Problem Identification:
The City is perpetually challenged to close a sizeable gap between General Fund expenditures and revenues.

Recommended Action:
Develop ‘target budget plans’ for all City departments at the beginning of each fiscal year that establish spending goals and applicable revenue requirements at levels slightly below adopted appropriation levels.

Cost Savings, Organizational

Functional/Operational Area:

Estimated Annual Impact:
$2,100,000 – $12,800,000

Estimated Implementation Costs:

Barriers to Implementation:
Reluctance to adopt a new approach to budgeting.

Projected Implementation:

Next Steps:
Instruct the Finance Department to establish appropriate target budget plans for all City departments.

Baltimore’s municipal government functions on a July 1 to June 30 fiscal year. Budgetary planning for the next fiscal year, however, begins in the fall of the current fiscal year. Departments are provided with instructions for developing funding requests that are ultimately submitted to the Finance Department. These submissions include ‘target budgets’ that essentially detail what departments would like to have for the next fiscal year and ‘current level of service budgets’ that purportedly represent departments’ absolute minimal funding needs to maintain the level of service delivered during the previous fiscal year. The final budgets approved by the Finance Department and transmitted to the Board of Estimates and City Council fall somewhere between the ‘target’ and the ‘current level’ submissions.

When dealing with multi-million dollar budgets, resourceful financial managers are capable of squeezing modest efficiencies and cost savings from a number of budgetary cost centers. Following the appropriation process, City managers should be directed to limit their department expenditures to a level slightly below the legally appropriated budget. These savings can be easily accomplished by delaying the hiring of non-critical personnel, delaying or reducing purchases of materials and supplies, or not expending the fully budgeted amount for a professional services contract. While a budgetary savings of less than two percent of a department’s budget might seem inconsequential, when aggregated across the totality of the City’s General Fund budget, the savings can be significant.

Utilizing information from the FY2000 Adopted Budget, were the City to institute incremental budget savings plans for just its General Fund expenditures and achieve a total cost reduction of between .25 and 1.5 percent of its General Fund budget by having departments manage to the incremental budget savings plan as opposed to the adopted appropriation levels, a total cost savings of between $2 and nearly $13 million could be achieved.