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MAKING LIBRARY BUDGETS
Instructor:Anne M. Turner
An Infopeople Workshop
Winter 2009
This Workshop Is Brought to You By the Infopeople Project
Infopeople is a federally-funded grant project supported by the California State Library. It provides a wide variety of training to California libraries. Infopeople workshops are offered around the state and are open registration on a first-come, first-served basis.
For a complete list of workshops, and for other information about the project, go to the Infopeople website at infopeople.org.
Introductions
• Name
• Library
• Position
• How many budgets have you created?
Today We Will Talk About
• Creating a library budget
• Privatizing and contracting out
• Cutting the budget
• Revenue Sources
• Making the Dry Creek Library Budget for FY 2009-10
Dry Creek--a Garden Spot in California
Notes on the City:
• 76,000 people on edge of Central Valley
• Gated communities built outside demand service
• Economy impacted by shift in agricultural processing overseas
• Budget exceeds revenues
Notes on the Library
• Department of City of Dry Creek• Advisory Board• Three facilities: Main Library, Barely
Adequate Branch, and Abysmal Branch• 38,591 registered adult borrowers, 10,732
registered kids• 503,600 checkouts last year • 51 FTE staff (14 librarians, 37 others)
Creating A Public Library Budget:
What’s In It And How Did It Get
There?
Three Elements
• Personnel
• Supplies & services
• Capital outlay
Personnel
• 68% of the Dry Creek Library budget is for personnel.
• 25% of the Personnel amount is benefits, which are 35% of salaries
• Look at how personnel costs are spread across the Library divisions
Dry Creek Library Personnel Expenses by Library Division
Supplies & Services
• Objects that are flexible – Library materials or training
• Objects that are not– Electricity or rents
Exercise #1
• Look at the Dry Creek Library Budget Summary on Page 8. Working together, identify which items are flexible and which are not.
• Total up each column
Why Is This Important?
• Inflexible item cost is going up 5%
• Must hold budget to 2.5% increase
• Where’s the difference going to come from?
The Flexible items or Capital Outlay?
Capital Outlay
• Capital Outlay is comprised of all the equipment and other items costing more than $5,000 each, plus a summary line for all those things in the under $5,000 category.
• Shelving, shelving, shelving, and computer equipment
But Capital Outlay also includes. . .
• Big repair or building maintenance items, like $40,000 for the new roof at the Main Library or $25,000 to re-do the HVAC system.
The Budget-making Process
1. Get requests
2. Establish the cost of the inflexible items
3. Create Draft #1
4. Ask Questions and Cut
5. Create Draft #2
6. Take it to the Board, to City or County management, and to the Council or Board of Supervisors
Draft #1: Everything’s In
But everything’s questionable too
The “What-Why-What If-Couldn’t We?” Model
• What is the problem the item or service will solve or program will support?
• Why do we need this particular item, and not some other?
• What If we don’t buy this item or service
• Couldn’t we save money by buying or doing something else?
Exercise #2Analyzing & Asking Questions
• Look at the Object from the 2006-07 Dry Creek Library Budget assigned to your table. Pretend this is a request for
2009-10
• Using the “What-Why-What If-Couldn’t We?” model, develop a list of specific questions about the items requested.
Adding A New Program
• New programs easier to add
• More $ for day-to-day needs is harder
• Package as a new service?
Elements Of A New Program Proposal
• What is the need?
• Who will be served?
• Why is the library the best group?
• How much will it cost?
• How much will it save?
Draft #2: The ‘Final’ Draft
• Put everything together to achieve a final number you think you can live with.
• Take it to the Library Board• Objective is to get active support• Present the new program• Talk about the imperatives of the new roof or
whatever • Add what Board members can’t live without
The Guys In Suits
• The City Manager and the Finance Director will both look over the ‘final’ budget
• They too will wonder why, ask questions, and suggest/demand changes
And Finally
• Present to City Council or the Board of Supervisors
• Their questions
• The role of the library board at the presentation
Other Budgeting Methods
• Program budgets
• Performance budgets– See also PPBS
• Multi-year budgeting
• Zero-based budgeting
Exercise #3
A Program Budget for the
Young Adult Services
Grant Proposal
Privatizing & Outsourcing
A.K.A.
“The private sector can
do it cheaper”
Privatizing
• Def: moving a whole department or function of government into the private sector.
• Ex: Waste Water Treatment
State Prisons
Libraries
OutsourcingA.K.A. Contracting Out
Def: Hiring other people to do a piece of work that is not key to the organization’s primary mission.
– Shipping and delivery– Telecommunications– Janitorial Services
Privatization
• A matter of political philosophy
• Elected officials make privatization proposals to solve difficult political or budget problems.
How Does A Private Firm Like LSSI Save Money?
Two ways:
• Takes the employees out of the public sector benefit system
• Centralizes back-of-the-house services
Pros Of Privatizing Libraries
• Cheaper
• Consolidating can make economic sense
• Gets rid of a department the elected officials don’t understand
• No need to negotiate a regional alliance
Cons of Privatizing Libraries
• Cost savings are ephemeral at best. What about next year?
• Unfair to library workers
• Who will advocate for library services?
