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Local Government and School Accountability

Multiyear Financial Planning

A Tutorial for Local Government Officials

Module 1: Elements of a Successful Plan
The Process of Multiyear Financial Planning

Some General Principles of Multiyear Financial Planning that you may wish to consider in Step 4, Describe Your Assumptions:

  • Use historical data to develop a basis for future projections.
Real Property Taxes (1001)
  Property Tax ($'s)Tax Revenue Change
 20017,148,023---
 20027,548,7006%
 20038,344,07611%
 20049,786,48017%
Enter current year200511,837,13521%
Enter amount OR projected % change2006 11,837,1350%
Enter % change200711,837,1350%
Enter % change200811,837,1350%
Enter % change200911,837,1350%
  • Temper historical average growth rates with known changes. For example, if the historical trend shows an annual growth of 3% in salaries, but you know a 5% increase is upcoming, use the 5% figure.
  • Determine whether recent trends are stable or not, which may affect your assumptions. For example, if the trend has been toward increasing rates of growth, you may want to project a figure at or above the most recent year, as opposed to calculating the average over the span of past years' data.
  • Identify any one-time revenues or expenditures that significantly affect prior budgets.
  • Compare the projections of prior years with the actual collections and spending for those years. If the variance is more than 5%, you may wish to analyze the reasons. Was there a specific, unforseeable occurance or were the projections just off-base? If the latter, you may wish to analyze your revenue projection methodology or encourage your department heads to be more realistic with their budget needs.
  • Have any federal, state or local laws impacted your budget? Is there any pending legislation?
  • Are funding streams consistant? Are there any new mandates, programs or sources of revenue that will significantly change the budget? Have any been discontinued?
  • Were there any policy changes that affected spending? Are any planned? For example, the decision to defer needed road repairs can result in a trend that is not sustainable and may even spike when repairs can no longer be deferred. Likewise, temporarily cutting operating hours for a pool or park will affect those figures.
  • How is the economy? For example, a major economic slowdown will have an almost immediate effect on costs and on certain revenues, such as sales tax.

arrowsarrows Next: Step 5: Revisit Your Plan