Category: Administration (page 1 of 4)

Citizen Engagement Tools: Online Budget Simulations

Blog post by Whitney Afonso, Zach Mohr, and Scott Powell

Questions for Practitioners:

  • When (as in time of year) should you engage citizens in budget simulations?
  • Can I expect trust in our government to increase if we engage citizens in budget simulations?
  • How do starting budget conditions affect revenue and expenditure preferences, and what role do deficits, surpluses, and balanced conditions play in shaping these preferences?
  • In what ways can local government practitioners enhance the design of budget simulations based on the findings, and what considerations should they take into account when implementing such simulations to engage citizens in the budget process?

 

Introduction

In the rapidly evolving landscape of budget engagement, online budget simulations have gained prominence. This blog addresses the increasing use of these simulations, particularly in local governments, and emphasizes the need for a thoughtful evaluation of design choices. While previous studies focused on federal budgets, this blog delves into municipal budget simulations, posing the question: does beginning the simulation in balance, deficit, or surplus affect respondents’ engagement and budget preferences?

The blog post summarizes an article published in the journal Public Budgeting & Finance.  We also discuss findings that were not presented in the article that suggests that starting the simulations in deficit really does not affect trust. The blog is useful to anyone that is looking to think more deeply about how to set up an online budget simulation.  They may also be useful to those that want to do experiments in budget and finance settings, which have some important practical challenges.

The findings from the research are highly relevant to local government budget practitioners who wish to engage citizen to participate in the budget process. As budgeting preferences are shown to be a function of design, budgeteers should think critically about the design of their simulations.  Specifically, we think that starting from a small budget deficit position, such as the level of inflation, may be the best way to practically get more engagement with the budget simulation, but this may influence the budget outcomes from the simulation.  At any rate, a choice on how to start the simulation must be made.

Summary of the Article

While traditional in-person engagement has been the norm, the shift to online methods, accelerated by the COVID-19 pandemic, brings benefits such as broad accessibility to the simulation and speed to complete them (although this may also be a bit of a problem).  The article first traces the evolution of online budget simulations from national to local levels, emphasizing their growth in popularity and recognition as a best practice in public engagement, with examples of awards received by local governments. The newer “dynamic” simulations, allowing simultaneous adjustments to revenue and expenditures, are highlighted for their widespread adoption and relevance for both local governments and scholars interested in testing budget engagement theories.

Behavioral Model and Hypotheses

In the article, we discuss the impact of information presentation in budget simulations on participant engagement and budgetary preferences. Referring to previous studies, we establish that the way information is presented, especially concerning cost and performance, influences budget preferences. The model proposed suggests that starting a simulation with different budgetary conditions affects participant engagement and preferences. Unlike prior assumptions of intrinsic motivation, this research explores how the simulation structure influences engagement levels, potentially influencing other perceptions like trust in the government, which we discuss more below.

Research Design and Analysis

Participants engaged in the simulation as part of an online survey experiment. The study aimed to understand how starting conditions (balanced, a 5% deficit, or a 5% surplus) influenced participant engagement, preferences, and perceptions.

Due to local leaders’ concerns about public perception, the simulation had to be conducted in a controlled lab environment rather than in the field. This field-in-lab experiment involved randomly assigning participants to different budgetary conditions, mirroring those of a nearby local government. The participants were younger and more diverse than the general population, being students from the university, thus the specific policy preferences indicated in the simulation are not generalizable to the population.

The analysis focused on three main aspects: level of engagement, budgetary preferences, and final budgetary balance. Contrary to expectations, the time spent on the simulation did not significantly differ between deficit, surplus, and balanced conditions. However, the deficit treatment significantly reduced the number of participants completing the simulation, indicating potential difficulties. The deficit treatment increased the number of changes made to both expenditures and revenues, while the surplus treatment primarily influenced changes in revenues.

Starting conditions significantly affected both revenues and expenditures. Participants tended to maintain taxes when starting in balance, reduce them in surplus, and either maintain or increase them in deficit. Expenditure changes were idiosyncratic, with deficits leading to more significant cuts.