• Puts a beneficial public service into private hands
• Reduces public accountability
Contracting Out
• “We’re not in the cleaning business. We’re in the city government business. It is a waste of our resources to be spending as much time as we do supervising janitors.”
A City Manager
Analyzing A Proposal To Outsource
• Four elements:– What needs doing– Direct costs– Indirect costs– Social costs
What Needs Doing?
• Develop a detailed specification list
• Be careful what you wish for
• Develop objective measures for the quality of the service
What Are Direct Costs?
• Identify using janitorial services
What Are The Indirect Costs?
• Biggest is damage to employee morale and productivity of the existing in-house workers
Social Costs
• Called the “negative externalities”
• Failure to calculate these makes the price of the product artificially low– Air pollution example
Social Costs Summarized
• Loss of equity
• Loss of public participation
• Loss of accountability
• And a final question: will the outsourced contract be particularly vulnerable to budget cuts because public employees are not doing the work?
Library Core Functions: Could They Be Outsourced?
• Cataloging and Processing
• Reference Service, Virtual and Otherwise
• Story Hours
• What else?
Exercise #4
Outsource the Work of Five Dry Creek Library Employees
The Bottom Line
• Outsourcing can be a useful tool
BUT
• We have to define and protect our core competencies
• We have to be sure to compute all the costs
Cutting The Budget
• The bad news:
The Dry Creek city manager has imposed level funding on all departments for the new fiscal year
What Does This Mean?
• Personnel slated to increase 4% = $147,119
• Fixed cost items will increase 2.5% = $23,125
• You have to find cuts worth $170,246 in the FY 2008-09 budget
Evaluating Potential Cuts:Four Criteria
• Will the cut be visible to the public?
• Is it a short or long term cut?
• Does the cut require staff layoffs?
• Which library constituency will be most affected?
Visibility
• Public must understand it costs $$ to run the library
• Invisible cuts help people think that the library can continue to deliver services with less and less money
• Hard to get invisible cuts restored
• What are some visible cuts?
Short or Long Term Cuts
• Is the city-imposed cut temporary or long-term?
• Can we live without this item forever?
Long Term Cuts are Hard to Achieve
• Closing a branch, reducing open hours, etc.
• They involve painful staff layoffs, but that isn’t what makes them hard to achieve
• It’s the politics
Will It Involve Staff Layoffs?
• Almost always, the layoffs are at the bottom of the library staffing array
• BUT: easier to get back support staff to restore open hours than a reference librarian
• Watch out for bumping rights
53
Which Constituency Is Most Affected?
• Who benefits? Nobody.
• Who is hurt the most and what kind of power do they have?
• Again, a political issue
54
Three Things To Avoid At All Costs
• Cutting off your nose to spite your face
• Allowing groups to pit one branch or service against another
• Handing the issue to a candidate for office
Exercise #5
Cutting The Dry Creek Library Budget
Don’t Take It Personally
Revenue Sources
Where do Dry Creek and the Library get their money?
The Four Basic Taxes
– Property tax– Parcel taxes– Sales taxes– Excise taxes
Property TaxesA.K.A. Real Estate Taxes
• Ad valorem; based on the assessed value of the property
• The chief source of revenue for local governments in the U.S.
• Tax limitation measures like Prop 13 require workarounds
Three Other Points:
• Tax rates: what people pay depends upon the assessed value of their property, and the rate set by the governing body
• Property taxes are flexible
• Not all property is taxed Churches, schools, libraries, government
buildings, and university and community college campuses are exempt
Parcel Taxes
• NOT Ad Valorem
• A fixed amount placed on every property to (usually) do something specific.
• A favorite of the schools--$21 on every property for class size reduction
Sales Taxes
• Have to have something worth taxing
• Respond to the economic cycle: collections are good when times are good, but go down when times are bad.
• The “Point of Sale”
concept
Excise Taxes
• Taxes on specific commodities produced within a nation.
• A way to tax wealthier people, and also to “control” use of harmful substances—tobacco, alcohol, etc.
Impact Fees
• A fee imposed on the developer of a new housing project
• Compensates for the city resources in place that the new residents will use
• Not enormous, but better than NO fees
Borrowing Money
• “G.O.” Bonds, or General Obligation Bonds
• Revenue Bonds
• Special Assessment District Bonds
• Tax Increment Financing
• “C.O.P.s” or Certificates of Participation
• Impact Fees
An Important Fact About Borrowing Money
It has to be paid back!
Other Revenue Sources
• Fees and Fines
• Gifts and Bequests
• Grants
• Fundraising
Where Does The City or County Put The Money It Collects?
• It puts it into funds– Enterprise Funds– General Fund– Library Fund– Internal Service Fund
Funding The Dry Creek Library Projects
• Different money for different projects
• Planning and talking about what’s coming
Economic Growth
• A city’s whose growth is limited to the 2.5% annual CPI increase is NOT growing and is in economic trouble
• It has to find ways to increase economic growth beyond the 2.5% rate, because the cost of doing business grows faster than the CPI
Exercise #6
Making the Dry Creek
Library Budget for FY 2009-10
Are we done yet?
Nope. Not until you have filled out and turned in your evaluation forms