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Is your strategy supported by your budget?
The importance of local government strategic planning is well-documented. However, many local government organizations run into issues when it comes to aligning their budget process with the intended strategic outcomes in their strategic plan.
Strategic planning and budgeting are both multifaceted processes. In this post, we’re going to look at the key ways that local governments miss out on effectively connecting their strategy to their budget (and how to fix it).
The truth is, many local government organizations struggle when it comes to aligning their budget process with their intended community outcomes. But if you have a strategy that is not supported by your budget, you’re unlikely to be successful when it comes to implementing it.
Today, fast-evolving community needs, rising resident expectations, and economic uncertainties have led to many many more communities developing strategic goals, full strategic plans, and vision statements. However, traditional, incremental line-item approaches to budgeting often struggle to keep up, and can leave the budget disconnected to the community’s needs and strategic direction.
Connecting budgeting directly to strategic planning through an outcomes-based budgeting model (often called priority-based budgeting) that aligns scarce resources with specific goals and performance outcomes is a critical piece of the implementation puzzle. The other critical piece is to have a strategic plan that is adaptable and regularly refreshed—a “living” plan.
In summary: when it comes to effectively connecting strategic planning and budgeting, we’re talking about introducing and aligning more agile and modern budgeting and strategic planning processes.
What does your budget communicate?
Budgets are often said to function as value statements about what is important to an organization. For most local governments, resources are limited, which necessitates difficult decisions about how to balance those resources across competing needs.
Your strategic plan ought to outline your vision and goals for your organization and community. By aligning your actions with your budget, you ensure resources are properly allocated, making it easier to achieve that vision and communicating the priorities of the organization and community.
Ask yourself: what is the value statement being communicated by your budget?
Does your budget communicate that keeping the status quo as the priority? Or does it paint a picture of the unique goals of your community and a vision for the future?
5 reasons why should you connect your strategy to your budget
The need to move to a resource allocation model based on desired outcomes and/or strategic priorities has come into sharp focus in local government over the last couple of years.
This shift in recommended budgeting and strategic planning practices has been the subject of careful discussion and research by professional associations such as the Government Finance Officers Association (GFOA) and their Rethinking Budgeting initiative.
Local governments have traditionally relied upon the previous year’s budget as a baseline, making incremental, line-item changes to shape the budget for the following year. While this method has advantages—it is straightforward, and it can be useful during stable periods—it often leaves local governments scrambling to adapt during times of change. And these days, there is no shortage of fast change in our communities.
Priority-based budgeting (or outcomes-based budgeting) is an approach that emphasizes allocating resources to the actions and programs that help you to achieve your strategic goals. Remember: what gets funded is ultimately what gets done.
Here are five reasons why it is important for local governments to ensure that their strategic plans are connected to their budget:
- Effective resource allocation: Connecting strategic planning with budgeting helps ensure that resources are allocated in a way that supports the government’s long-term goals. This prevents wastage on non-essential projects and ensures that funds are directed toward high-priority initiatives that drive community growth and development.
- Agility and responsiveness: A strategy-aligned budget allows local governments to be more agile and responsive to changes. Instead of being bogged down by outdated funding priorities, they can quickly reallocate resources to address emerging challenges or capitalize on new opportunities.
- Improved transparency & clarity: When budgets are tied to specific strategic goals, it becomes easier to measure progress and communicate the value of the work of the local government. This transparency helps to foster trust within the community and further helps to ensure that public monies are being used effectively.
- Better decision-making: A budget that reflects strategic priorities provides a clearer framework for decision-making. Leaders can make informed choices about where to invest, knowing that their decisions are backed by a coherent plan aimed at achieving the community’s long-term vision.
- Increased economic resilience: Ensuring that the budget supports strategic objectives contributes to the sustainable development of the community. It helps avoid short-term fixes and promotes investments in projects that yield long-term benefits.
Rapidly changing environments demand dynamic approaches to problem solving. When local governments work to make sure there is alignment between their strategy and budget, they can better navigate uncertainty, and effectively utilize scarce resources.
5 tips for connecting strategy to budget
Ideally, resource allocation begins with a clear understanding of what you’re hoping to accomplish.
However, it is important to note that your strategic plan should not include absolutely everything that you, your staff, and your organization do in a day. Your strategic plan is your transformative work—the initiatives and undertakings that push your organization forward and help you actualize your mission, vision, and values. Maintenance work and existing programs generally do not need to sit in your strategic plan, and so only some portion of your budget will be allocated against strategic work.
1. Carefully define your vision and goals
There are a lot of different ways you can get started on developing a strategic plan itself. We love to see local government plans that incorporate a blend of resident input and qualitative data points to assist them.
