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Budget Process Overview

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 City’s 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 five years.

While 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 City’s Two-Year Financial Plan

The fundamental purpose of the City’s Financial Plan is to link what we want to accomplish for the community with the resources necessary to do so. The City’s 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

Linking important 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 City’s 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 Council’s policy guidance.

Financial Plan Policies

Formally articulated budget and fiscal policies provide the foundation for preparing and implementing the Financial Plan while assuring the City’s 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 productivity.

Preparation and Review Process

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 City’s 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 June 30.
  • 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 fiscal year.
  • Mid-Year Reviews. The Council formally reviews the City’s 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 City’s 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.