Step 1 - Forecast Revenues and Expenditures
Annually, prior to the start of the budget process, the Office of Management and Budget (OMB) prepares a preliminary multi-year forecast of revenues and expenditures. The forecast process is our best effort to understand and predict our financial future. Historical trends, current events, and predictions of future economic indicators are incorporated into the forecast. An accurate and comprehensive forecast process helps prepare for potential adverse events and circumstances. It provides a framework that assists elected officials and executive team in making important decisions about Mesa's direction.
Analyzing historical financial data allows for the identification of seasonal patterns. The data provides context to our current financial state. Historical data helps us anticipate when, and to what extent, to expect different revenues and expenditures during the course of the fiscal year.
Once identified, these patterns are considered in relation to current events on the national, state, and local levels. Considering these events and their effects on Mesa's financial situation is another important part of forecasting future conditions. Federal fiscal policy, state budget decisions, and local housing permit levels are all examples of factors that impact our budget.
In addition, data predicting future economic trends is incorporated into the forecast model. Through a partnership with the University of Arizona’s Eller College of Management, we analyze a variety of economic factors predicted for the next thirty years. These long-term factors, along with an understanding of current and past conditions, provide a framework for the forecast.
While preparing a forecast generally follows an annual schedule, it is also a continuous process. Forecasting models and the information on which they are based are constantly updated in an effort to provide the best predictions possible. Staff work to supply the Council and City Manager with accurate information from which decisions can be made.
Step 2 - City Council Reviews Strategic Plan and Establishes Budget Priorities
An updated forecast is presented at a Strategic Planning Workshop held with the City Council, City Manager, and the Executive team. The purpose of the workshop is to review the Long-Term Strategic Plan, provide updates to Council on the status of the current fiscal year’s initiatives, and receive direction from Council on priorities for the upcoming budget cycle.
Step 3 - Base Budget Guidelines Established
Based on the citywide forecasted resources available, departments are allocated a portion of those resources in order to fund their operations. Typically, departments are allocated an amount equal to their previous year’s ongoing expenditures plus additional personnel costs that have been updated with expected salary, benefits and supplemental pay.
Step 4 - Departments Prepare Operational Plans
Departments develop annual operational plans that identify the planned work (action plan), and the personnel, materials, and capital items needed to conduct that work for one year. The operational plan identifies who will do what and with what resources. These plans identify a means to evaluate progress and achievement of desired outcomes.
Step 5 - Departments Submit Base Budget and Funding Requests
Departments allocate their base budget to core business processes based on the resources apportioned to their department each year. Departments submit to the City Manager, through the Office of Management and Budget (OMB), requests for additional resources if applicable. The requests may be for one-time or ongoing budget adjustments. Based on available funding and Council priorities, the City Manager includes additional funding allocations.
Step 6 - OMB/City Manager Review Department Budgets and Performance Plans
The Office of Management and Budget (OMB) and the City Manager review the budget submissions to ensure that Council priorities are followed, legal regulations are adhered to and our functions are properly supported. Budget submissions are reviewed for alignment with available resources.
Step 7 - City Council Reviews Department Budgets and Significant Issues
OMB provides preliminary budget information to the City Council through a combination of reports and presentations. The City Council receives additional information from departments as needed. The City Council provides direction on issues and projects included in the upcoming budget.
Step 8 - City Manager Submits Budget to City Council
Based on feedback received from the City Council, the City Manager submits a balanced budget to the City Council for consideration.
Step 9 - City Council Establishes Tentative Budget
Per state statute, the City Council adopts a Tentative Budget, which sets a legal ceiling or maximum for the Final budget.
Step 10 - City Council Seeks Public Input
The City Council requests public input during one or more public hearings.
Step 11 - City Council Adopts Final Budget
Final feedback is incorporated into the budget and the City Council adopts a Final budget.
Step 12 - Departments Review Progress toward Achieving Plan Desired Outcomes
Departments review their progress toward achieving their plans’ desired outcomes. They determine what assisted them in exceeding performance targets or what contributed to not achieving departmental goals. They decide on actions to build on success or correct steps in the process to meet goals in the future.
The adoption of the budget by the City Council sets the maximum expenditures that can be made during the fiscal year. The dollar amount is set based on the anticipated activity during the time period. Much of the activity not related to personal services is presented to the City Council for review and consideration before it is acted upon. Some examples are: construction contracts, purchase contracts, service contracts over a set amount, agreements to accept grant funds and intergovernmental agreements with other governmental entities.
Budget management is an on-going process and involves not only the review and oversight of the financial aspect of the budget but also of the progress toward the desired outcomes of the various programs. The following is used to help in manage the City budget:
- Budget to Actual Financial Review
The Office of Management and Budget (OMB) and Financial Services monitor budget to actual spending and provide reports to management. Central staff works with department staff monthly to review spending patterns and ensure proper posting and reporting of transactions.
- Target to Actual Performance Review
Departments track actual performance measure results against targeted results. OMB’s Performance Excellence Team works with department staff to align measures with goals and objectives and to assist with proper reporting of data.
- MesaStat Meetings
The City Manager meets with each department on a regular basis to review financial information, to review progress on achieving desired outcomes, and to receive a general status update.
- Budget Amendments/Modifications
In order to achieve the desired outcomes, department directors have the authority to realign resources within their departments. Budget adjustments between departments or between funding sources must be presented to the Office of Management and Budget (OMB) for verification of budget capacity and the appropriateness of the funding source.
We are bound by the requirements of the Arizona Constitution, various state statutes, the Mesa City Charter, generally accepted accounting principles (GAAP), and our financial policies. Restrictions include limitations on the amount of annual expenditure appropriation, as well as limitations on actual expenditures. There are also requirements for the issuance, type and amount of debt; budget calendar dates; and the number and type of public notices that must be made as part of the budget process.
The Arizona Constitution requires the adoption of a balanced budget, which is “all-inclusive” (Title 42 Arizona Revised Statutes (A.R.S.)). This means that budgeted revenues and other resources must be equal to budgeted expenditures and that no expenditure may be made without appropriation. Because of this, it is incumbent on us to ensure that the budget includes sufficient appropriation and contingency for unanticipated revenues (e.g., unanticipated grant awards) that may become available during the fiscal year as well as unanticipated expenses.
The amount of primary property tax that a county, city, town or community college district may levy is limited by the Arizona Constitution. Each taxing entity's limit was established in 1980, and that limit can increase by 2% each year, plus any new construction. As we do not levy a primary property tax, we are not subject to the requirements for limiting primary property tax levies.
Secondary property taxes in Arizona may only be levied for voter-approved budget overrides, special districts, or to pay for bonded indebtedness. We first instituted a secondary property tax levy for the repayment of bond debt associated with the 2008 bond election. The first receipts of secondary property tax occurred in FY 2009/10. Since then the levy has been updated based on the authorization of additional general obligation bonds by Mesa voters.