Bridging the gap: budget balancing in the city of Austin, Texas.

• Author: Garza, Rudy

A thriving city in the central Texas hill country, Austin is the home of two major institutions: the Texas state capitol and the University of Texas. Through the years, Austin has earned a number of monikers, including the "live music capital of the world" for its promotion and support of the music scene; the "city within a park" for its meticulous care of the environment and preservation of green space; and the "city of ideas and creativity" for its promotion of the arts, cutting-edge technology, and reputation as a safe city. Like most cities, Austin takes great pride in the many amenities it has to offer. For city leaders, the challenge is to fund the infrastructure, programs, and services necessary to maintain the high quality of life residents have come to enjoy.

During the mid to late 1990s, when the economy was growing at record levels and money was flowing into city coffers at rates that not even the most optimistic budget officers could predict, this was not a very difficult task. The real challenge during this period was managing the unprecedented growth so that revenues would continue to meet or exceed ongoing expenditure requirements. Now almost two years into one of the most sluggish economic environments in recent memory, the story is much different. Like many other state and local governments, Austin has confronted the unwelcome reality of the largest budget gaps in its history. Fortunately, early planning and a comprehensive budget program have allowed the city to successfully address this challenge thus far. This article describes how Austin balanced its fiscal 2003 budget and its strategy for achieving structural balance in the years ahead.

FROM SURPLUS TO DEFICIT

Based on its long-term planning process, Austin recognized as early as January 2001 that the economy was about to reverse course and that the city would soon be facing deficits rather than surpluses. For fiscal year 2003, the city projected general fund revenues of $445 million and expenditures of $517 million--a deficit of $72 million. While this news was certainly unwelcome, the early financial forecast galvanized the city into action to close the deficit and achieve structural budgetary balance.

Austin used a simple graph to size up the operating deficit and communicate the magnitude of the challenge to city stakeholders. As Exhibit I shows, the graph illustrates trends in operating revenues and expenditures over a 10-year period that includes projections for the next five years. This graph quickly became known as the "gator graph" because its shape resembled that of a wideopen alligator mouth. Throughout the entire budget process, the City Council, management, staff, media, and the public never lost sight of either the gator graph or the implications of the structural deficit on the city's long-term prosperity.

Even before the new fiscal realities became obvious, the city manager had recognized the need for a change in the city's approach to financial planning and budgeting and had laid out a strategy for achieving one overarching goal--structural budgetary balance. This five-point strategy assumed particular urgency once the city's expenditures began to outpace revenues, and was invaluable in closing the $72 million hole in the fiscal 2003 budget.

Managing for Results. One of the more useful budgetary tools during the fiscal crisis has been the performance information from the city's managing for results initiative. Funding decisions for any given program are influenced by the anticipated impact on that program s performance targets. For example, if the proposed funding level for a youth program resulted in too severe a reduction in the number of youth served, funding would be increased. The offset in funding would come from a program that could sustain a reduction and continue to meet acceptable performance targets based on that program's performance measures. The fact that performance measurement has been institutionalized in Austin allowed the city to balance its budget based on priorities and outcomes.

Core Services Initiative. To complement its managing for results program, Austin implemented the so-called "core services initiative" to ensure that core municipal services were not compromised by...