Presentation at the 2014 MD GFOA Summer Conference Holly Sun,
Deputy Director of OMB, Prince Georges County, MD and Ph.D.
Candidate, George Washington University June 20, 2014 Multi-Year
Projections & Fiscal Planning in Local Governments Status and
Impact
Slide 2
Background 2 State and local government sector continues to
face near-term and long-term fiscal challenges that grow over time.
- GAO projections in April 2012 A long-range fiscal planning
framework and has been advocated by professional organizations as a
promising approach/tool GFOA: long-term financial planning World
Bank: medium-term expenditure framework (MTEF) Limited information
on the actual practice among local governments
Slide 3
Questions 3 Are multi-year fiscal planning and projections
widely used among local governments? How are they implemented?
(design, process, players, etc.) Does such a practice make a
difference? How to make multi-year projections and fiscal planning
more effective?
Slide 4
2013 Survey (Spring) Survey developed in collaboration with
GFOA to study the practice and perceived impact of multi-year
fiscal planning and projections among local governments with a
focus on the General Fund Distributed to approximately 1,341 GFOA
Distinguished Budget Presentation Award winners, with 559 responses
(41.7% response rate): 537 local governments from 44 states (344
municipalities, 91 counties, and102 special districts such as
schools, parks, transit authority, etc.) 2 state governments 20
local & provincial governments in Canada 4
Slide 5
Is Multi-Year Projections and Fiscal Planning Widely
Implemented? 5
Slide 6
Wide Implementation More than 78% of responding governments
reportedly implement multi- year projection for the General Fund.
The percentages are also high for multi-year planning practices for
CIP, fiscal policies, strategic planning, and other funds. 6
Slide 7
Comprehensive Multi-Year Frameworks Many governments use a
comprehensive multi-year fiscal planning framework with multiple
components over 59% reportedly implement at least five out of the
seven listed multi- year practices. 7
Slide 8
Increased Momentum Among the responding governments, the
portion that adopts multi- year projections for the General fund
has increased significantly in the past two decades. 8
Slide 9
How are these multi-year frameworks developed and implemented?
Design, Purpose, Players, Process, etc. 9
Slide 10
Comprehensiveness of Document Most of the reported multi-year
projections and fiscal plans include key revenues, expenditures and
projected fund balance, but less than half of them offer solutions
or scenarios to address identified issues. 10
Slide 11
Transparency & Communications Most projections results are
presented to critical decision makers the legislative authority
(84.0%) and the executive authority (70.6%). Slightly over one
fifth of the governments present projection results to five or six
stakeholders; about one third share the results with three to four
listed stakeholders; 44% inform only two stakeholders or less.
11
Slide 12
Central budget/finance offices reported play a critical role in
developing multi-year projections. Other main players include:
senior management (nearly 90% of the time) individual departments
(three fourth of the time) the legislative authority (slightly over
50%) Other players (citizen advisory boards, revenue/expenditure
panel, etc.) are less frequently engaged. Engagement in Multi-Year
Projections / Planning 12
Slide 13
Close to half of the responses indicate that their multi-year
expenditure projections either have no observed linkage with the
governments long-term strategic plans or are primarily driven by
other factors. The rest respond that their multi-expenditure
projections largely match strategic priorities by sector (e.g.,
public safety) 17% Department 26% Program 10% Integration With
Strategic Planning 13
Slide 14
Key Challenges / Obstacles 14 Lack of confidence in projections
for out years Administrative burden Concerns on its usefulness
Difficulty to integrate multi-year projections with long-term
strategic priorities Lack of interest from the elected
officials
Slide 15
Does Multi-Year Projections and Fiscal Planning Make a
Difference? 15
Slide 16
Impact Evaluation Framework Survey respondents asked to provide
ratings (0=no impact, 1=little impact, 2=some impact and
3=significant impact) on multi-year fiscal plannings effect on
improving five aspects: Fiscal discipline and long-term fiscal
sustainability Allocation efficiency (match strategic priorities)
Operation efficiency Agencies involvement Transparency / Citizens
understanding Note: the five aspects are primarily based on the
framework used by the World Bank and IMF to assess the
effectiveness of MTEFs and public finance management 16
Slide 17
Effectiveness Perceived High In particular, 90% responses
indicate that multi-year fiscal framework has an impact on fiscal
health, and 60% believe this impact is significant 17
Slide 18
How To Make Multi-Year Projections and Fiscal Planning More
Effective? Survey Responses Statistical Analysis Results 18
Slide 19
Strong Purpose and Clear Targets Multi-year projections and
fiscal planning is designed to not only inform on trend and issues,
but also to help achieve clearly identified fiscal/strategic policy
goals, such as: Certain fund balance level A structurally balanced
budget Improved performance on priority services 19
Slide 20
Quality Projections and Presentation Quality Accuracy,
Comprehensiveness, and Simplicity Engage stakeholders and experts
to improve projection accuracy Include detailed assumptions,
analysis and implications Use graphs and bullets to deliver key
messages Strategies / options / scenarios needed Showing strategies
/ options to address the predicted fiscal issues is critical to
facilitating candid dialogues among key stakeholders regarding
tradeoffs between options and consensus building Integration
Projections/plan closely reflects multi-year strategic priorities
rather than showing a status quo scenario alone 20
Slide 21
Collaboration and Transparency Involve key players in the
development of multi-year projections/plan development to improve:
quality of the projections understanding of fiscal outlook
consensus building on priorities Communicate results of the
multi-year projection results with key stakeholders Facilitate
strategic discussions for understanding and decisions 21
Slide 22
Integration with the Annual Budget Present multi-year
projections to the legislative authority (Council) before or during
the annual budget reviews Make the multi-year fiscal outlook and
planning an official component of the annual budgeting process
On-going modifications, evaluation and follow-up 22
Slide 23
Summary of Success Factors Survey ReponsesStatistical Analysis
Results 23 Quality of multi-year forecasting On-going
modifications, evaluation and follow-up Multi-year projections made
an official component of the annual budgeting process Support or
buy-in of elected officials Collaborative approach
Comprehensiveness of the multi-year projection/planning materials
Strategies / Options included Multi-year projections/planning
designed to achieve a structurally balanced budget or certain level
of fund balance Integration between projections and multi- year
strategic priorities at a detailed level Multi-year projections are
presented to the legislative authority (council) before or during
the annual budgeting reviews Engage more players in developing
multi- year projections Projection results are presented to more
stakeholders
Slide 24
Conclusion Multi-year Projections and Fiscal Planning can be an
effective policy tool that helps improve decision making and fiscal
health Its success lies in the fundamentals (e.g., the quality of
projections and presentation materials) as well as its ability to
inform decision makers and facilitate candid dialogue among key
stakeholders regarding priorities and strategies to reach policy
goals in a multi-year framework Certain factors (purpose,
comprehensiveness, collaboration, integration level, etc.) prove to
be critical to its effectiveness 24
Slide 25
Reference and Contact More details regarding findings from the
survey can be found in an article by Holly Sun (Improving the
Effectiveness of Multi-Year Fiscal Planning) published on
Government Finance Review, February 2014 Feedbacks, questions, and
experiences to share are welcome Contact: [email protected] or
[email protected]@[email protected] 25