br />
But the far more important takeaway<br />
is that the growth of SMAs means<br />
all municipal bonds can find a home.<br />
Calls to standardize bond structures<br />
or to adjust borrowing strategies to<br />
accommodate investment expectations<br />
seem less salient when every big<br />
investor has a private mutual fund. For<br />
today’s municipal bonds, with apologies<br />
to Meredith Whitney, sui generis might<br />
just be OK.<br />
Justin Marlowe is a research professor at<br />
the University of Chicago, Harris School of<br />
Public Policy, and a fellow of the National<br />
Academy of Public Administration.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 71
IN PRACTICE | INTERVIEW<br />
WITH ANNE BAKER<br />
Administrative Services Director, City of Florence, Oregon<br />
BY MIKE MUCHA<br />
Mike Mucha, GFOA’s deputy<br />
executive director, spoke with<br />
Anne Baker, the administrative<br />
services director for the City<br />
of Florence, Oregon, about<br />
her career in public service,<br />
volunteering with membership<br />
organizations, certification,<br />
and the most important<br />
skills necessary for finance<br />
professionals to become leaders.<br />
Mike: Can you start by describing<br />
your current role with the City of<br />
Florence?<br />
Anne: As administrative services<br />
director, I oversee finance, information<br />
technology, utility billing, and the<br />
municipal court. We have a pretty<br />
wide scope, everything from financial<br />
reporting to providing water and sewer<br />
service to citizens. I have an IT manager<br />
and finance manager who help with<br />
most of the meat of the department,<br />
and in my role, I focus more on working<br />
with our city manager and council, and<br />
making sure that we can effectively<br />
communicate needs from across the<br />
city so we can make good decisions<br />
about the use of city resources.<br />
What are the biggest challenges<br />
facing Florence?<br />
The biggest challenge is hiring and<br />
maintaining employees. Florence is<br />
a rural and located in a remote area of<br />
Lane County, Oregon. We are about 90<br />
minutes from the city of Eugene and<br />
have a population of approximately<br />
9,600. I’m sure our challenges at the<br />
city are not unique and I know that<br />
others in Florence, including many<br />
businesses, struggle to hire. For<br />
example, in addition to not having<br />
enough accountants or police officers,<br />
we also have a shortage of doctors. Our<br />
community is an attractive retirement<br />
destination, and we are growing, but we<br />
don’t have the places for new people to<br />
live—specifically younger individuals<br />
who would be able to fill open jobs. From<br />
a city perspective, we also can’t afford<br />
to pay what others do. I’ve been with<br />
the city for four and a half years. During<br />
that time, I don’t think the city’s police<br />
department has been fully staffed.<br />
When we are able to hire new officers,<br />
we get them trained, and they have a<br />
tendency to move on for higher salaries.<br />
Have you been able to work on<br />
these issues?<br />
Recently, the city has been having<br />
more discussions about how to create<br />
incentives for younger generations to<br />
locate here. We also have an initiative<br />
to create more affordable housing and<br />
two planned projects. In my role, as<br />
administrative services director, I have<br />
PHOTO COURTESY OF THE CITY OF FLORENCE, OREGON<br />
72
een involved in those discussions and<br />
have enjoyed it. This position has put me<br />
out there and I’m more aware of issues<br />
in the community. In my past positions,<br />
I would tend to work on issues related to<br />
just the finance department.<br />
How did you initially get involved in<br />
government? Were you always drawn<br />
to public service?<br />
I got started late in my career. I have<br />
a bachelor’s degree in business<br />
administration/accounting and one<br />
in computer science, but I earned both<br />
after I turned 30. At the time, I intended<br />
to get my CPA and work for one of the big<br />
six accounting firms; however, when<br />
I was in school, I took a governmental<br />
accounting class. I really liked learning<br />
about fund accounting, I was pretty good<br />
at it, and my professor encouraged me<br />
to think about a career in government.<br />
When I graduated, I applied for jobs at<br />
a local CPA firm and with Josephine<br />
County. I interviewed at both and<br />
decided to give government a chance.<br />
And now over the last 25 years,<br />
you’ve worked in a variety of positions<br />
for five different governments.<br />
What has led to your success?<br />
I always have to be learning something<br />
new. For example, when I started with<br />
City of Albany, the city received the<br />
GFOA award for budget and annual<br />
comprehensive financial report<br />
