CityEconomist 

The late Aaron Wildavsky in 1964 laid out the basic  battle of the budget, which is spenders versus cutters. The spenders are the agencies that carry out the work of government. The cutters are the budget offices that have to keep spending within revenues.

Advocates must make the case for their piece of the budget. It is a competition among worthy causes. As Milton Friedman has said, needs are unlimited. Actually what he said was, when I hear the word need I hold on to my wallet.

Each year, almost every unit of government starts with a fund balance, money in the bank. During the year, it raises revenue from taxes, sale of assets and borrowing. Each year it spends money on operating expenses, capital investment and repayment of loans and interest. The major single exception is the national government, which can print money. In Zimbabwe, the printing press has lost its effectiveness because the money loses value faster than it can be printed. But so far since 1980 the United States has been able to run huge deficits and borrow to fund them without significant inflation.

The budget director in most cities and states has the last word because budgets must be balanced - by law in most states and as a practical matter in all the otherds. The same is true of cities and counties. So agency heads work with their clienteles to advocate for their share of spending. A local Department of the Aging must compete with the Department of Mental Health and the Department of Education. How do they do this?

1. Agency officials within government work with legislative committees and nonprofit organizations to build an active constituency that can be relied upon to respond when cuts are made.  One of the most effective examples of this was when 110 busloads of tenants went to Albany to defend rent regulations. It was very effective. No one in Albany had seen anything quite like it as tenants streamed through the Capitol building in Albany wearing hats saying “I’m a Tenant and I Vote.” Legislators from both parties were very impressed by this display and the effort to weaken rent controls died that day. The same tactic is used for other causes - "I'm a teacher and I vote" or "I'm a parent and I vote" or "I'm a senior and I vote." 

2. Alliances. That’s not enough, however. A major campaign cannot be carried out frequently or the constituents become exhausted.  The next step is for agency officials and constituent nonprofits to create alliances. For example, environment and education, as exemplified by Green Chimneys or FrOGS. A mentor program could bring together programs for the elderly with schools, Different types of constituencies with common goals, like NAMI and the Alzheimer;s Association could work together. A Food Bank could work with a legislative office to work with local restaurants, giving credit both to the legislator and the restaurant association that serves as a broker. A sports association like the USTA could team up with schools in advocating funds for recreational activities.  A library can work with the elderly and schools and other services  to become a community resource.

3. Performance.The third and final main tactic that Wildavsky notes as successful is for agencies to show results. In theory, that should be the most important consideration, the strongest case for funding a program, but unfortunately it doesn’t always work in the absence of constituency-building and alliances. How to show performance is something that I spent 15 years of my life working on as the founder and executive director of the Council on Municipal Performance. It is enough here to say that somehow you have to measure how well you are doing and  you have to show your track record  both over time and in comparison with other agencies trying to do the same kind of work.

A Walk-Through on Budget Analysis

Here are two simple descriptions of the kind of analysis of budgets that municipalities must go through each year:
 1. A succinct discussion of fund balances and net spending during the year for a small city worried about running a deficit: http://www.policepay.net/pdf/smartcities.pdf.
2. A longer discussion of the danger of cutting budgets only to find that the cuts create the need for greater expenditures later, a New York City example, here.