Multi-Year Projections & Fiscal Planning in
Local Governments – Status and Impact
Presentation at the 2014 MD GFOA Summer Conference
Holly Sun,
Deputy Director of OMB, Prince George’s County, MD and
Ph.D. Candidate, George Washington University
June 20, 2014
Background
 “State and local government sector continues to face near-term and
long-term fiscal challenges that grow over time.”
- GAO projections in April 2012
 A long-range fiscal planning framework and has been advocated by
professional organizations as a promising approach/tool
 GFOA: “long-term financial planning”
 World Bank: “medium-term expenditure framework” (MTEF)
 Limited information on the actual practice among local governments
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Questions
 Are multi-year fiscal planning and projections widely used
among local governments?
 How are they implemented? (design, process, players, etc.)
 Does such a practice make a difference?
 How to make multi-year projections and fiscal planning
more effective?
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2013 Survey (Spring)
 Survey developed in collaboration with GFOA to study the
practice and perceived impact of multi-year fiscal planning and
projections among local governments with a focus on the General
Fund
 Distributed to approximately 1,341 GFOA Distinguished Budget
Presentation Award winners, with 559 responses (41.7%
response rate):
 537 local governments from 44 states (344 municipalities, 91 counties,
and102 special districts such as schools, parks, transit authority, etc.)
 2 state governments
 20 local & provincial governments in Canada
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Is Multi-Year Projections and Fiscal
Planning Widely Implemented?
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Wide Implementation
More than 78% of responding governments reportedly implement multiyear projection for the General Fund.
The percentages are also high for multi-year planning practices for CIP ,
fiscal policies, strategic planning, and other funds.
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Comprehensive Multi-Year Frameworks
Many governments use a comprehensive multi-year fiscal
planning framework with multiple components – over 59%
reportedly implement at least five out of the seven listed multiyear practices.
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Increased Momentum
Among the responding governments, the portion that adopts multiyear projections for the General fund has increased significantly in the
past two decades.
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How are these multi-year frameworks
developed and implemented?
• Design, Purpose, Players, Process, etc.
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Comprehensiveness of Document
Most of the reported multi-year projections and fiscal plans include key
revenues, expenditures and projected fund balance, but less than half of
them offer solutions or scenarios to address identified issues.
Which of the following items are included in your multi-year projection reports or
long-term fiscal plans? (Choose all that apply)
Key revenue assumptions
Key expenditure assumptions
Expenditures by category (e.g., personnel costs)
Ending fund balances
Operating budget impact of CIP (e.g., maintenance cost)
Expenditures by department
Multi-year economic outlook
Strategies to address fiscal issues identified
Projection scenario(s) that close the projected budget gap
Expenditures by program
Sensitivity test based on different assumptions
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93.4%
92.5%
79.6%
79.2%
56.7%
52.2%
48.9%
41.0%
34.7%
25.5%
20.1%
Transparency & Communications
Most projections results are presented to critical decision makers – the
legislative authority (84.0%) and the executive authority (70.6%).
Slightly over one fifth of the governments present projection results to
five or six stakeholders; about one third share the results with three to
four listed stakeholders; 44% inform only two stakeholders or less.
% of Responding Governments that Present Multi-Year Projection Results to
The Following Stakeholders
Legislative Authority
Executive Authority
The Public (one-line publications)
The Public (hearings/meetings)
Bond Rating Agencies
Collective Bargining Units
0.0%
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20.0%
40.0%
60.0%
80.0%
100.0%
Engagement in Multi-Year Projections / Planning
Central budget/finance offices reported play a critical role in
developing multi-year projections. Other main players include:
 senior management (nearly 90% of the time)
 individual departments (three fourth of the time)
 the legislative authority (slightly over 50%)
Other players (citizen advisory boards, revenue/expenditure panel,
etc.) are less frequently engaged.
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Integration With Strategic Planning
Close to half of the responses indicate that their multi-year
expenditure projections either have no observed linkage with
the government’s long-term strategic plans or are primarily
driven by other factors.
The rest respond that their multi-expenditure projections
largely match strategic priorities by
 sector (e.g., public safety) – 17%
 Department – 26%
 Program – 10%
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Key Challenges / Obstacles
 Lack of confidence in projections for out years
 Administrative burden
 Concerns on its usefulness
 Difficulty to integrate multi-year projections with
long-term strategic priorities
 Lack of interest from the elected officials
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Does Multi-Year Projections and
Fiscal Planning Make a Difference?