(ACFR). I took on the task of putting<br />
together the city’s first popular<br />
annual financial report (PAFR). In<br />
preparing the PAFR, I had to learn the<br />
idiosyncrasies of financial statements.<br />
I also had to learn how to communicate<br />
technical information in a way that<br />
citizens understand. That helped me a<br />
lot when it came later to working with<br />
elected officials.<br />
that I really didn’t like tax accounting.<br />
I also realized that government offers<br />
a better work-life balance. It’s not<br />
that I wasn’t putting in a lot of hours,<br />
but I appreciate that I am able to take<br />
vacation when I need to.<br />
About that time, I also got involved<br />
with the Oregon GFOA (OGFOA) which<br />
continued to encourage me to look for<br />
new opportunities in local government.<br />
I really feel that each of my positions<br />
has set me up for success with for the<br />
next one. I took advantage of the OGFOA<br />
network for new opportunities. I didn’t<br />
get every job I applied for, but I didn’t<br />
give up. When I didn’t get my dream<br />
job, I was able to realize that it wasn’t<br />
because I wasn’t qualified, it was<br />
because the competition can be fierce—<br />
and that is a good thing.<br />
I want to discuss your involvement<br />
with OGFOA. What is it like being<br />
part of that organization?<br />
It can be a lot of work, but very much<br />
worth it. At first, I was a bit hesitant<br />
to get involved. I wanted to be good at<br />
my job, but also thought I could hide in<br />
the background. For a while, that did<br />
work. I was able to take advantage of<br />
educational opportunities and meet<br />
peers in other organizations. But at<br />
one of the conferences, I got roped into<br />
the IT committee for the organization.<br />
What they were doing intrigued me<br />
and seemed to leverage some of my<br />
academic background. Once I got more<br />
involved, I really started having fun.<br />
The more people I met, the more fun<br />
I had and the bigger my network grew.<br />
I ended up with more and more people<br />
who I could lean on, and the value of<br />
OGFOA really became clear. Those<br />
individuals then pushed me to take<br />
that next step in my career, pursue<br />
the new opportunity, and continue<br />
to learn. I pursued my certification<br />
through OGFOA and later also joined<br />
the certification committee. When I<br />
moved to the City of Albany, my boss<br />
was very supportive of my involvement<br />
in OGFOA and I took advantage of the<br />
opportunity to join the governing<br />
board of OGFOA, which then led to me<br />
becoming president of OGFOA in 2013.<br />
Have you ever considered options<br />
outside of government?<br />
In between my positions at Josephine<br />
County and Benton County, I graduated<br />
from University of Oregon with a master<br />
of accounting degree. As part of the<br />
program, you had to participate in a<br />
recruitment process, so again I put in<br />
an application to work at a CPA firm.<br />
I ended up working there as an intern<br />
and thought of switching, but I realized<br />
Anne Baker (left) and some of her team members in the City of Florence Administrative Services<br />
Department get into the holiday spirit.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 73
IN PRACTICE | INTERVIEW<br />
For someone who initially wanted to<br />
hide in the background, what was it<br />
like being president?<br />
At some point after becoming president,<br />
I realized that you had to get in front<br />
of everyone and talk. I would say that<br />
I’m more of an introvert, but I learned<br />
through my OGFOA experience that I<br />
can be more extroverted if I need to.<br />
Public speaking was hard at first, but<br />
now not so much. This experience has<br />
definitely helped me when I have to<br />
present in front of council, talk with the<br />
public, or broadcast meetings online.<br />
During my time with OGFOA, we also<br />
changed our name from the Oregon<br />
Municipal Finance Officers Association<br />
to the Oregon Government Finance<br />
Officers Association. We wanted<br />
to expand to better serve members<br />
from special districts, schools, the<br />
state, and other governments without<br />
those individuals assuming we only<br />
served cities. It also helped us align<br />
better with the Government Finance<br />
Officers Association. I’m proud of the<br />
partnership that we’ve been able to<br />
build with GFOA.<br />
As a member of both GFOA and<br />
OGFOA, how do you differentiate the<br />
benefits you get from both?<br />
I haven’t always been able to be a<br />
member at both. Up until my job with the<br />
City of Florence, I was not a member of<br />
GFOA, and it wasn’t until I got to the City<br />
of Florence that I was able to travel to a<br />
GFOA event. I believe the work that the<br />
