MAKING LIBRARY BUDGETS Instructor: Anne M. Turner [email protected] An Infopeople Workshop Winter 2009.

MAKING LIBRARY BUDGETS

Instructor:Anne M. Turner

[email protected]

An Infopeople Workshop

Winter 2009

This Workshop Is Brought to You By the Infopeople Project

Infopeople is a federally-funded grant project supported by the California State Library. It provides a wide variety of training to California libraries. Infopeople workshops are offered around the state and are open registration on a first-come, first-served basis.

For a complete list of workshops, and for other information about the project, go to the Infopeople website at infopeople.org.

Introductions

• Name

• Library

• Position

• How many budgets have you created?

Today We Will Talk About

• Creating a library budget

• Privatizing and contracting out

• Cutting the budget

• Revenue Sources

• Making the Dry Creek Library Budget for FY 2009-10

Dry Creek--a Garden Spot in California

Notes on the City:

• 76,000 people on edge of Central Valley

• Gated communities built outside demand service

• Economy impacted by shift in agricultural processing overseas

• Budget exceeds revenues

Notes on the Library

• Department of City of Dry Creek• Advisory Board• Three facilities: Main Library, Barely

Adequate Branch, and Abysmal Branch• 38,591 registered adult borrowers, 10,732

registered kids• 503,600 checkouts last year • 51 FTE staff (14 librarians, 37 others)

Creating A Public Library Budget:

What’s In It And How Did It Get

There?

Three Elements

• Personnel

• Supplies & services

• Capital outlay

Personnel

• 68% of the Dry Creek Library budget is for personnel.

• 25% of the Personnel amount is benefits, which are 35% of salaries

• Look at how personnel costs are spread across the Library divisions

Dry Creek Library Personnel Expenses by Library Division

Supplies & Services

• Objects that are flexible – Library materials or training

• Objects that are not– Electricity or rents

Exercise #1

• Look at the Dry Creek Library Budget Summary on Page 8. Working together, identify which items are flexible and which are not.

• Total up each column

Why Is This Important?

• Inflexible item cost is going up 5%

• Must hold budget to 2.5% increase

• Where’s the difference going to come from?

The Flexible items or Capital Outlay?

Capital Outlay

• Capital Outlay is comprised of all the equipment and other items costing more than $5,000 each, plus a summary line for all those things in the under $5,000 category.

• Shelving, shelving, shelving, and computer equipment

But Capital Outlay also includes. . .

• Big repair or building maintenance items, like $40,000 for the new roof at the Main Library or $25,000 to re-do the HVAC system.

The Budget-making Process

1. Get requests

2. Establish the cost of the inflexible items

3. Create Draft #1

4. Ask Questions and Cut

5. Create Draft #2

6. Take it to the Board, to City or County management, and to the Council or Board of Supervisors

Draft #1: Everything’s In

But everything’s questionable too

The “What-Why-What If-Couldn’t We?” Model

• What is the problem the item or service will solve or program will support?

• Why do we need this particular item, and not some other?

• What If we don’t buy this item or service

• Couldn’t we save money by buying or doing something else?

Exercise #2Analyzing & Asking Questions

• Look at the Object from the 2006-07 Dry Creek Library Budget assigned to your table. Pretend this is a request for

2009-10

• Using the “What-Why-What If-Couldn’t We?” model, develop a list of specific questions about the items requested.

Adding A New Program

• New programs easier to add

• More $ for day-to-day needs is harder

• Package as a new service?

Elements Of A New Program Proposal

• What is the need?

• Who will be served?

• Why is the library the best group?

• How much will it cost?

• How much will it save?

Draft #2: The ‘Final’ Draft

• Put everything together to achieve a final number you think you can live with.

• Take it to the Library Board• Objective is to get active support• Present the new program• Talk about the imperatives of the new roof or

whatever • Add what Board members can’t live without

The Guys In Suits

• The City Manager and the Finance Director will both look over the ‘final’ budget

• They too will wonder why, ask questions, and suggest/demand changes

And Finally

• Present to City Council or the Board of Supervisors

• Their questions

• The role of the library board at the presentation

Other Budgeting Methods

• Program budgets

• Performance budgets– See also PPBS

• Multi-year budgeting

• Zero-based budgeting

Exercise #3

A Program Budget for the

Young Adult Services

Grant Proposal

Privatizing & Outsourcing

A.K.A.

“The private sector can

do it cheaper”

Privatizing

• Def: moving a whole department or function of government into the private sector.

• Ex: Waste Water Treatment

State Prisons

Libraries

OutsourcingA.K.A. Contracting Out

Def: Hiring other people to do a piece of work that is not key to the organization’s primary mission.

– Shipping and delivery– Telecommunications– Janitorial Services

Privatization

• A matter of political philosophy

• Elected officials make privatization proposals to solve difficult political or budget problems.

How Does A Private Firm Like LSSI Save Money?

Two ways:

• Takes the employees out of the public sector benefit system

• Centralizes back-of-the-house services

Pros Of Privatizing Libraries

• Cheaper

• Consolidating can make economic sense

• Gets rid of a department the elected officials don’t understand

• No need to negotiate a regional alliance

Cons of Privatizing Libraries

• Cost savings are ephemeral at best. What about next year?