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Impact Evaluation – Framework
Survey respondents asked to provide ratings (0=no impact,
1=little impact, 2=some impact and 3=significant impact) on
multi-year fiscal planning’s effect on improving five aspects:
•
•
•
•
•
Fiscal discipline and long-term fiscal sustainability
Allocation efficiency (match strategic priorities)
Operation efficiency
Agencies’ involvement
Transparency / Citizens’ understanding
Note: the five aspects are primarily based on the framework used by the World Bank
and IMF to assess the effectiveness of MTEFs and public finance management
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Effectiveness Perceived High
• In particular, 90% responses indicate that multi-year fiscal
framework has an impact on fiscal health, and 60% believe
this impact is “significant”
Impact Evaluation of Multi-Year Fiscal Planning and Projections
Improve fiscal discipline & long-term fiscal sustainability
Improve expenditure prioritization (match strategic priorities)
Improve departments' involvement in budget development
Improve efficiency (reduce cost per unit of services)
Improve citizens' understanding of budget and policies
0%
No Impact
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Minor Impact
20%
40%
Some Impact
60%
80%
Significant Impact
100%
How To Make Multi-Year Projections
and Fiscal Planning More Effective?
• Survey Responses
• Statistical Analysis Results
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Strong Purpose and Clear Targets
 Multi-year projections and fiscal planning is designed to not
only inform on trend and issues, but also to help achieve
clearly identified fiscal/strategic policy goals, such as:
 Certain fund balance level
 A structurally balanced budget
 Improved performance on priority services
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Quality Projections and Presentation
 Quality – Accuracy, Comprehensiveness, and Simplicity
 Engage stakeholders and experts to improve projection accuracy
 Include detailed assumptions, analysis and implications
 Use graphs and bullets to deliver key messages
 Strategies / options / scenarios needed
 Showing strategies / options to address the predicted fiscal issues is
critical to facilitating candid dialogues among key stakeholders
regarding tradeoffs between options and consensus building
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 Integration
 Projections/plan closely reflects multi-year strategic priorities rather
than showing a status quo scenario alone
Collaboration and Transparency
 Involve key players in the development of multi-year
projections/plan development to improve:
 quality of the projections
 understanding of fiscal outlook
 consensus building on priorities
 Communicate results of the multi-year projection results
with key stakeholders
 Facilitate strategic discussions for understanding and decisions
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Integration with the Annual Budget
 Present multi-year projections to the legislative authority
(Council) before or during the annual budget reviews
 Make the multi-year fiscal outlook and planning an official
component of the annual budgeting process
 On-going modifications, evaluation and follow-up
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Summary of Success Factors
Survey Reponses
 Quality of multi-year
 Comprehensiveness of the multi-year






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Statistical Analysis Results
forecasting
On-going
modifications, evaluation
and follow-up
Multi-year projections
made an official
component of the
annual budgeting
process
Support or buy-in of
elected officials
Collaborative approach




projection/planning materials
Strategies / Options included
Multi-year projections/planning designed to
achieve a structurally balanced budget or
certain level of fund balance
Integration between projections and multiyear strategic priorities at a detailed level
Multi-year projections are presented to the
legislative authority (council) before or
during the annual budgeting reviews
Engage more players in developing multiyear projections
Projection results are presented to more
stakeholders
Conclusion
 Multi-year Projections and Fiscal Planning can be an effective policy tool
that helps improve decision making and fiscal health
 Its success lies in the fundamentals (e.g., the quality of projections and
presentation materials) as well as its ability to inform decision makers
and facilitate candid dialogue among key stakeholders regarding
priorities and strategies to reach policy goals in a multi-year framework
 Certain factors (purpose, comprehensiveness, collaboration,
integration level, etc.) prove to be critical to its effectiveness
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Reference and Contact
 More details regarding findings from the survey can be found in an
article by Holly Sun (“Improving the Effectiveness of Multi-Year Fiscal
Planning”) published on Government Finance Review, February 2014
 Feedbacks, questions, and experiences to share… are welcome
 Contact: hsun@co.pg.md.us or holly.w.sun@gmail.com
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