The results partially supported hypotheses related to the size of changes and the final budgetary balance. Participants starting in deficit made larger changes to expenditures, but the final balance was only significantly influenced by the surplus condition, aligning with anchoring and status quo bias. The study sheds light on how starting conditions in budget simulations impact participant behavior, providing valuable insights for both academic research and practical applications in local government budget engagement.

Discussion

The experiment demonstrates that different starting conditions significantly impact engagement and budgetary preferences. Two out of three engagement outcomes were influenced by starting conditions, indicating their substantial role in shaping participant behavior. The deficit condition particularly amplified cuts to services like the police, suggesting that unpopular services might be more vulnerable during financial downturns. Despite the expected increase in time spent on the simulation due to varied starting conditions, time was not significantly affected, potentially influenced by the participants’ choice to avoid difficult tasks.

The deficit condition reduced the likelihood of participants completing the simulation, highlighting cognitive limitations and avoidance of challenging situations. This finding has practical implications for practitioners, emphasizing the trade-off between obtaining more information through deficit starting conditions and the decrease in completions. Future research could explore predictors of completion, such as math literacy, to enhance engagement. Additionally, practitioners may need to consider when to run simulations, as participants’ responses could vary depending on the budget preparation cycle.

Observations of “chunking” behavior in deficit conditions, where participants made larger changes, suggest a dynamic relationship between engagement and budgetary preferences. The study encourages further behavioral theory development in the context of budget simulations.

The research contributes to understanding individual psychological processes like anchoring, loss aversion, and decisional inertia in budget engagement, offering insights for practitioners on designing effective simulations. Practical implications include adjusting starting conditions based on desired outcomes and considering the impact of performance information on budget engagement. The study advocates for more field experiments and “field-in-lab” experiments to refine the choice architecture of politically sensitive topics like budget simulations, enhancing the usability and effectiveness of engagement efforts. Overall, the findings underscore the importance of behaviorally informed changes in shaping public engagement and preferences in budget-related decision-making.

The Simulation’s Effect on Trust

One of the things that was particularly important to our local government partner that we were helping to test the effect of starting position was to make sure that this did not have an effect on citizen’s trust.  The city had carefully maintained its well earned reputation for being a good steward of taxpayers money and it did not want to see that reputation tarnished because citizens’ were asked to do a budget simulation that started in deficit.  This was a major reason that we ran the simulation on students where we could properly debrief them that the scenario was not real and we took out all mentions to this specific city in the simulation.

We also saw that it was an opportunity to test the effect of the simulation and the simulation starting position on the outcome of trust in local government.  So, we actually designed an experiment within the experiment that would look at the effect of seeing no simulation relative to seeing a simulation.  We also are able to see if the effect of the treatment of balance, deficit, and surplus had an effect on trust.  So, the experiment participants were first given a series of demographic questions and a question about trust in different levels in government, they were then randomly assigned into one of the four treatments shown in figure 1 and were asked to complete the simulation, and then the participants were asked about their level of trust in government again.  So, this can be treated as either a between subject or pre-post design.

Figure 1: The four treatment conditions

 

It really doesn’t matter, though, how we analyze the data because there was no statistically significant effect of the simulation on trust.  There was likewise no effect between the different starting treatments on the levels of trust between the treatments or the change in the trust.  Put simply, starting a budget in deficit is not going to influence the level of trust – at least as we measured it.  One of the things that we are doing with future surveys is looking at whether the simulations had effects on other perceptions about the government.

Conclusion

The results of the published study and the results that we are presenting here suggest that there are only minimal negative effects of starting a budget in deficit.  Most importantly it may modestly reduce the number of completions.  However, starting the budget simulation in a small deficit – such as the current rate of inflation – may lead the respondents that complete the budget to adjust more types of revenue and expenditure and provide budgeteers with more realistic information about how citizens would balance the budget.  Starting the budget simulation in deficit is also found not to reduce trust.  Future research is ongoing about the responses to different levels of deficit (2.5%, 5%, 7.5% or 10%) and effects on other perceptual outcomes.  We would invite the budget community to propose other types of experiments that they would like to see researchers address and the research community should continue to work with local governments to test their most promising behavioral changes to these simulations.

 

Citation to journal article:

Mohr, Zach, and Whitney Afonso. “Budget starting position matters: A “field‐in‐lab” experiment testing simulation engagement and budgetary preferences.” Public Budgeting & Finance (2023).

