What’s Wrong With

Newtown’s Budgeting?

To the Editor:

Newtown employs an incremental budget process, which treats existing programs and departments as already approved, subject only to increases or decreases in the financial resources budgeted. The town’s historical costs are the basis from which budget planning starts. The focus of this budgeting process is on the changes anticipated in last year’s numbers.

Our budgets are opaque and very difficult to analyze, e.g., this year we compared the 2005-06 actual to the 2006-07 budget (even though more than nine months of actual expenditures existed for 2006-07), to the Proposed 2007-08 Budget.

To show how absurd this presentation is, let’s assume that any specific account had an actual expenditure in Year 1 of $10,000 and that the budget for that same account for Year 2 is $10,500 representing a five percent increase over the Year 1 actual and that Year 3’s projected budget is $11,000, a 4.76 percent increase over the Year 2’s budget. It appears that although the budget and proposed numbers are going up, they are doing so at a decreasing rate, giving the impression we are managing our expenditures.

However, if I told you that the actual forecast for Year 2 was going to be $8,500 and not $10,500, then the increase from $8,500 to $11,000 is 29.4 percent and not 4.76 percent. And therein lies the problem: the manner in which the numbers are presented to us. Whether this is intentional or not it contributes to our skepticism and mistrust.

The danger here, especially when not comparing actual expenditures to actual expenditures, is a risk of creeping costs year after year. Each year that we take last year’s budget plus an incremental percentage increase and fail to question the basis for increase we risk budget increases that can continue unchallenged for decades.

The more obvious disadvantages are it assumes activities and methods of working will continue in the same way and provides no incentives for developing new ideas or for reducing costs. It encourages spending up to the budget so that the budget is maintained next year. The budget can become out of date and no longer relate to conditions that existed when they were originally set. And finally, there may be budgetary slack built into the budget, which will never be reviewed.

The Independent Party of Newtown recommends a Zero-Based Budget System. Financial planners start with nothing in every account and build the budget based upon approval of individual expenditures. For an expense to be accepted, it will have to be proven necessary and financially sound in an evaluation of all elements of revenue and spending. In zero-based budgeting, each item is examined selectively to justify its existence, and is compared to alternatives. Priorities are established and each cost center is challenged to prove its necessity. We must bring Newtown into the 21st Century.

It’s Time For A Change: Vote for the Independent Party of Newtown candidates and put fiscal responsibility back into Newtown government.

Albert P. Roznicki

Legislative Council Candidate District 1

Independent Party of Newtown

169 Hanover Road, Newtown                              September 11, 2007