Mayor’s Plan for Zero-Based Budgeting
During Houston’s Fiscal Year 2020 budget workshops, Council Member Mike Knox proposed, and successfully added, a budget amendment that would require the city to pursue zero-based budgeting and now, the administration has released a plan to implement the new process in 2021.
Budget workshops are one of the few opportunities when council members have the opportunity to directly propose an item and have it voted on by the full council. Typically, any council member-proposed item doesn’t get added to the agenda without mayoral approval, so this provides a rare, but powerful opportunity for council members.
“We’ve got to start somewhere,” Knox said, “we’ve been talking about this for a long time,” before rolling out his amendment which reads as follows:
“All City departments shall adopt a zero-based budgeting method for Fiscal Year 2021 only. Traditional incremental budgeting is based on the assumption that the “baseline” is automatically approved. By contrast, zero-based budgeting starts from a “zero base,” and every function within an organization in analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period. A report from the Administration shall be delivered to Council on plans for implementation of FY21 zero-based budgeting by November 1, 2019.”
Simply put, the amendment requires city departments to start from a zero-dollar baseline and justify expenses when crafting their budgets for 2021. This is a change from incremental budgeting which assumes all previous expenses were justified and uses that as the baseline moving forward.
The report from the administration says they pulled information from industry groups and communicated with the City of San Diego to draft implementation plans.
Fiscal Year 2021’s zero-base budgeting will focus on the city’s General Fund only. This is the fund derived from revenue from property and sales taxes, fines and fees, licenses and permits, and charges for fees. With 23 different departments within it, the General Fund is the city budget’s largest portion.
Most importantly, zero-based budgeting for 2021 will focus on some of the biggest-ticket departments including the Mayor’s Office, City Council, City Controller, the Fire Department, the Police Department, Solid Waste Management, to name a few.
Because of the time-consuming nature of zero-based budgeting, the 2021 budget process is expected to start earlier.
According to the administration’s timeline, departments will receive budget forms, training will be completed, and they will start to build budgets in December of 2019. The plan will also require the city to first establish priorities and departments to identify core services.
Budget workshops will be moved up, as well. The plan calls for them to begin in March of 2020, rather than in June, like this year’s budget. The 2021 budget will be compiled in April, proposed by the mayor in May, and considered by council in June of 2020.