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Analyzing Expenditure Estimates

Managers often overestimate expenditures. By doing this, they appear more efficient when they provide services at less than "projected" costs. Also, if budget reductions become a necessity, enough "fat" exists to allow for the cuts. By carefully reviewing expenditures, the union can identify this fat and fight for it to be used to fund its demands.

The union can identify questionable expenditure estimates by comparing budgeted expenditures to either the actual expenditures of the past year or to the annualized expenditures of the current fiscal year. For example, if you are analyzing the FY 1999 proposed budget and you are currently seven months into FY 1998, you can annualize the year-to-date FY 1998 expenditures (annualization explained on page 6) and compare those with the proposed expenditures for next year (FY 1999). Calculate both percentage and dollar increases.

If the annualized FY 1997 figures are significantly less that the FY 1998 budget, there may be additional funds left over. If the annualized figures for FY 1997 are significantly less than the proposed expenditures for FY 1998, you may wish to question the proposed expenditures. Management may be attempting to pad the budget.

If you can't get recent year-to-date figures for the current fiscal year (FY 1998), compare the FY 1998 budget with actual expenditure figures for the last completed fiscal year. You will want to use actual proposed, expenditure figures since the jurisdiction may have spent less than budgeted. Besides comparing the proposed budget with the current or past years' budgets, you also may want to question large dollar increases and percentage increases above the rate of inflation. For example, if a utility line item is increased 20 percent when inflation is expected to increase only 4 percent, this may be questioned.

Other Expenditure Issues

When reviewing the expenditure portion of the budget, you should pay particular attention to potential salary savings, contingency funds, misallocated capital projects, and evidence of contracting out.

Salary savings

Salary expenditure estimates often do not consider attrition and turnovers. During the year, positions may go unfilled, saving money that had been allocated for their pay and benefits. Experienced workers may be replaced with new hires at lower rates over the year. As a result, salary and benefit expenditures are often 3 to 5 percent below budget. This planned overbudgeting for salaries is a frequent source of support for wage increases.

Contingency funds

Jurisdictions create contingency funds to provide flexibility in meeting unforeseen and unbudgeted expenses. Scanning previous year's budgets often shows that these funds go unused for many years and can be reduced or eliminated. These funds can then be used to support wage and benefit increases. A budget may contain several contingency funds throughout the budget. They can be called a variety of names including reserves, departmental executive reserve, emergency authorization, unallocated appropriations and unappropriated expenditures.

Capital projects and equipment

The budget is an operating guide for the fiscal year and should only contain revenues and expenses for the year. Non-operating expenditures benefiting the jurisdiction for more than one year are often incorrectly charged against a single year's revenue. Capital items such as road resurfacing, park and recreation improvements or sewer line installations should be financed over their useful lives. Financing should be used for major equipment purchases, especially large vehicles. These long-term expenses may be financed using long-term bonds or short-term notes, depending on the useful life of the improvement or equipment.

Consulting services and contracting out

Contracting out with private firms to provide public services is one of the greatest threats to public employment. Frequently, the first warning sign is an increase in expenditures for items such as "consulting contracts" or "purchased services" or "contract services." Always question increases in these line items. They can also include proposals to study or undertake contracting out. The AFSCME Department of Research and Collective Bargaining Services will provide information and assistance on fighting contracting out.

In addition to providing a source of funds for contracting out, many agencies use the consulting category as a seldom-questioned hiding place for funds.

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