Charter amendment allowing a two-year city budget process

This charter amendment changes Denver’s budget process to improve public engagement, transparency, and accountability. First, this charter amendment would allow for an optional two-year budget cycle which would give partners and the City the ability to better plan for long term projects. It also frees up staff time during the adjustment year, year two, to work on program and budget evaluation within city agencies. Denver could still choose a one-year budget in time of economic uncertainty.

Second, this charter amendment would require a public process to collect community input while the budget is being developed. This process would be managed by the Mayor’s Office and the results would be presented to Council and the public by the third Monday in July. This allows the public to give direct feedback on budget priorities ahead of the final budget being presented to Council.

Third, this charter amendment would change the timeline of the budget process to allow Council and the public more time to analyze the budget and develop better budget amendments. It would remove the Charter required July 1 date which requires a preliminary budget estimate that is not representative of the final budget. Instead, it would free up staff time for program assessment and planning. It would also move the September 15 date forward, requiring the Mayor to propose a budget the first Friday of September. This gives Council and the public an additional week to review the proposed budget and better prepare for budget hearings in mid-September. The charter amendment would also require the Final Budget be sent to Council on the second Friday in October instead of the third Monday in October. This would allow one

additional week for council and the public to suggest budget amendments ahead of Council’s public hearing on the fourth Monday of October.

Fourth, the charter amendment would create a process for when revenues decline or expenditures outpace revenues unexpectedly. If expenditures exceed total appropriations by two percent or more, or expected revenues are more than two percent less than projected revenue, the Mayor Shall propose budget reductions and inform Council. This would require the Department of Finance to present a budget reduction plan in a committee hearing any time they discover projected revenues or expenditures are more than two percent off. In the event expenditures are expected to exceed total appropriations by five percent or more, or expected revenues will be more than five percent less than projected revenue, the Mayor shall propose and Council shall reduce appropriations by ordinance to balance the budget. This would require the Department of Finance to present a budget reduction plan in a committee hearing and Council would reduce appropriations by ordinance any time the Department of Finance discovers projected revenues or expenditures are more than five percent off. This will ensure that projected expenditures cannot outpace projected revenues by significant amounts.

It would be a huge mistake for Denver to move to a two-year “biennial” budget cycle. Denver rarely gets a one-year budget right. A biennial budget would force the Department of Finance to accurately project revenues and expenditures up to three years ahead of the end of each budget cycle. Yet we know from our actual experience just last year, when economic conditions faltered and Denver faced a $200 million deficit in the middle of the year, that biennial budgeting is a recipe for fiscal disaster.

Biennial budgeting limits the ability of the city to quickly adapt to changes in financial forecasts. The city’s Department of Finance uses monthly data to be as accurate as possible when forecasting the city’s revenue. Denver’s general fund, which pays for most city services, is 56% sales tax. That number fluctuates from month to month depending on a variety of economic influences, including what is happening politically at the state and federal levels. It is already a challenge to forecast revenue for a 12-month period. Trying to forecast for 24 months, starting 12 months before that, will be wildly off. We’ve seen two budgetary crises just since 2020.

Based on economic projections, Denver needs to be flexible and make adjustments to spending as quickly as possible. Locking into a two-year budget severely reduces that flexibility and slows down response time to uncertainty.

Proponents respond that the city can make adjustments in the second year of a two-year budget if there are economic challenges. Well then what’s the point of having it in the first place? The State of Colorado requires Denver to pass a balanced budget every single year. So biennial budgeting would be entirely a wasted effort. We should preserve the ability to adapt and make changes quickly by sticking with an annual budget cycle.

Also, giving the mayor’s administration a two-year budget relinquishes too much of City Council’s power of the purse to the mayor.

Going to biennial budgeting is against the prevailing practice among governmental jurisdictions. Fewer of them use biennial budgeting in the first place, and more of them have decided to switch to annual budgeting than have gone from annual to biennial, as proposed here.

Lastly, proponents of biennial budgeting state without evidence that biennial budgeting would give city agencies, vendors and providers more planning certainty, and it would provide more certainty for capital improvement projects, which always take more than a year. This is nonsense. First, the city already uses a rolling six-year capital improvement projects plan, which biennial budgeting has nothing to do with.

Second, the city already issues multi-year contracts, typically three to five years, with vendors and nonprofit service providers, so a biennial budget provides no improvement at all over an annual one.

Bottom line: Our current annual budget system is preferable in every way over the chaotic adjustments that biennial budgeting would bring.