KNOWING THE NUMBERS

Analyzing Public Budgets

Know what information you need to analyze budgets.

Understand what to look for, and what it all means.

Evaluate whether or not an employer has a budget problem.

Workshop Objectives

What is a Budget?

• It is a political document.• It is a financial planning tool.• It is not etched in stone.

We must do more than understand the budget – we

must organize and build power to win our demands.

Why Analyze Budgets?

• To find ammunition for the bargaining table.

• To evaluate the employer’s finances if they plead poverty.

• To gain insights into the employer’s operations and plans.

• To let the employer know we are paying attention.

A Budget Analysis Can Make a Difference

Defining Budget Terms

Revenues

Expenditures

General Fund

CAFR

Fund Balance

Deficit

Surplus

Fiscal Year (FY)

BUDGET TERMS

Tools You Need for a Budget Analysis

• Comprehensive Audited Financial Report (CAFR)

– Basic Financial Statement– Past Budget Information– Management’s Discussion and Analysis

• Year-to-Date Financial Reports, if available• Enacted Current Year Budget• Proposed Budget for Next Year, if available

How to Get These Tools

• Employer’s Budget Office• Employer's Website

You have to ask. You have to ask. Employers may Employers may not be too keen not be too keen on sharing on sharing information information about their about their financial financial situation.situation.

Workshop Objectives Know what information you need to analyze

budgets

Understand what to look for, and what it all means

Evaluate whether or not an employer has a budget problem

Crunching The Numbers

Key Questions to Ask

• Does the employer have money in reserve?

• Does the employer have a surplus or a deficit?

• Are revenues growing? If so, by how much?

• How fast are expenditures growing and in what areas?

• How do budgeted amounts compare to actual spending and revenues?

Basic Financial Statement:

Balance Sheet

• Examine revenues and expenditures.

• Assess whether there is a surplus or a deficit.

Surplus or Deficit?

• Revenues= $450,000

• Expenditures=$456,000

$6,000 Deficit!

Basic Financial Statement:

Fund Balance• Reserved funds are off

limits.• Unreserved funds can be

used for any purpose.• Employers may attempt

to “restrict” or “earmark” funds, but they are still unreserved!

Knowledge Check1.A Comprehensive Audited Financial Report

(CAFR) contains:o Basic financial informationo Past budget informationo Management’s discussion and analysis of the employer’s

financeso All of the above

2.In most cases, AFSCME members are paid out of:o Reserved fundso Restricted funds o The General Fund

3.True or False: Public Employers do not have to provide audit reports and budget information.o Trueo False

Answers1. Correct answer – all of the above

CAFRs usually contain several sections but there are three that we are most interested in: o The Basic Financial Information section contains revenues, expenditures,

fund balances, deficits and surpluses among other things.o Past budget information usually includes the previous year’s budgeted

and actual numbers which give us an idea of how accurate their budget was for that particular year.

o And finally, the Management’s Discussion and Analysis gives valuable insight into how the employer viewed their own finances for the previous year. It identifies highlights in the general fund, summarizes divergences from the budget and makes predictions for the coming year’s budget.

2. Correct answer is General Fundo The General Fund is very important for a budget analysis. Most employers

have several funds that they account for, things like capital funds, debt service, sewer funds, etc. But we usually look at the general fund as it is the major operating fund and likely the fund that most of our members are paid out of.

3. Correct answer is falseo The most important thing to remember is that public employers must

provide these documents. Although they may not want to let you in on their financial situation it is their obligation to do so. All you have to do is ask.

Workshop Objectives

Know what information you need to analyze

budgets

Understand what to look for, and what it all means

Evaluate whether or not an employer has a budget problem

How is Your Employer’s Fiscal Health?

• Between 5-15%

• Below 5%

• Over 15%

Answering Budget Questions

Q: Does the employer have money in reserve?A: UFB as % of Revenues

Q: Does the employer have a surplus or a deficit?A: Basic Financial Statement Balance Sheet

Q: Are revenues growing? If so by how much?A: Balance sheets for the past three years

Answering Budget Questions

Q: How fast are expenditures growing and in what areas?

A: Balance sheets for the past three years

Q: How do budgeted items compare to actual items?

A: Budget vs. Actual statements

Remember….

• Budgets help us understand an employer's financial flexibility.

• The General Fund and the Unreserved Fund Balance are key indicators of the employer’s financial situation.

• You have the tools to analyze a public budget.

• We must do more than understand budgets – we must organize and build power to win our demands.

AFSCME Publication:

“Knowing the Numbers: A Guide to Budget Analysis” http://www.afscme.org/publications/1661.cfm

For More Information