state GFOA does is an extension of GFOA,<br />
and the state association works for me in<br />
a way that GFOA can’t. GFOA can’t offer<br />
training on state-specific issues like<br />
unique Oregon laws and regulations.<br />
Oregon has a very specific budget<br />
process that is probably different from<br />
all others. I look to GFOA for overarching<br />
best practices, information on GASB<br />
updates, or larger industry trends. I<br />
look to the state association for specific<br />
issues. For example, recently I was able<br />
to find out about information related<br />
to public meeting requirements in this<br />
state from OGFOA.<br />
I also believe that state organizations<br />
had an advantage in the past with<br />
networking groups and were able to<br />
encourage better levels of participation;<br />
however, that might be changing. The<br />
pandemic taught us all how to work<br />
remotely and that we can network<br />
remotely too. About a year ago, I joined<br />
GFOA’s Women Public Finance Network<br />
(WPFN) and look forward to getting<br />
more involved in the programs that<br />
they offer.<br />
How would you recommend that<br />
others get involved in either GFOA<br />
or their state association, knowing<br />
it can be difficult for some to make<br />
that initial connection?<br />
Go to a conference, and when you<br />
are there, really try to participate.<br />
I do see a lot of members who just<br />
attend sessions but don’t really take<br />
advantage of all that a conference<br />
can offer. If I was talking to someone<br />
who’s new to government, I would also<br />
encourage them to join a committee<br />
or smaller group organized around<br />
issues you care about. Having this<br />
small group of peers to learn from or<br />
just discuss issues with is extremely<br />
beneficial. I really enjoy learning from<br />
others in committees. Our issues aren’t<br />
our issues alone. You never know when<br />
you will meet someone who can help<br />
or offer something insightful. For me, I<br />
just needed to step outside my comfort<br />
zone and realize that others are in a<br />
similar situation. Once you do, it’s fun.<br />
You have been involved with the<br />
Professional Finance Officer<br />
Certification program with OGFOA<br />
and became a GFOA Certified<br />
Public Finance Officer in 2013.<br />
What led you to pursue the CPFO?<br />
Again, I think it was my desire to take<br />
on more. In prior positions, my main<br />
focus was budgeting, but I knew that<br />
eventually, to achieve my career goals,<br />
I would need knowledge to manage<br />
an audit, issue debt, understand<br />
government investing, and more.<br />
CPFO was a great program that forced<br />
me to study—even when my current<br />
position made it difficult. I learned a<br />
lot. The exams were tough, but that<br />
means it was worth it. For a while, I felt<br />
like the Blue Book was my best friend.<br />
Which exam was the most difficult?<br />
I passed all on my first try except for<br />
treasury. That one took two tries.<br />
Become a CPFO<br />
Learn more about GFOA’s CPFO<br />
program, the next step as you<br />
prepare for leadership positions<br />
in state and local government.<br />
gfoa.org/cpfo<br />
Has your investment in CPFO paid off?<br />
Having a CPA license or a CPFO designation<br />
is a preference for most jobs that I’ve<br />
applied for. It does open doors and can set<br />
me apart from other applicants. For those<br />
hiring managers who may not understand<br />
the details of public finance, it can also<br />
provide credibility and recognition that<br />
I do have the necessary skills. I’m also<br />
proud of meeting the requirement for<br />
ongoing education. Having to accumulate<br />
continuing professional education (CPE)<br />
credits means that I commit to staying<br />
current. Now I have to stay informed on<br />
current best practices and don’t want to<br />
waste the hard work that I put in to get the<br />
CPFO in the first place. I really believe that<br />
I wouldn’t be able to do my job well without<br />
ongoing training, and the CPFO makes it<br />
easier to get approval for that training.<br />
At GFOA, we talk all the time about<br />
needing to learn both technical skills<br />
and leadership skills. What leadership<br />
skill do you think is most important for<br />
finance officers?<br />
The ability to communicate. Good<br />
communicators not only convey goals<br />
and expectations clearly, but also engage<br />
in active listening. You need to be open<br />
to feedback, either good or bad. If you<br />
don’t listen, you won’t understand how to<br />
resolve conflicts, keep your team aligned,<br />
or build trust.<br />
I have also learned that having the<br />
ability to recognize and understand<br />
your emotions is important. Things in<br />
government can get emotional—whether<br />
we fund a project or not, can afford raises<br />
