The Role of Multi-Year Forecasting in the Annual Budgeting Process for Local Governments

Authors

Roy W. Bahl, Georgia State UniversityFollow
Larry Schroeder, Syracuse UniversityFollow

Author ORCID Identifier

Roy Bahl: https://orcid.org/0000-0002-7956-5076

Document Type

Article

Publication Date

1984

Abstract

The annual budget focuses on a single twelve-month period, yet spending and reve­nue decisions made today can have long-lasting fiscal effects. New capital projects re­quire future spending on operations, maintenance, and debt-carrying charges; altered pension benefits carry long-term commitments; new fee structures will influence later years' revenues; and hiring, layoff, and salary schedule decisions have fiscal impacts well beyond the year in which they are made. Despite these very obvious long-term im­plications, surprisingly few local governments have attempted systematically to link the annual budget to a multi-year fiscal plan.

Multi-year projections of revenues and expenditures are a necessary step in over­coming the myopic attitudes often exhibited in the annual budget process. Projections do not, by themselves, constitute a multi-year fiscal plan, but they are both the first step and the major building block in preparing long-term budget plans. The aim of this paper is to argue that local governments can prepare and effectively use revenue and expen­diture forecasts in the annual budget process, and to report the successful experience in a group of large cities. We begin by briefly describing the techniques which can be used to derive three-to-five-year forecasts of spending and revenues. The experiences of several large cities which use such projection efforts are then reviewed to show how the results have been directly applied in preparation of the annual budget. Finally, the role of forecasts in budgetary policy making is summarized.

Comments

Originally published in Bahl, Roy, and Larry Schroeder. 1984. “The Role of Multi-Year Forecasting in the Annual Budgeting Process for Local Governments.” Public Budgeting and Finance 4 (1): 3–13. https://doi.org/10.1111/1540-5850.00627.

(c) Wiley. Posted by permission.

DOI

https://doi.org/10.1111/1540-5850.00627

Recommended Citation

Bahl, Roy, and Larry Schroeder. 1984. “The Role of Multi-Year Forecasting in the Annual Budgeting Process for Local Governments.” Public Budgeting and Finance 4 (1): 3–13. https://doi.org/10.1111/1540-5850.00627.