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Douglas County Implements Innovative Priority Based Budgeting

August 8th, 2014

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In March 2014, Douglas County, Nevada won the Cashman Good Government Award for developing innovative budget solutions through priority based budgeting. As with many local governments in Nevada, Douglas County faced a significant structural deficit after the Great Recession. To address this deficit, Douglas County embarked on a priority-driven budget development process that included public input. Through these efforts, Douglas County was able to reduce its structural deficit and improve its bond rating for the first time in 10 years.

Douglas County uses the following six steps to implement priority based budgeting:

  • Step 1: Determine desired community results (priorities). Douglas County identified 6 results:
    • Financial Security
    • Safe Community
    • Economic Vitality
    • Infrastructure
    • Natural Environment, Resources and Cultural Heritage, and
    • Manage Growth and Change.
  • Step 2: Clarify the definitions of the results (priorities) by detailing the factors that influence the way results are achieved.
  • Step 3: Identify a comprehensive list of programs and services.
  • Step 4: Value the programs using 7 peer review teams. The teams score programs against 5 basic attributes: mandate to provide the program, reliance on Douglas County to provide the program, cost recovery of the program, level of demand for the program, and cost avoidance and/or efficiency resulting from the program. The teams also score programs on the degree of relevance to the results (priorities) identified in Step 1.
  • Step 5: Determine the cost of each program.
  • Step 6: Determine income from each program .

The end result of this process is a Resource Alignment Diagnostic tool that groups each program and its budget into a quartile ranging from 1 to 4 (see Figure 1). Quartiles 1 and 2 are the most relevant priorities of the county while quartiles 3 and 4 are less relevant to the priorities of the county. This tool is used to target funding towards programs in quartiles 1 and 2 and to determine whether to reduce spending for programs in quartiles 3 and 4.

Figure 1

Douglas small

Source: Douglas County Board of Commissioners’ Strategic Planning/Priority Based Budgeting Workshop, June 30, 2014

As part of priority based budgeting, Douglas County develops strategic objectives to implement the priorities. The County then establishes annual goals for each strategic objective and monitors the results.

To obtain public input, Douglas County used a pioneering online tool that allowed County residents to show how they would spend an imaginary $500 on the 6 community results (priorities). The County received 86 responses and found that infrastructure was the top priority in the community. Based on this input and the results of the priority based budgeting process, Douglas County shifted funding from lower priority programs towards preventive road maintenance, increasing the budget from $300,000 to $1.5 million in 2013-14.

Priority based budgeting can be used at any level of government. There have been efforts to implement similar structures in Nevada state government. Since 2011, Governor Sandoval has been working on incorporating performance based budgeting into the State budget process, with the goal of tying budget resources to performance measures. For the 2015-2017 biennial budget, the Department of Administration plans to implement a pilot program for major budget initiatives that will track whether the initiative accomplished its stated purpose or goal and whether the agency providing services and has met its performance measures.

Douglas County’s experience shows that focusing the budget on priorities can improve fiscal stability and target funds towards services that are needed the most. Implementing these changes requires leadership and commitment at all levels within a government agency. It also requires a paradigm shift from making incremental changes to the budget each year, to annually reviewing priorities and critically analyzing each program.

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