Getting started on long-term financial planning: making financial decisions using reliable long-term financial trends and information is simply good policy.

• Author: Hodges, Betsy
• Position: Best Practices

Local government finance officers know that long-term financial planning fosters good financial decisions. The daunting challenge for many finance officers is how to engage key players in our organizations. This article offers a few tips to help finance officers get long-term financial planning off the ground.

Minneapolis, Minnesota, got serious about long-term financial planning in 2002. Here's what it took: significant turnover in elected leaders, the loss of one triple-A credit rating due to large deficits in three internal service funds, an urgency to remake the 2002 budget, and a prepared finance staff. Most local governments are not fortunate enough to have this confluence of factors to initiate long-term financial planning.

If your government doesn't have the pressure of financial challenges or new leaders willing to make change, how can finance officers make the case for long-term financial planning?

GOOD POLICY

Making financial decisions using reliable long-term financial trends and information is simply good policy. The Government Finance Officers Association (GFOA) thinks so, too. The GFOA's best practices support using long-term financial plans and trends. Combined with good financial reporting, policymakers and managers can use long-term financial planning as a powerful tool to improve any decision that has a financial dimension. (See the GFOA's "Long-Term Financial Planning" best practice at http://www.gfoa.org/downloads/LongtermFinancialPlanningFINAL.pdf.) Examples of these decisions include compensation policy and labor negotiations, multi-year contracts for services, capital investments, borrowing and investing decisions, ways to use one-time funds, and negotiating employee benefits (health care and pensions). Any of these decisions can be improved when the longer-term financial consequences are considered.

ACHIEVE GOALS

Long-term financial planning can help achieve financial and operational goals. When goals can be expressed with specific outcomes--such as improving the condition of streets or the amount of time it takes police to respond to calls--managers can forecast resources along with changes in business or operational processes to reach these goals. Long-term financial planning can also help the jurisdiction reach financial goals such as improving fund balances, building cash reserves, and reducing debt.

Long-term financial plans can forecast the resources that will be needed to achieve financial and operational...