Citizen Engagement: Active Participation

Local governments in North Carolina are required to engage citizens in their budget process by following the guidelines set forth by the Local Government Budget and Fiscal Control Act. This act requires that local governments provide opportunities for public input and involvement throughout the budget process, including public hearings, workshops, and other forums for community feedback. The local government must also make the budget and related documents available to the public for review and provide a written summary of the proposed budget. Furthermore, the budget must be advertised in the local newspaper, and the public must be given an opportunity to comment on the budget before it is adopted.

In addition to these legal requirements, many local governments in North Carolina have taken further steps to engage citizens in the budget process. For example, some governments hold community meetings or town hall events specifically to discuss the budget and gather feedback from citizens. Others may use social media platforms or online surveys to reach a wider audience and gather input from those who cannot attend in-person meetings. By involving citizens in the budget process, local governments can ensure that the budget reflects the needs and priorities of the community and fosters a sense of transparency and accountability.  In previous posts (for example: here, here, and here), I have discussed citizen engagement in the budgeting process.  In general, these discussions go well beyond what is required by the state in terms of citizen engagement.  In this post, I will discuss the third and final “phase”, active participation.   Active participation is achieved when government and citizens collaborate on a set of policy issues and citizens are actively able to shape policy and outcomes.

Governments, especially local governments, around the world are increasingly turning to active participation methods like participatory budgeting (including Greensboro and Durham) and citizen advisory boards to engage with citizens and foster greater public participation in decision-making processes. These methods are designed to ensure that the voices of all citizens are heard, and that governments are accountable to the communities they serve. In this blog post, we’ll explore the benefits and concerns of these methods, as well as best practices for their implementation.

What is PB? - Participatory Budgeting Project

Benefits of Active Participation Methods

Active participation methods like participatory budgeting and citizen advisory boards have several benefits. First, they promote greater transparency and accountability in government decision-making. By involving citizens directly in the decision-making process, governments can demonstrate that they are responsive to the needs of the communities they serve.

Second, these methods can help to build stronger communities by fostering greater civic engagement and participation. When citizens feel that their voices are being heard and that they have a say in how their tax dollars are being spent, they are more likely to be invested in the success of their communities.

Third, active participation methods can help to identify and address issues that may not be immediately apparent to government officials. By involving citizens directly in the decision-making process, governments can gain a better understanding of the needs and priorities of their communities, and develop more effective policies and programs as a result.

Rainy Day Bus Riding Survival Guide

Concerns and Drawbacks

Despite the many benefits of active participation methods, there are also some concerns and drawbacks to consider. One concern is that these methods can be time-consuming and resource-intensive. Participatory budgeting, for example, requires significant staff time and resources to manage the process and ensure that it is fair and transparent.

Another concern is that these methods may not always be representative of the broader community. For example, citizen advisory boards may be dominated by certain interest groups or demographics, which can skew the priorities and perspectives represented in the decision-making process.

Finally, there may be concerns about the efficacy of these methods. While participatory budgeting and citizen advisory boards can help to identify community needs and priorities, they may not always result in the most effective policies or programs. Additionally, there may be questions about whether the decisions made through these methods are binding or simply advisory.

How to Do a Cost-Benefit Analysis for Important Decisions - Lucrum Consulting, Inc.

Best Practices for Implementation

To ensure the success of active participation methods, governments should follow best practices for implementation. These include:

  • Clearly define the goals and objectives of the process. Governments should be clear about what they hope to achieve through participatory budgeting or citizen advisory boards, and ensure that these goals are aligned with broader policy objectives.
    • This includes not asking for feedback and input that your jurisdiction does not have a plan for using and/or acting on.
  • Develop a transparent and inclusive process. Governments should develop a process that is transparent, fair, and inclusive, and ensure that all citizens have an equal opportunity to participate.
    • This often means having several avenues for citizens to participate.
  • Provide adequate resources and support. Governments should provide adequate resources and support to ensure that the process is well-managed and that citizens have the information and tools they need to participate effectively.
  • Incorporate feedback and evaluation. Governments should incorporate feedback and evaluation into the process, and use this feedback to refine and improve the process over time.

