Shifting Paradigms: The Case for Forward Budgeting in Government Leadership

Stacey Lea Flanagan, Director, Health & Human Services, City of Jersey City

Stacey Lea Flanagan, Director, Health & Human Services, City of Jersey City

Stacey has nearly 20 years of university teaching experience as an adjunct for New Jersey City University, Touro College, and the Graduate Program for International Affairs at The New School. She also worked with the National Development Corporation of Costa Rica to provide training and technical assistance to local municipalities, develop small enterprise businesses with women, and plan programs supporting alternative education for adults.

What recent trends and challenges have you noticed in program budgeting that you think are important?

In the post-COVID era, one of the key challenges in budgeting is the alignment of needs with new government grant dollars, which may not always meet the requirements. I've been reflecting on the dynamics of budgeting, program design, and strategic planning within government, and it seems there's often a mismatch. This situation prompts reflection on whether the issue lies in poor budgeting practices or ineffective strategic planning within government entities.

Often, it seems we're budgeting backward; the government allocates funds first and then expects us to fit our activities within those financial constraints. This approach contrasts sharply with the conventional method taught in schools about budgeting: assessing all costs, projecting expenses monthly, multiplying by 12, and allowing for a buffer. In government settings, the reverse often occurs – a fixed dollar amount is assigned, and organizations must mold their plans to fit within that financial framework. This adaptation process can be exceptionally challenging. I've been pondering strategies for government leaders facing challenges in forward budgeting. Specifically, I'm considering the concept of budgeting in reverse versus budgeting proactively.

Budgeting forward involves innovative leadership, often driven by private funding, while budgeting backward is when the government dictates available funds, and leaders must fit programs into that financial framework. Balancing these approaches is challenging in government leadership, where the difficulty lies in ensuring programs are adequately funded for effective operation and evaluation. Evaluating programs is crucial for justifying their impact, potentially leading to additional funding, but it's often overlooked due to the constraints of backward budgeting. To enhance the effectiveness of government leadership, there should be a shift towards encouraging forward budgeting, allowing for more flexibility and strategic planning.

“Encouraging forward budgeting is essential to enhance the effectiveness of government leadership. This approach fosters greater flexibility and enables strategic planning, ensuring a more proactive and adaptive governance.”

What prevailing misconceptions surround budget forwarding, and what do you perceive as the prevalent trends in the market?

In government, we allocate budgets for current objectives several years in advance, yet market dynamics evolve over time. The current budget that I'm working off of in my organization stems from several different arms of the federal government, and some of those proposals we submitted were made in 2022. However, only recently have we gained access to those funds. In the interim, significant changes have occurred, such as the impact of the Great Resignation leading to a shortage of skilled professionals, requiring us to pay higher prices for services. Government delays, including the lack of a clear budget for the current fiscal year that started in October, hinder our ability to be visionary. So when advocating to drive change within the government, presenting a vision with budgetary considerations becomes challenging, especially when implementation timelines are extended, making it difficult to project and adapt to changing circumstances. Government grants further limit our ability to adjust projections in response to dynamic market conditions.

Is there a need for advancements in technology to better manage the current system, or are there more effective operational methods that could be implemented with improved tools?

Technology often proves beneficial for budgeting by facilitating comprehensive evaluations compared to hiring external experts for organizational assessments. Individuals can easily provide feedback through digital forms, and aligning budgets with systems can be efficiently managed. However, the changing nature of technology costs poses a challenge. For instance, last year, our staff envisioned a program utilizing tablets, only to discover that it is only compatible with Apple iPads, which are $300 more expensive than Microsoft tablets. This oversight has led to a delay in implementation due to inadequate budgeting. The unpredictable costs of technology are further exacerbated by private investors, as prices are influenced by trends and preferences rather than actual needs. Consequently, if a technology becomes trendy, its cost may escalate rapidly. New technologies that were relatively inexpensive a year and a half ago may now be subject to increased pricing due to heightened investor interest and funding. This trend has a notable impact on budgeting processes. Unlike the traditional inflation rate, which historically hovered around 3 percent, the post-COVID inflation rate now stands closer to 9 or 11 percent, varying depending on geographical location and other factors. This substantial increase in inflation significantly alters the landscape of budgeting, as organizations continue to operate based on budgetary projections made months in advance.

How do you anticipate the future development and trajectory of budgeting?

Understanding the calendar system of government grants and their entities is crucial for effective budgeting and staying ahead of the curve. When I began working in government 11 years ago, I didn't anticipate that executing a project would take up to two years. In the nonprofit sector, implementing a project might take six to eight months due to waiting for the next fiscal year. However, in government, delays can extend to two to three years, significantly impacting workflow. Consequently, it's essential to factor in an additional 10-15% in traditional program designs or budgets to account for potential changes or increased costs over time. What a car cost before COVID-19 versus what a car costs today is dramatically different, accompanied by a slowdown in the supply chain. For instance, if you placed an order for a car in 2020, you might have received it in early 2023 or 2024. However, if you ordered a car in 2024, it could cost you 20 percent more than it did three or four years ago. Such fluctuations highlight the importance of proactive budgeting. Many leaders in government tend to focus on fulfilling budgets rather than learning to budget forward. It's crucial to provide support and training to help individuals develop budgeting skills, enabling them to allocate resources effectively for upcoming needs. Often, individuals in government and nonprofit sectors find themselves in leadership roles without proper training or preparation, relying on accidental promotions. By investing in capacity building, professional development, and technical assistance, we can empower leaders to anticipate and budget for future requirements more effectively.