Home News Opinion Opinion: Town’s budget process promotes spending, not savings

Opinion: Town’s budget process promotes spending, not savings

November 29, 2023

374

By Karen Wolfe

The release of the 2024 draft budget calls for a 5.5 per cent increase in taxes. Last year the increase was 6.8 per cent.

There are two schools of thought around a budgeting process…First, it can be created using a traditional budgeting model which uses the revenue and expenses from the previous year as a baseline and starting point for the new budget being developed. Or, it can use a zero-based budgeting approach which throws out the old and builds a new budget from scratch based on the funding needs to address priorities in the coming year.

There are probably pros and cons for both approaches but I am not in favour of traditional budgeting. In this economic climate it seems to me that you won’t find the savings and efficiencies that you should be looking for if you continuously start your budgeting process using the money you had in the previous year. But the Town has built a staff culture over the years that uses the traditional approach to budgeting and that probably isn’t going to change anytime soon.

And so, let’s take a look at what has happened to the Town’s operating budget in just two short years.

At the end of 2022, the total operating expenses (without water and wastewater) was $61.3 million. Staff started the 2023 budgeting process using that same $61.3 million and ended up increasing it to $66.3 million.

Then, for the 2024 budget, staff used the $66.3 million as a base budget and by the end of the process, the operating budget grew to $75 million. So basically, our operating expenses in just two short years have gone up by almost $15 million and we will be carrying that $15 million increase into 2025 when they start the process all over again, using $75 million as a starting point.

The largest line item in the Town’s operations budget is salaries and benefits ($42,035,200) which in 2024 will represent 76 per cent of the $55.3 million in taxes that the Town will collect in 2024. And in 2024, the loan repayment line item grew from $772,820 in 2023 to $4.7 million in 2024.

So, where are the savings? What happened to all of the calls from taxpayers urging constraint?

From my standpoint, it doesn’t appear that anyone was listening to the people who took the time to respond to the budget survey. Even though the new Civic Centre was not a question on the survey, it was top-of -mind enough by the respondents to request the Town not to build it at all.

They also wanted zero or well below the rate of inflation as a tax increase. Well, the rate of inflation is now 3.1 per cent and the draft budget says taxes are going up 5.5 per cent. Respondents also suggested a hiring freeze but instead, five new employees will be hired in 2024.

The Town Treasurer, Rob Wheater, whom I respect immensely, will argue that the majority of the $75 million which represents a $15 million increase since 2022 is “not necessarily a tax levy pressure to residents.”

That is because there are several revenue sources that are used to fund the $75 million. I get that, but Holy Smokes, it is just the increase in spending that blows my mind. If we weren’t spending so much, then the funding sources outside of the tax levy could be used to reduce taxes.

But no…every dime the Town finds doesn’t go toward giving tax payers a break, it goes toward finding something else to spend it on. Even the surpluses which the Town traditionally experiences every year, isn’t ever used reduce taxes, it is thrown into the reserve pot to be spent later on.

I come from the corporate world and whenever I would put together a budget, I used a zero-based budgeting formula. It forced me to go back and look at every line item and evaluate the expense against the priorities I had identified for the coming year. With that driving my budgeting process I was always able to defend my budget and come in with a budget that met the needs of my department and demonstrated accountability while promoting the company’s culture of responsible cost management.

Traditional budget practitioners cite the “if you don’t use it, you lose it” phenomenon which supports their decision to continuously budget based on previous expense levels so as not to experience a decline in their funding the following budget year. But, excuse me, a decrease in spending is precisely what is needed in these economic times and in my humble opinion, traditional budgeting offers little opportunity for that to take place.