Weighing costs and relative benefits: Phoenix' Comprehensive Program Budget Review.

• Author: Glaus, Barbara

Like many Sunbelt communities in the 1980s, Phoenix experienced high population growth and benefited from a thriving construction industry. Annual sales tax collections, which supply nearly 30 percent of the city's operating revenues, averaged 8 percent annual growth over the decade, and $5 to $6 million in new or expanded programs were routinely added to the city's budget each year.

By the end of the decade, as the local economy began losing momentum, a financial forecast indicated that the Phoenix municipal budget was due for a period of austerity. Three major fiscal pressures faced the city in 1990.

* Loss of state shared revenues. Phoenix shares in tax revenues collected by the state, revenues that are distributed to Arizona cities based on population. Although Phoenix' population increased between the 1985 and 1990 census, the growth rate of other Arizona cities was larger, reducing Phoenix' proportionate share of state revenues by $7.8 million. The city also was put on notice that state budgetary problems would continue to threaten the revenues shared with the cities.

* Declining sales tax collections. In the 1980s, the typical annual growth rate for sales tax was 8 percent or more. By 1990, city sales tax growth was projected to be only 4 percent, which was below the anticipated inflation rate.

* New capital facilities' operating costs. In April 1988, the citizens of Phoenix approved $1.1 billion in bonds for a wide range of new city facilities, such as parks, libraries and fire stations. The city was faced with a choice of building these facilities and then locking their doors or finding the resources to operate the new facilities.

Following the city council's direction not to raise taxes, a five-step program was launched to proactively address the pending budget shortfall. Actions were taken to improve retail sales tax collections, hold the line on new facilities' operating costs, cut costs in the annual budget process, conduct more productivity audits, and begin a zero-base review of all departments' budgets and programs. This zero-base budget review is known as the Comprehensive Program Budget Review (CPBR).

Goals of the CPBR Process

For Phoenix, the Comprehensive Program Budget Review process is a tool directed at three goals. As an educational tool, the process seeks to inform the city council about the range and nature of services and programs provided by each city department. The council is provided an opportunity to consider and evaluate services of a lower priority when placed against other service needs.

As a management tool, the CPBR process enables city and department management to inventory current services, programs and expenditure levels and to compare current activities to the department's mission. The goal is to identify programs that have outlasted their original purpose.

Using the CPBR as a budget tool, the city's goal is to identify and systematically evaluate the costs and relative benefits of each program and to make sure services are provided efficiently. The process is directed at shifting resources within the budget rather than allocating additional resources.

Linkage with the Annual Budget

Phoenix' Comprehensive Program Budget Review builds on the existing budget process, which since 1977 has been a modified...