or not, or shift policy to benefit some<br />
in the community. Understanding and<br />
listening is important for you to better<br />
consider different viewpoints and remain<br />
composed under pressure.<br />
74
A coastal city in Lane County, Oregon, Florence lies about 60 miles west of Eugene and has a population of nearly 10,000 residents.<br />
As leader of your department, and<br />
one with many functions, how do you<br />
keep everyone aligned and working<br />
as a cohesive team?<br />
Divisions can tend to silo themselves. I<br />
try to instill in them that because you are<br />
in finance or IT, what they do can impact<br />
everyone. If they realize how connected<br />
our functions are, they will think about<br />
Good communicators not only convey goals and<br />
expectations clearly, but also engage in active listening.<br />
You need to be open to feedback, either good or bad. If<br />
you don’t listen, you won’t understand how to resolve<br />
conflicts, keep your team aligned, or build trust.<br />
Overcome Differences with GFOA’s Perspectives program<br />
This online learning experience equips participants with science-backed skills to<br />
improve communicaton and manage political issues in the workplace. Learn more:<br />
gfoa.org/perspectives<br />
strategies or actions and how it impacts<br />
everyone. I also think this leads to better<br />
discussions with our team at a strategy<br />
level. I try to encourage dialogue within<br />
the team and feel that this also can help<br />
encourage people to ask for help if they<br />
need it. Hopefully no one is left out.<br />
Opinions do matter. It doesn’t mean that<br />
we will always agree, but we shouldn’t<br />
be afraid to hear an opposing or<br />
slightly different view.<br />
Did you always think you would end<br />
up as a leader in city government?<br />
That’s a good question. When I<br />
interviewed in Josephine County, the<br />
finance manager who interviewed<br />
me asked where I saw myself in five<br />
years, and I said I wanted his job. I did<br />
want to move up and did set my sights<br />
on being a finance director.<br />
Any desire to move up even further<br />
on the organizational chart?<br />
No! I want to stay away from being<br />
a city manager. I’ve seen that up<br />
close and don’t like it. I do like the<br />
added responsibilities I have as<br />
administrative services director,<br />
though. In Florence, much like in<br />
other smaller cities, administrative<br />
functions are grouped, and I enjoy<br />
working with IT. I would encourage<br />
anyone in a similar position to get<br />
involved in other projects and teams.<br />
Get exposed to new areas. I’m not an<br />
expert in IT, even though I manage<br />
it, but understanding the big picture<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 75
IN PRACTICE | INTERVIEW<br />
with IT means I can better understand<br />
the big picture with finance. The<br />
same is true with other functions and<br />
departments here at the city.<br />
Any other advice on working with<br />
staff from outside the finance<br />
department?<br />
Make sure you have a good team, and<br />
then trust them. Rely on your team<br />
to help you find the best way to solve<br />
problems.<br />
Great advice. Now a few questions<br />
to wrap up our interview. Is there<br />
anything you would do differently<br />
in your career?<br />
Start earlier. I also wish I would have<br />
been more confident in my abilities<br />
earlier on. I wanted to move up, but<br />
I let doubt creep in more than I should<br />
have. My abilities were there—I just<br />
needed to realize it.<br />
What is one thing you would change<br />
about local government finance if<br />
you could?<br />
There are a lot of things I would change,<br />
but I’m not sure everyone would agree<br />
that they would be for the better. Right<br />
now, one change I’m confident in is<br />
that GASB needs to really look at what<br />
The people I know<br />
in public finance are<br />
educated, ethical, and<br />
hardworking. They<br />
are here because they<br />
believe they can help<br />
provide the community<br />
with the best service,<br />
with what resources are<br />
available. And they care.<br />
they are doing and the impact that it<br />
has on smaller jurisdictions. Some of<br />
the most recent standards have had<br />
big monetary impacts for our city. We<br />
don’t have the staff to handle the new<br />
reporting requirements, so we rely on<br />
consultants, and they are expensive.<br />
The costs also seem to continue to<br />
grow as reporting becomes even more<br />
complicated. It takes us away from<br />
funding services or helping solve<br />
problems in our community. I don’t<br />
think GASB realizes the stress they put<br />
on small governments.<br />
What is one thing that most people<br />
outside of the profession get<br />
wrong about public finance or local<br />
government?<br />