• Unfair to library workers

• Who will advocate for library services?

• Puts a beneficial public service into private hands

• Reduces public accountability

Contracting Out

• “We’re not in the cleaning business. We’re in the city government business. It is a waste of our resources to be spending as much time as we do supervising janitors.”

A City Manager

Analyzing A Proposal To Outsource

• Four elements:– What needs doing– Direct costs– Indirect costs– Social costs

What Needs Doing?

• Develop a detailed specification list

• Be careful what you wish for

• Develop objective measures for the quality of the service

What Are Direct Costs?

• Identify using janitorial services

What Are The Indirect Costs?

• Biggest is damage to employee morale and productivity of the existing in-house workers

Social Costs

• Called the “negative externalities”

• Failure to calculate these makes the price of the product artificially low– Air pollution example

Social Costs Summarized

• Loss of equity

• Loss of public participation

• Loss of accountability

• And a final question: will the outsourced contract be particularly vulnerable to budget cuts because public employees are not doing the work?

Library Core Functions: Could They Be Outsourced?

• Cataloging and Processing

• Reference Service, Virtual and Otherwise

• Story Hours

• What else?

Exercise #4

Outsource the Work of Five Dry Creek Library Employees

The Bottom Line

• Outsourcing can be a useful tool

BUT

• We have to define and protect our core competencies

• We have to be sure to compute all the costs

Cutting The Budget

• The bad news:

The Dry Creek city manager has imposed level funding on all departments for the new fiscal year

What Does This Mean?

• Personnel slated to increase 4% = $147,119

• Fixed cost items will increase 2.5% = $23,125

• You have to find cuts worth $170,246 in the FY 2008-09 budget

Evaluating Potential Cuts:Four Criteria

• Will the cut be visible to the public?

• Is it a short or long term cut?

• Does the cut require staff layoffs?

• Which library constituency will be most affected?

Visibility

• Public must understand it costs $$ to run the library

• Invisible cuts help people think that the library can continue to deliver services with less and less money

• Hard to get invisible cuts restored

• What are some visible cuts?

Short or Long Term Cuts

• Is the city-imposed cut temporary or long-term?

• Can we live without this item forever?

Long Term Cuts are Hard to Achieve

• Closing a branch, reducing open hours, etc.

• They involve painful staff layoffs, but that isn’t what makes them hard to achieve

• It’s the politics

Will It Involve Staff Layoffs?

• Almost always, the layoffs are at the bottom of the library staffing array

• BUT: easier to get back support staff to restore open hours than a reference librarian

• Watch out for bumping rights

53

Which Constituency Is Most Affected?

• Who benefits? Nobody.

• Who is hurt the most and what kind of power do they have?

• Again, a political issue

54

Three Things To Avoid At All Costs

• Cutting off your nose to spite your face

• Allowing groups to pit one branch or service against another

• Handing the issue to a candidate for office

Exercise #5

Cutting The Dry Creek Library Budget

Don’t Take It Personally

Revenue Sources

Where do Dry Creek and the Library get their money?

The Four Basic Taxes

– Property tax– Parcel taxes– Sales taxes– Excise taxes

Property TaxesA.K.A. Real Estate Taxes

• Ad valorem; based on the assessed value of the property

• The chief source of revenue for local governments in the U.S.

• Tax limitation measures like Prop 13 require workarounds

Three Other Points:

• Tax rates: what people pay depends upon the assessed value of their property, and the rate set by the governing body

• Property taxes are flexible

• Not all property is taxed Churches, schools, libraries, government

buildings, and university and community college campuses are exempt

Parcel Taxes

• NOT Ad Valorem

• A fixed amount placed on every property to (usually) do something specific.

• A favorite of the schools--$21 on every property for class size reduction

Sales Taxes

• Have to have something worth taxing

• Respond to the economic cycle: collections are good when times are good, but go down when times are bad.

• The “Point of Sale”

concept

Excise Taxes

• Taxes on specific commodities produced within a nation.

• A way to tax wealthier people, and also to “control” use of harmful substances—tobacco, alcohol, etc.

Impact Fees

• A fee imposed on the developer of a new housing project

• Compensates for the city resources in place that the new residents will use

• Not enormous, but better than NO fees

Borrowing Money

• “G.O.” Bonds, or General Obligation Bonds

• Revenue Bonds

• Special Assessment District Bonds

• Tax Increment Financing

• “C.O.P.s” or Certificates of Participation

• Impact Fees

An Important Fact About Borrowing Money

It has to be paid back!

Other Revenue Sources

• Fees and Fines

• Gifts and Bequests

• Grants

• Fundraising

Where Does The City or County Put The Money It Collects?

• It puts it into funds– Enterprise Funds– General Fund– Library Fund– Internal Service Fund

Funding The Dry Creek Library Projects

• Different money for different projects

• Planning and talking about what’s coming

Economic Growth

• A city’s whose growth is limited to the 2.5% annual CPI increase is NOT growing and is in economic trouble

• It has to find ways to increase economic growth beyond the 2.5% rate, because the cost of doing business grows faster than the CPI

Exercise #6

Making the Dry Creek

Library Budget for FY 2009-10

Are we done yet?

Nope. Not until you have filled out and turned in your evaluation forms