The City of San Luis
Obispo has received national recognition for its use of a two-year Financial Plan and
budgetary process that emphasizes long-range planning and effective program management.
Significant features of the Citys two-year Financial Plan include the integration of
Council goal-setting into the budgetary process and the extensive use of formal policies
and measurable objectives. The Financial Plan includes operating budgets for two years and
a capital improvement plan (CIP) covering four years.
appropriations continue to be made annually under this process, the
Financial Plan is the foundation for preparing the budget in the second
year. Additionally, unexpended operating appropriations from the first
year may be carried over for specific purposes into the second year with
the approval of the City Manager.
Purpose of the
Citys Two-Year Financial Plan
The fundamental purpose
of the Citys Financial Plan is to link what we want to accomplish for the community
with the resources necessary to do so. The Citys Financial Plan process does this
by: clearly setting major City goals and other important objectives; establishing
reasonable timeframes and organizational responsibility for achieving them; and allocating
resources for programs and projects.
Major City Goals
objectives with necessary resources requires a process that identifies key goals at the
very beginning of budget preparation. Setting goals and priorities should drive the budget
process, not follow it.
For this reason, the
City begins each two-year Financial Plan process with a series of in-depth goal-setting
workshops where Council members invite candidate goals from community groups, Council
advisory bodies, and interested individuals; review the Citys fiscal outlook for the
next five years and the status of prior goals; present their individual goals to fellow
Council members; and then set and prioritize major City goals and work programs for the
next two years. City staff then prepare the Preliminary Financial Plan based on the
Councils policy guidance.
budget and fiscal policies provide the foundation for preparing and implementing the
Financial Plan while assuring the Citys long-term fiscal health. Included in the
Financial Plan itself, these policies cover a broad range of areas such as user fee cost
recovery goals, enterprise fund rates, investments, capital improvement management, debt
management, capital financing, fund balance and reserves, human resource management, and
Under the City Charter,
the City Manager is responsible for preparing the budget and submitting it to the Council for
approval. Although specific steps will vary from year to year, the following is an
overview of the general approach used under the Citys two-year budgetary process:
First Year. As
noted above, the Financial Plan process begins with a Council goal-setting session to
determine major objectives to be accomplished over the next two years. The results of
Council goal-setting are incorporated into the budget instructions issued to the operating
departments, who are responsible for submitting initial budget proposals. After these
proposals are comprehensively reviewed and a detailed financial forecast is prepared, the
City Manager issues the Preliminary Financial Plan for public comment. A series of study sessions
and public hearings are then held leading to Council adoption of the Financial Plan by
- Second Year. Before the
beginning of the second year of the two-year cycle, the Council reviews progress during
the first year, makes adjustments as necessary, and approves appropriations for the second
- Mid-Year Reviews. The
Council formally reviews the Citys financial condition and amends appropriations, if
necessary, six months after the beginning of each fiscal year.
- Interim Financial and Project
Status Reports. Online access to "up-to-date" financial information is
provided to staff throughout the organization. Additionally, comprehensive financial
reports are prepared monthly to monitor the Citys fiscal condition, and more formal
quarterly financial reports are issued to the Council and key City staff. The status of
major program objectives—including CIP projects—is also periodically
reported to the Council on a formal basis.
As set forth in the City Charter, the
Council may amend or supplement the budget at any time after its adoption by majority vote
of the Council members. The City Manager has the authority to make administrative adjustments to
the budget as long as those changes will not have a significant policy impact nor affect
budgeted year-end fund balances.