Comments on: Proposing a New Way to Budget in Arlington

By: Dan Dunn’s Podium » Town Meeting ‘10 Session 6

Dan Dunn’s Podium » Town Meeting ‘10 Session 6 — Thu, 13 May 2010 05:57:21 +0000

[...] course, am a huge proponent of the overhead budgeting. You can read more in my previous post on budgeting. Phelps moves the question. Approved on voice [...]

By: Gordon Jamieson

Gordon Jamieson — Sun, 14 Mar 2010 13:46:51 +0000

Good thoughts Dan (as always)

Yet I believe you need to back out the solid waste collection costs from the DPW budget line item since it represents the cost of services from WM that do not have any town side overhead cost

Cheers, Gordon

By: Sue Doctrow

Sue Doctrow — Sun, 14 Mar 2010 00:38:24 +0000

Dan, This is an excellent proposal. It would make the budgets much more informative and, as you and others have suggested, provide incentive to pay attention to these costs and factor them into hiring decisions. I have written federal research grant proposals for 20+ years. We always have a “fringe benefit” figure beside each salary. Where I work now, that figure is about 26%, and does not include pensions (pensions? what are those? Then, we add an “indirect costs” figure as one line item for broader overhead costs that are not directly linked to individual employees. Like most elegant ideas, yours looks so obvious now that I’m seeing it. I hadn’t even thought about the difference between the town budgets and the ones I always write before seeing your post (thanks to Michael Quinn’s link to it on the Arlington List). Anyway, as others have said, I hope your idea will be adopted.

By: Ron Spangler

Ron Spangler — Sat, 06 Feb 2010 12:50:50 +0000

Dan – I agree with you. This is how most services organizations budget and track costs. (As a former P/L manager, I know it all too well … ) As with out of district Special Education tuitions, which used to be “off budget” for the school department, putting the indirect costs of personnel into an off-budget bucket creates a perverse disincentive to watch those costs. (Before 2006, it actually made more sense for the school department to send a child with special needs to an expensive private school than to accommodate those needs in-district.)

With insurance, when the 2006-09 teachers’ contract was negotiated, the Town Manager took issue with the health insurance deal reached by the Superintendent with the AEA negotiators. I disagreed with the Manager that the school dept. was too generous, but that’s not relevant at the moment.

To make sure we’re all on the same page this time, we made a point of including the Manager in the ongoing AEA negotiations. It’s not what you propose, but it’s a step in that direction.

Ron Spangler

By: Craig Colman

Craig Colman — Thu, 04 Feb 2010 14:26:53 +0000

While you proposal makes sense, and is exactly the way we run my business, to me an important question is does keeping insurance and pensions as separate line items make it easier for us to tap into other revenue sources ? I heard an idea being batted around that since heathcare costs are increasing so quickly that there might be state or federal funds to help pay for some of the increases. While this might just be a pipe dream, we need to make sure that our budget is set up to be able to take advantage of any potential revenue opportunities.

By: Dan Dunn’s Podium » Two Arlington Finance Meetings

Dan Dunn’s Podium » Two Arlington Finance Meetings — Thu, 04 Feb 2010 05:12:58 +0000

[...] Not much effect this year, but might be a big saver in a few years. There was a discussion about my proposal to use fully loaded budgets. The Manager was “concerned about putting the actual money in [...]

By: Flynn Monks

Flynn Monks — Mon, 01 Feb 2010 20:27:03 +0000

This makes total sense. I’m actually quite baffled how it can be that it would be otherwise. So, how does it get implemented asap?

By: dunster

dunster — Fri, 29 Jan 2010 00:22:12 +0000

Thank you all for your comments.

@JohnM – My suggestion is to apply the overhead to the salary portions of a department budget only. Healthcare is a per-person expense. Pension expense is based on salary.

The question about how to handle retiree benefits is a bit stickier. My initial proposal is to just ignore it, and have the departments bear responsibility for retirees based on current employee counts. I think the “winner” in a plan like this would be the DPW which has reduced the most, and therefore wouldn’t be paying for its past retirees exactly.

The alternative would be to leave retirees as a separate budget line, like is done today. The downside to that is that it would require our actuarial consultant to break the pension assessment into two chunks, the cost of current employees, and the cost of past retirees. I don’t see that as a big win, but it’s an option.

@Steve – If I understand your point correctly, we’re on the same page. The budget does already successfully put the expenses in the right departments – schools pay for their maintenance and heating, police pays for their fuel, etc. That part the town does already. If you take a look at the detailed budget I lined to, and go into the Appendix for budgets, you’ll see it.

The capital budget is trickier. It is by definition very lumpy – huge expenses for a couple years for a specific department, then zeroes for years after that. I don’t think we gain any budgeting successes by including that lumpiness into annual budgets. Drop me an email if I didn’t understand your point.

By: Quantum Mechanic

Quantum Mechanic — Thu, 28 Jan 2010 23:09:29 +0000

An excellent proposal!

Unfortunately, it makes too much sense to ever get adopted, sadly.

It’s stunning to me that benefits overhead doesn’t “live” in the department budgets already.

By: Dr. Wayne Pitcher

Dr. Wayne Pitcher — Thu, 28 Jan 2010 18:36:56 +0000

Er, that should be “make money off of grants”