Budget Planning 101

If you've been watching the news, you noticed that all of the cities in this area have made some drastic cuts to their budgets. The cities of Hattiesburg, Laurel, Petal, Poplarville, Purvis, Columbia and Wiggins announced that they will not have any pay raises during FY (fiscal year) 2012 and they will be limiting all overtime pay, but the City of Lumberton has a different approach to budget planning. Clearly, Hattiesburg, Laurel, Petal, Poplarville, Purvis and Columbia has several revenue generating businesses within their city limits, but they still found it necessary to stop pay raises and overtime pay. But the City of Lumberton is including an $8,000 pay raise for Stephanie Mullings and Dennis Hobson in the 2012 budget. How are they planning on paying for these two increases in salary? At the last meeting, Kent Crider suggested that the City of Lumberton look into raising the fee for services like background checks, fingerprinting and notary. Currently, the City of Lumberton charges $5.00 for background checks, $25.00 for fingerprinting and $5.00 for having documents notarized. In contrast, the City of Purvis charges $5.00 for background checks, $10.00 for fingerprinting and notary services are free. Kent Crider's proposal to increase the fee on those services will not generate enough revenue to cover $8,000 in pay raises. I don't understand how a city that's not generating revenue expects to continue giving out pay raises. There's another budget workshop scheduled for next week, and here's a few tips on how they should try and approach the budget for the City of Lumberton:

1. Start with your list of account and list out expenses for the year. If the expense is a variable expense, look at last year’s total and divide by twelve. That should give you a starting point for a predictable forecast.
2. When preparing your expenses, look closely at where you exceeded budget in the prior year. Why?
3. After expenses, it is time to start looking forward for revenue projections. You can’t make predictions without looking at past performance. When forecasting monthly revenue goals for the upcoming year, ask these questions:

A. Did we meet goal last year? If not, Why?
B. What percentage of growth from the prior year was forecast? What was the actual? C. If there is a trend, it can help you prepare your “percent growth over last year” goals.
D. What are your targets for next year? Where did they come from?
E. Are there any new services/options/enhancements/price increases we can expect in the next year? This may increase your revenue goal.
F. Are there any indications in the SWOT (Strengths, Weaknesses, Opportunities and Threats)analysis that will potentially curb your growth?

Preparing an annual budget is a great exercise in “diving deep” into your core business and setting milestones and expectations. In a city that's not generating revenue, and showing a great deal of losses (especially in the water department); giving pay raises will result in a great financial step backwards for any city. The City of Lumberton needs to pay attention to the surrounding cities; if these revenue generating cities are making cuts in every department, one would think Lumberton would follow suit.