Franchise fee increase not needed
The one-year franchise fee increase to generate approximately $0.8 million to provide additional support to the schools was not needed.
The support was available from existing city resources. From early June when the budget was approved to the September estimate of fiscal year end results (June 30, 2011), the estimated general fund favorable variance in a $43 million budget increased from $0.5 million to $2.3 million. This is in addition to the mid-year 'sweep' of $0.5 million. The favorable variance improved from last year's favorable variance but is still too much. Staff did a good job producing a favorable budget variance.
Good information means good decisions. State budgeting law is conservatively biased when it comes to putting a budget together. There are more downsides to spending more than budgeted than there are upsides to spending less. The trade-off of budgeting too conservatively is not spending enough on basic programs (e.g. road or pathway maintenance) or holding the line on tax/fee increases (e.g. property taxes or franchise fees).
What does this mean for future budget/policy choices for the city?
General Fund budget revenues - the process for the budget for the year ahead produces a number for ongoing general fund revenue (property taxes, franchise fees, intergovernmental, fees, fines and forfeitures, etc.) that is very, very good. We can always do better, but the current budget process for revenue is very, very good. For 2010/2011 the favorable variance of $241,000 in a $43 million budget is excellent.
General fund budget expenses - budgeting for the year ahead of ongoing general fund expenses is OK (not as good as the revenue side, but nonetheless OK). The 2010/2011 results are about 5 percent positive.
When preparing the budget there are limitations due to Oregon state budget law. The expense budget for any year generally ends up high. In early September, the 2010/2011 general fund estimated favorable variance was $1.1 million in compensation (payroll plus benefits), $962,000 in materials and services and $130,000 in interest expense. There is nuance in policy and detail and you have to drill down, but better budgeting could have been done.
Current year actual to budget and forecasting - we can do significantly better in staying more aware of the status of general fund expenses. In 2010/2011 the $1.1 million favorable variance on payroll/benefits, the $962,000 favorable variance in materials/services and the $130,000 favorable in interest expense should not have come as a surprise. If council had known, different decisions might have been made in the budget process (e.g. not increasing the franchise fee for one year, increased funding for roads and pathways, offsets to the 3 percent increase in tax assessed property value, etc.).
The council used to receive a monthly one page financial summary. It should do so again.
Next budget year - the next budget year is based on the current year budget and current year estimates. If either of those numbers are significantly off, then policy choices for the next budget year can be distorted.
Between sublimely vague and ridiculously precise estimating of results, we can do better budgeting/monitoring of our dollars. If we had done better, schools would have been supported and the one-year franchise fee increase would not have been needed.
Jeff Gudman is a member of the Lake Oswego City Council. He notes that his views are his alone and not those of the council.