When multi-year budgeting makes sense: while multi-year budgeting offers some attractive benefits, these will not materialize unless a government possesses certain necessary characteristics and is committed to a true multi-year budget process.(Solutions)

Multi-year budgeting in the public sector has increased in popularity over the years. For fiscal year 2003, 78 recipients (7 percent) of GFOA's Distinguished Budget Presentation Award budgeted on a biennial cycle. While some governments abandoned multi-year budgeting during the most recent economic downturn--mostly because of flagging revenue growth that necessitated drastic and short-term corrective actions--the momentum is likely to resume once revenues turn the corner.

Despite widespread interest in multiyear budgeting, it is no panacea for the shortcomings of traditional budgeting. Some governments that have switched to multi-year budgeting have reported significant improvements, while others have not. Such mixed results clearly suggest that multi-year budgeting is not for every organization. So how do you determine whether it makes sense for your jurisdiction? This is the very question one special district recently asked GFOA to answer.

MULTI-YEAR BUDGETING: WHY AND WHY NOT?

Before describing how GFOA helped this particular client evaluate the business case for multi-year budgeting, it is useful to understand the current state of this practice in the public sector. Governments that have moved to a multiyear budget process usually cite one or more of the following reasons:

* Reduces staff time devoted to budget development

* Improves long-range and strategic planning

* Encourages a more policy-oriented budget process