Waste. I hear a lot that governments<br />
have no problem spending money and<br />
that employees are lazy. This makes me<br />
mad. Coming into work every day, what<br />
I see are people who chose to be here<br />
because they want to make a difference.<br />
The people I know in public finance are<br />
educated, ethical, and hardworking.<br />
They are here because they believe they<br />
can help provide the community with<br />
the best service, with what resources are<br />
available. And they care.<br />
Last question. If you had ten words<br />
to persuade someone to pursue a<br />
career in local government, what<br />
would you say?<br />
Ten words is not nearly enough, but I<br />
will say that working for government is<br />
an important job. We are trusted by the<br />
community. We can see the direct impact<br />
of our work. We can also advance in our<br />
profession and become leaders. I think<br />
I’m a pretty good case for that. OK, here<br />
are ten words: Government work brings<br />
pride in your job and your community.<br />
Mike Mucha is the deputy executive<br />
director of GFOA.<br />
76
The Right Skills<br />
for the Role<br />
AN<br />
INTERVIEW WITH GLENYS SALAS<br />
BY JARA KERN<br />
Jara Kern of Right Angle Studio spoke with Glenys R. Salas, director of<br />
budget and fiscal analysis for the City of Saco, Maine, about transitioning<br />
from the private to public sector, using data to drive better decision<br />
making and continuous improvement, and how government finance<br />
professionals can make more of their networks and connections.<br />
©<strong>2023</strong> ANNA GODEASSI C/O THEISPOT.COM<br />
Glenys has followed a<br />
unique career path to<br />
her role in government<br />
finance. After earning<br />
a Bachelor of Science<br />
in business with a<br />
focus in marketing,<br />
she moved into marketing analytics<br />
roles with Unilever, NUK USA, and Ai<br />
Media Group. In 2017, with a newly<br />
kindled interest in electoral politics and<br />
local government, she joined the City of<br />
Saco as finance director and treasurer.<br />
In the six years since, her role has<br />
expanded as she has shaped processes<br />
and planning in her community.<br />
Glenys is also active in GFOA’s Women’s<br />
Public Finance Network and serves on<br />
the board of the Maine Municipal Tax<br />
Collectors and Treasurer’s Association.<br />
Making a leap—of sector, skills,<br />
and community<br />
Early in her career, Glenys found her<br />
marketing sweet spot in data analytics<br />
roles. Business analytics unlocked<br />
opportunities to drive growth and<br />
continuous improvement—and to see the<br />
results in business growth.<br />
At the time, Glenys was living in the<br />
New York City area, but when the finance<br />
director position at the City Saco opened<br />
up, Glenys saw it as a chance to make<br />
the leap to the public sector. Located<br />
just south of the Portland, Maine, area,<br />
Saco is home to a population of 19,000<br />
residents—and is rapidly growing.<br />
The challenge lay in navigating the<br />
transition. Fortunately for her, as she<br />
recalls, “The city administrator was open<br />
to thinking differently when filling the<br />
role. He wanted to bring in someone who<br />
had a data mindset and tech experience<br />
and was willing to think creatively about<br />
what a finance director for a midsized<br />
municipality in Maine could look like.”<br />
While working in data analytics roles,<br />
Glenys had earned a master’s degree in<br />
data analytics from Villanova University.<br />
Her education and experience prepared<br />
her to understand the software and<br />
reporting side of finance in a different<br />
way. “Because I had become interested<br />
in government and we wanted to move to<br />
Maine, the role was a perfect fit.”<br />
Glenys was eager to bring her skills<br />
to her new role—and immediately saw<br />
opportunities to do so, starting with the<br />
budget process. She led two key projects<br />
for the city. The first was transforming<br />
the text-heavy budget presentation into a<br />
more visually driven, audience-friendly<br />
format. “Reporting, analytics, and data<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 77
IN PRACTICE | INTERVIEW<br />
“Reporting, analytics, and data visualizations can all make<br />
the budget easier for people to understand. So, I took the<br />
budget presentation, which was word- and number-heavy,<br />
and made it more visual.”<br />
visualizations can all make the budget<br />
easier for people to understand. So, I took<br />
the budget presentation, which was wordand<br />
number-heavy, and made it more<br />
visual with charts, graphs, and icons.”<br />
She also used her marketing<br />
background to change the budget<br />
conversation. “In marketing, everything<br />
starts with the product, and it drives price<br />
and budget. The product of government<br />
