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The City of Duluth pivots budgeting strategy to ensure successful new comprehensive plan

The City of Duluth

Duluth, MN

The city of Duluth struggled to bridge increasing budget gaps that impacted the success of its new comprehensive plan. By pivoting to a program-based budgeting strategy to determine budget cuts, Duluth shrunk the budget gap and ensured the success of its Imagine Duluth 2035 plan.

Topics Covered

Fiscal Uncertainty

Cost

Initial: 40 Thousand USD

O&M: 25 Thousand USD

Funding

General Fund/Existing Public Funds

Project Status

Operational since 2022

Gov Champion

Mayor's Office, Finance Director

Problem Addressed

The City of Duluth needed to close the gap between expenditures and revenues so resources could be aligned for a new comprehensive plan.

For years, the City of Duluth avoided introducing new initiatives or hiring new staff to close the gap between growing people-related expenditures and relatively fixed revenue streams.

Operating with a traditional line-item budget, the city avoided new expenditures by holding positions vacant, asking for volunteer cuts, or making cuts across the board.

In 2018 they had to cut $1.7 million from their general fund budget and assigned specific amounts to each department. Armed only with details provided in the line item, making budget cuts this way left city officials in the dark as to how they would affect services or move the needle on advancing the city’s priorities.

At the same time as these budget cuts were made, the city was reworking the current Comprehensive Land Use Plan to plan for Duluth’s future. After two years of community-oriented outreach, the city identified key areas of importance and specific priorities. These are reflected in Imagine Duluth 2035, Duluth’s new plan, which will serve as the city’s primary planning tool. Specific priorities documented in the plan included: attracting new employers, improving the road network, and preserving the city’s natural resources and open spaces.

With this brand new plan guiding Duluth’s future growth with input from the community, the city needed to close the budget gap so that resources could be aligned with priorities laid out in Imagine Duluth 2035.

Solutions Used

Duluth changed how it viewed its budget using Priority-Base Budgeting and reduced expenditures to shrink the budget gap.

With tremendous support from the Mayor and the Budget Office, it was decided that the city would implement Priority Based Budgeting for all city funds.

Rather than viewing the city’s budget through the lens of line items, Priority Based Budgeting ties line items to programs so their impact and performance can be more accurately evaluated. Over an eight-month process, all city departments participated in the full implementation of program creation, cost allocation, and program evaluation to determine how the city's resources are currently aligned to the city's priorities.

City staff identified 497 programs offered by the city. The first significant milestone for many managers was completing the cost allocation phase because their eyes were opened to what could be accomplished with program-level data. The program data showed the programs where people were actually spending their time, and it wasn't necessarily where management thought they were spending their or where they wanted or needed them to be spending their time.

"We no longer made decisions by reducing lines but by looking for opportunities based on what departments are working on and what programs cost - the more departments started looking, the more ideas were generated." - Jen Carlson, Finance Director, City of Duluth, MN

The program evaluation phase produced a list of programs divided into "opportunity quartiles." “Departments directors were asked to find five opportunities within their own departments where funding could be diverted using the following categories:

● Partnership Opportunities

● New Technology or Process

● Reducing Service Levels

● Raising Fees

● Recovering Costs via a Grant

Despite not receiving additional sources of revenue, Duluth was able to reduce its expenditures through the creation of opportunity quartiles. With the budget gap now shrunken, the city was able to fill previously vacant positions, hire a new full-time Sustainability Officer and create new partnerships.

Outcomes

1

Under the new budgeting process, city officials were able to shrink the budget gap by more effectively evaluating the performance of city programs.

2

Duluth applied the same program-based approach to their purchasing to ensure purchases moved the needle in achieving the city’s goals.

3

The increased visibility into how the budget was distributed allowed the city to be flexible in retraining staff for needed positions during COVID lockdowns.

4

After years of putting off hiring and creating new initiatives, Duluth hired a new full-time Sustainability Officer and is on track to implement Imagine Duluth 2035.

5

Under the new process, the city-based budgeting decisions on what departments are working on and what programs cost, no longer looking just to reduce the number of line items.

Who Should Consider

Local governments considering program budgeting to better align resources to the goals of the community and provide insight into opportunities such as partnerships, cost recovery, and resource reallocation.

Last Updated

Mar 25th, 2022
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