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June 21, 2005 > Editorial: The Operating Budget, what does it mean to you?

Editorial: The Operating Budget, what does it mean to you?

Corporate annual statements strive to inform stockholders of cash flow, operations and the general health of a company but recent indictments of high-level executives have shaken the financial foundations of America. How could these things happen when annual reports are mandated by law? Apparently, it is easily done when CEOs and auditors hide transactions and manipulate numbers without fear of scrutiny. The old saying, "Figures never lie, but liars figure" can have multiple meanings and shades of truth.

City operating budgets are interesting and revealing documents. Unfortunately, though these are available for public scrutiny, few read them and even fewer take time to understand what is going on. Cities are charged with multiple tasks and therefore use a variety of funds to try to clearly define what monies are designated for each area of responsibility. Some funds are received as "restricted," and can only be used for specific purposes, while others are general but may be deposited in accounts that have been named for a specific purpose. An Operating Budget will show a variety of accounts that allow each department to understand where its money is coming from and how much they have to spend. However, some accounts are set up, not due to a restriction from an outside funding entity, but rather by the direction of city council. These accounts can be opened for a specific project or as an "opportunity fund" (Fremont used an opportunity fund and possibly other accounts for the Poe Dam debacle).

If a city decides to build a new town hall, there may be funds available from outside sources to help do this but let's assume there are no such funds. The new building will cost $10 million. Taxes due to the city are paid and collected. To save the money, the city sets up fund #809 to receive $1 million each year over the next 10 years. Each time the Operating Budget is shown, Fund #809 will reflect the deposit but is separated from the General Fund assets. In five years, the city will have deposited $5 million in the Fund #809 and include accumulated interest.

What happens if the city runs into hard times and the General Fund is unable to receive enough revenue for operations? In most cases, a reserve fund has been developed to help during the crisis. A close look at operations may also reveal areas that can be streamlined to cut costs. But, don't forget the $1 million dollars being deposited each year into the new town hall fund. When things get really tight, that contribution can be reduced or deferred. Although the fund has been set up to receive the annual contribution, there is no requirement that the city do this.

A question for councilmembers is how to best use resources before coming to their constituents crying "poor." Remedies, as painful as they may be, must all be explored before tapping citizens on the shoulder and then, pocketbook for more money. Is money being held in accounts that can be transferred to the General Fund? Are contributions being made that can be deferred?

An average citizen may not have the time or inclination to read the budget for their city, but by breaking it down into manageable parts, a person can watch a particular portion of it to see if projections and expenditures are reasonable. For instance, those interested in the parks and recreation services of a city will find that area covered in the budget and can monitor what is going on.

Looking at projected income and expenses may be comforting or raise questions. In some cases, questions of why expenditures are included or omitted can cause serious thinking by city officials. This is true citizen participation and will create meaningful dialogue. Whether comment is about historic preservation, a park, building maintenance, salaries and benefits or a myriad of other issues, constituent input is imperative for healthy government.

You can participate by simply reading a few pages of the Operating Budget of your city usually found on a website or at city offices. Surprisingly, many parts of the budget are easy to read and understand.

Local City Websites:

www.ci.fremont.ca.us
www.ci.newark.ca.us
www.ci.union-city.ca.us
www.ci.hayward.ca.us
www.ci.milpitas.ca.gov

 
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