is our services to the community,”<br />
Glenys explained in relating how she<br />
repositioned the budget conversation to<br />
start with city services rather than cost.<br />
“Services are the foundation of what<br />
we do, and the foundation of a strong<br />
community. Good service delivery draws<br />
more people to a community, which<br />
results in rising property values and<br />
more revenue. This, in turn, can fund the<br />
necessary cost increases on existing city<br />
services as well as new city services.”<br />
Glenys pointed out that it took two or<br />
three years for the nature of the budget<br />
conversation to fully shift—but it did. “In<br />
the last two or three budget cycles, the<br />
conversation has been about what more<br />
we can do for the community of Saco, as in<br />
what services we can add. We haven’t had<br />
a conversation about cuts for years. This<br />
change has been great for our citizens<br />
and for our staff, who feel much more<br />
comfortable and confident in front of the<br />
council when talking about the budget.”<br />
Six years into her tenure with the<br />
City of Saco, Glenys oversees the budget<br />
process from start to finish, managed in<br />
collaboration with the city administrator.<br />
She is also responsible for all reporting<br />
related to the budget and to Saco’s<br />
annual comprehensive financial report.<br />
Glenys also administers the annual<br />
audit and leads work related to financial<br />
planning and financial analysis,<br />
including coordinating the city’s annual<br />
capital planning process, in addition to<br />
participating in several city committees,<br />
including the long-range planning<br />
committee. She is particularly passionate<br />
about strategic planning. “I love thinking<br />
about the strategic plan and how we can<br />
make it a reality. Our capital planning<br />
process now goes out 30 years, so we can<br />
think really long-term.”<br />
Glenys and her family also live in Saco,<br />
and she relishes when her work has a<br />
positive influence on the community.<br />
She describes a parking lot by one of<br />
Saco’s beaches that used to be unpaved,<br />
leading to parking and access problems.<br />
“When I first started, I advocated for<br />
paving it. It took three years of talking to<br />
the Department of Public Works, but we<br />
got it done. Now it’s paved and striped,<br />
and the parking is no longer a problem.<br />
It’s very rewarding to see the results in<br />
our community when things are done<br />
right in the finance office, as well as other<br />
departments.”<br />
Glenys sees opportunities for others in<br />
the private sector to make the transition<br />
to a career in local government finance.<br />
In her opinion, some roles make the<br />
transition more easily than others. She<br />
pointed to experience in government<br />
auditing for CPA firms or government<br />
services in banking as examples of roles<br />
that can offer fast transition. Other types<br />
of experience may require a bigger leap,<br />
but a business background provides a<br />
solid foundation. Glenys has sage advice<br />
for anyone considering the transition:<br />
“Get involved with your local government<br />
as a citizen, through committees.<br />
Volunteer your time and start to build<br />
connections with people working in<br />
local government. They will know of<br />
opportunities and open roles.”<br />
Harnessing the power of technology<br />
Glenys’s marketing background was key<br />
to repositioning the budget conversation.<br />
In much the same way, her education<br />
in data analytics has been essential to<br />
driving change in her role with the City of<br />
Saco. With her skills and experience, she<br />
has been able to identify opportunities<br />
for process improvement and shorten the<br />
learning curve for implementing systems,<br />
tools, and automated processes to go from<br />
data to decision making more quickly and<br />
effectively.<br />
She shared a few transformation<br />
examples. “When I started,” she explained,<br />
“there were a lot of workarounds because<br />
the general ledger account codes were<br />
not configured the way the reporting was<br />
configured. So, I cleaned up all the general<br />
ledger account codes because I understand<br />
both how these tables work together and<br />
how important good foundational data<br />
labeling is to reporting.” This change made<br />
78
eporting easier, more precise, and<br />
more efficient. Using her data analytics<br />
background, Glenys also changed the<br />
way capital asset infrastructure data<br />
was imported into Saco’s financial<br />
software, and she has been able to apply<br />
statistical analysis to the community’s<br />
tax bills—which has been useful while<br />
navigating a period of tax increases. The<br />
changes she has implemented have also<br />
improved forecasting, especially when<br />