Every community is unique, with unique needs and desired outcomes. Having a clear strategic roadmap allows for organizational alignment, but also promotes transparency and builds trust, by providing a clear rationale for resource allocation and policy-making.
However, the classic, static five-year model for strategic planning offers little flexibility when trying to keep your mission, vision, and values aligned with your work and your budget. We recommend a tiered approach: set high-level goals and strategies that will remain stable for two to four years (like long-term community health or sustainability initiatives), while reviewing specific actions annually.
2. Make your strategy operational (develop an action plan)
When connecting strategic planning to budgeting, it’s critical to identify the relevant actions that need to be taken to make strategic goals and strategies a reality. This probably sounds like a no-brainer, but it’s surprisingly easy to lose the forest for the trees, especially when you’re dealing with complex, multi-year, multi-department goals and budgets.
So what do we mean by making your strategy operational? What is an action plan? And how is it different from the strategic plan above?
If your strategic plan is a reflection of your idealized vision for your public sector organization and the community it serves, then your operational plan should take those strategies and translate them into actionable items, with associated timelines, departmental owners and contributors, and the performance metrics you’ll need to monitor along the way to ensure that you’re making progress.
Your operational plan, and the actions that define it, should be developed in consultation with members from all levels of your organization. Department heads will provide key insights into the overarching needs of their teams, but frontline staff will be essential in providing feedback on what needs to be measured and what needs to get done on a day-to-day basis.
You should continue to re-operationalize your plan on a regular basis in order to keep it relevant and agile. This is what is meant by having a “living plan”—a plan that evolves with you based on changing needs, circumstances, and the results you are seeing.
If the top two levels of your plan should stay in place 2-4 years, then the action level of your plan–the third level–should go through an annual process of review and refinement. Actions need to be supported by a budget, and tying actions to your annual budget cycle creates natural alignment between these two processes.
The very best way to operationalize your strategic plan is to get S.M.A.R.T.!
S.M.A.R.T. actions are: Specific, Measurable, Achievable, Resourced, and Time-bound.
When the goals and actions of the strategic plan are clear and well-defined, they provide a roadmap that directly informs budget decisions.
3. Use performance measures to stay on track and be ready to course-correct
In our experience, the ability to develop relevant performance metrics for your local government is a crucial component of connecting budget with strategy and performance. Effective performance measures allow you to monitor results, change course if needed, address roadblocks to program delivery early, make informed decisions around future budget allocation, and explain budgeting decisions to different audiences.
Local government spending is under a lot of scrutiny. That’s why clear, measurable outcomes (and outputs) should set the terms of defining success.
While tracking data, keep both output (what’s being done) and outcome (the actual impact) measures in mind. Outcome measures might be slower to develop, but they’re essential for understanding whether budget choices are creating real improvements. Leading indicators like output metrics, however, offer early signals to guide and adjust strategies. Usually, both are needed.
The example KPI in this diagram is what we classify as an “output” measure. An “outcome” measure for this strategic pillar might be “Resident satisfaction with quality of life” or “Percentage of residents who walk to work” for example.
4. Report progress to promote transparency and trust-building
Transparency can be intimidating, but it’s crucial to building community trust. Regularly reporting back on how funds are being used, what progress has been made, and the impact of funded initiatives allows residents to see the government’s commitment to using their taxes responsibly and in line with the agreed upon values and priorities of the community.
So, what about internal reporting?
Internal progress reporting is a key component of evidence-based decision. By regularly reporting progress, local governments can ensure that money is being used wisely, that the correct tradeoffs are being made, and that troubled or failing initiatives are supported or if necessary, scrapped, in order to increase the quality of life for the community.
Finally, making reporting a regular function of your organization helps foster a culture of transparency, data-informed action, and continuous improvement. By analyzing your performance trends and evaluating the effectiveness of your service delivery, you can make your yearly budgeting and action planning process a more effective exercise.
Our guide on how to develop a local government reporting framework can help you to create reports that deliver the most useful information, to a variety of different audiences, at the optimal times for better decision-making.
5. Treat strategy execution as a team effort
Connecting strategy and budget only succeeds when everyone in the organization is on board.
Successful strategy execution means that every employee is engaged, understands their role, and sees how their work contributes to the community’s goals. Embracing a “living plan” approach makes budgeting more agile and responsive to emerging needs.
By anchoring budgeting to a well-crafted strategic plan, engaging residents, focusing on outcomes, measuring progress, and reporting transparently, local governments can transform their budgeting processes into an impactful, forward-looking model that builds trust, meets community needs, and makes every dollar count.