it comes to tax increment financing<br />
(TIF) districts. With 30 percent of<br />
Saco’s assessed valuation captured in<br />
TIF districts, it’s important to be able to<br />
forecast anticipated revenue accurately<br />
and easily out a decade or more in<br />
evaluating such measures as 30-year<br />
bond issuance.<br />
Harnessing the power of technology<br />
has enabled Glenys and her team to work<br />
smarter. Today, more opportunities<br />
are on the horizon with automation,<br />
AI, and machine learning. While<br />
governments navigate the promise and<br />
pitfalls of these emerging technologies,<br />
Glenys noted, “AI is only as effective<br />
as the data you put it into, so if you’re<br />
not inputting really good detail on<br />
your invoice entry, capital assets, or<br />
infrastructure management, you’re<br />
going to be challenged with applying an<br />
AI model with precise output. Smaller<br />
municipalities like Saco don’t always<br />
have enough input information.”<br />
Capital planning for a growing<br />
municipality<br />
Saco’s growth has driven an increased<br />
focus on infrastructure and capital<br />
planning. Since moving into the role of<br />
director of budget and fiscal analysis,<br />
Glenys has increasingly focused on capital<br />
planning and the city’s 30-year plan. She<br />
and her team have built custom forms<br />
that allow department heads to input<br />
capital asset projects into the capital<br />
planning process at any point during<br />
the year. In addition, she has focused on<br />
importing infrastructure management<br />
“Good service delivery draws more people to a community,<br />
which results in rising property values and more revenue.<br />
This, in turn, can fund the necessary cost increases on<br />
existing city services as well as new city services.”<br />
data into the financial planning software<br />
for analysis and reporting. Recently<br />
the department rolled out a scorecard<br />
to measure sustainable funding levels.<br />
Together, these tools have helped Glenys<br />
and her team identify opportunities for<br />
continuous improvement, down to specific<br />
utilities and projects. She pointed to<br />
growth as evidence of progress: “Ten years<br />
ago, the city allocated only $60,000 a<br />
year to manage our infrastructure assets.<br />
Now, after a decade of focused work,<br />
our capital plan is $8 million annually.”<br />
The city has produced materials on this<br />
transformation to share the process and<br />
results with other midsized municipalities<br />
undertaking capital planning.<br />
Maximizing the benefits<br />
of membership<br />
Glenys is a member of New England<br />
States GFOA and Maine GFOA, as well as a<br />
member of GFOA’s Women’s Public Finance<br />
Network (WPFN). She is a frequent<br />
contributor to GFOA’s online member<br />
communities. She also serves on the board<br />
of the Maine Municipal Tax Collectors and<br />
Treasurer’s Association. Ultimately, she<br />
sees membership and participation as<br />
express routes to accessing information<br />
and building a vibrant network.<br />
“Coming from the private sector, I<br />
had a lot of questions, and I didn’t know<br />
where to go for answers. GFOA’s online<br />
member communities offered great<br />
guidance, including a suggestion on a<br />
capital planning software that I’ve just<br />
implemented. I also enjoy providing input<br />
to others. Whether you log in once a week<br />
or once a month, it will benefit you.”<br />
She values building relationships<br />
through WPFN that help her better balance<br />
work and home, as well as accessing<br />
robust training and certification through<br />
the Maine Municipal Tax Collectors and<br />
Treasurer’s Association. Some smaller<br />
communities in Maine may not have<br />
their own finance officer, so participating<br />
in the association is a way to build<br />
connections across the state. “Building<br />
your network through membership<br />
and participation is one of the best<br />
ways to advance your knowledge and<br />
make new connections. It’s absolutely<br />
worth the time you invest in it.”<br />
Jara Kern is a marketing strategist at<br />
Right Angle Studio.<br />
OCTOBER <strong>2023</strong> | GOVERNMENT FINANCE REVIEW 79
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©<strong>2023</strong> MICHAEL AUSTIN C/O THEISPOT.COM
ASSURED GUARANTY MUNICIPAL CORP. — ASSURED GUARANTY CORP. — NEW YORK, NY<br />
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ASSURED GUARANTY MUNICIPAL CORP. — ASSURED GUARANTY CORP. — NEW YORK, NY
Start the journey<br />
GFOA's Cerrfied Public Finance Officers (CPFO) program is designed to prepare individuals for<br />
leadership posiions in state and local governments by enhancing fundamental skills and increasing<br />
knowledge of best praccces and standards in public finance.<br />
Download our candidate guide<br />
to get started.