3 examples from high performing governments
1. A structured and operational plan: City of Denton, Texas
Denton, Texas is effectively aligning its strategy and budget through the implementation of six distinct Key Focus Areas (KFAs), which guide their strategic actions. This makes for a structured approach that has led to several significant accomplishments.
For instance, in 2023, Denton improved its city flood rating from an eight to a five, resulting in residents saving up to 15% on flood insurance premiums through the FEMA Community Rating System.
The action? Identify and improve core city drainage systems.
The city’s efforts to enhance community quality of life have also been successful, with approximately 58% of residents now living within a 10-minute walk of a park, surpassing the goal of 55%.
The action that was attached to this outcome? A holistic parks overhaul that connects specific neighborhoods to major trails, improving the overall trail system and core infrastructure.
The key takeaway here is that these outcomes were prioritized in the budget. By ensuring that their plans were strategically supported through careful actions, they were able to allocate their resources effectively.
2. Well-defined and measurable outcomes: Brookings, South Dakota
Brookings, South Dakota is a really good example of having well-defined measurables that promote connecting strategy and budget.
On January 24, 2023, City Council unanimously approved a new community economic development plan, using it as a guide to prioritize funding allocations. The summary of the plan emphasizes the need for a modern community economic development strategy that leverages the city’s assets and focuses resources on sustainable growth.
Key initiatives in Brookings’ plan include creating a revolving loan program with clear goals and guidelines, evaluating best practices from similar midwestern cities, and raising capital to distribute funds by 2025 with an emphasis on measurable impact.
The plan also involves convening a task force to promote local purchasing and studying successful “buy local” campaigns to adapt for Brookings. As their plans get underway, they will be tracking and measuring progress as they go. This systematic, measured approach, aligned with strategic goals, allows for continuous assessment and adjustment.
3. Strategic priorities in focus: City of Frankfort, Kentucky
Let’s take a closer look at Frankfort’s economic and business development strategy, which is built on the values of “sustainability, excellence, integrity, transparency, and creativity.”
The team at Frankfort treats economic development as a transformative, value-based function of their plan. This is reflected in their actions: they are taking concrete steps towards ensuring this value remains supported by their resource allocation process.
For instance, by making collaboration with partners a core part of their plan, they are prioritizing the process of identifying (and then allocating) resources. Their strategic plan details the ways in which they are continually exploring best practices from other communities, too—and by treating economic development as a team sport, Frankfort leverages holistic engagement as integral to its economic sustainability.
Frankfort is also looking into other avenues for financial stability by diversifying revenue streams, exploring service-based fees, and seeking efficiencies in service delivery. Their comprehensive approach, that integrates and prioritizes their business and economic development process, ensures that the city’s strategic vision is not impeded or derailed by budget limitations. A great example of a budget that is supportive of a community vision.
Connecting budget and strategy gets things done
Connecting strategy and budget requires that the strategy itself can be operationalized, that there are measurable outcomes, a culture of consistent measurement and reporting, and a “living” plan approach to planning. An excellent budgeting process to accompany this approach, and help to allocate funds, is outcomes-based/priority-based budgeting. Unlike traditional budgeting, which simply divides money based on departments and previous spending, outcomes-based budgeting helps to align funds with actual community goals.
By asking, “What impact do we want to create with this funding?” local governments can focus spending on programs that matter most.
Get the guide ↓
Want to dive deeper into these five tips for connecting your strategy and your budgeting? Our new guide, “5 Pillars for Aligning Budget With Strategy” gives you step-by-step advice on building a more cohesive and connected strategy and budget, allowing for innovative initiatives and real progress toward your community’s long-term goals.
Mary King
Mary King is a professional writer and researcher based in Toronto. She comes to Envisio with a Masters Degree, where she researched the relationship between the disappearance of urban public spaces, and high level decision-making processes in local governments.
For nearly a decade, Mary has worked as a community organizer, promoter, and supportive researcher in a variety of nonprofits and think-tanks, and her favorite area of focus was in connecting local artists with marginalized youth. Since 2017, her writings and research on policy, local governance, and its relationship to public art and public space has been presented at conferences internationally. She has also served as both a conference chair and lead facilitator on professional and academic conferences across Canada on how to better bridge academic research with local change-agents, policy makers, artists, and community members.
Envisio’s mission of excellence and trust in the public sector maps onto Mary's interest in local government and community mobilization. She loves working at Envisio because she cares about having well organized, strategic, and transparent public organizations and local governments. Mary is also a creative writer and musician and has been supported in her practice by the Canada Council for the Arts. Her stories can be found in literary journals across Canada.