Conclusion

Active participation methods like participatory budgeting and citizen advisory boards are powerful tools for engaging citizens and fostering greater public participation in decision-making processes. These methods have many benefits, including greater transparency, accountability, and civic engagement. However, there are also concerns and drawbacks to consider, including resource constraints, representativeness, and efficacy. By following best practices for implementation, governments can ensure that these methods are successful in promoting greater public participation and achieving policy objectives.

One Working Capital Management Strategic Tool: Interfund Transfers

By Michelle Lofton and Mikhail Ivonchyk

Working capital management is a managerial strategy that monitors and uses current assets (e.g., cash, accounts receivable, and inventory) and current liabilities (e.g., accounts payable and notes payable) to ensure smooth operations. The purpose is to maintain cash flows for liquidity to meet short-term operating expenses and obligations. This integral part of sound financial management uses a variety of strategic tools to manage cash flows. These can include the use of unrestricted cash, savings, interfund borrowing, interfund transfers, delaying payments, receivables, a line of credit, direct lending arraignments, and short-term debt. Yet, little academic research on governments has evaluated the process for selecting different tools, the policies governments have in place to implement them, and the consequences of using one tool over another.

Continue reading

So, Your Jurisdiction is Thinking of Starting a Revenue Manual…

Consulting and updating your revenue manual is the first step of the administrative process for revenue forecasting.  At least, that is what I say when I teach revenue forecasting.  Of course, when I then turn to the course participants and ask how many of them have revenue manuals in their jurisdiction only one or two raise their hands.  In fact, there are some years when no one raises their hand.

Continue reading

Who Says You are an Appraiser? Appraisal and other Property Tax Certifications, Credit Hours, and Designations

There are many certification programs involved with property tax.  I suggest that every NC property tax student be familiar with which organizations provide certifications, credit hours, and the requirements of those organizations. A certification or designation is required by law for some positions. Two are required in the assessor’s office. If you are one of the 100 appointed county assessors in North Carolina or a county appraiser, you must be certified by the NC Department of Revenue. Becoming and being a certified assessor or appraiser includes requirements for initial certification (certifying education) and also follow-up requirements for continuing education. If you represent yourself as a real estate appraiser but do not fill one of the two positions above, NC law requires your certification to be through the NC Appraisal Board. All other certification programs for property tax are not legally required in NC law but may be required by your employer or by your association. Perhaps you’re not currently in a position that is required to be certified but your future could lead you in that direction. Regardless, I think you should maintain your course records for attendance and successful completion of property tax courses. I have recognized uncertainty in this area over the years and it seems to be more so in recent times. I hope this post is a way to help bring us back to certainty. Continue reading

Sales Tax Considerations During the Pandemic

I have been having a great deal of conversations with folks across the state about what is going on with their sales taxes (and occupancy and food and beverage taxes).  What has happened versus what was expected for FY21 and what they are thinking about for FY22 now that local governments are starting to begin their budget processes.  I thought it might be useful to share some of the questions I have been getting and my answers to them and some of my broader thoughts about sales taxes and the pandemic, though it is no crystal ball.  I am going to structure it like a q&a.  I am not covering everything here and please reach out if there is more than I can help with.

 

  • Q: Our sales taxes are recovering quickly, what are you seeing other places in the state?
  • A: We are seeing that sales taxes have recovered more quickly than most people anticipated. That is great news, but I think a dose of caution should accompany it.  First, we see a bump starting in in the June collections (so sales for the month of May) where it went from down 13.3% year-over-year to down 4% year-over-year and then by July (so June sales) it was up year-over-year by 10.75%.  So that is all really promising, but we have to keep a few things in mind.  1) That is right when the state moved into Phase 2 and there may have been pent up demand. 2) That is when we have more generous unemployment benefits and federal stimulus, so people had more disposable income than they might otherwise have had.  3) Some people were deferring payments on rent and/or utilities, so they had less income than it looked like from their spending in that period.  Also, that trend is not universal.  Some areas are doing much better and others are having a slower recovery.

Continue reading

Webinar: Budgeting in the Pandemic

As governments are nearing the end of budget season in these uncertain times we want to make sure you all are aware of some of the resources available from the School of Government and our partners.  There are many COVID-19 resources at the UNC SOG dedicated Microsite.

Continue reading

The COVID-19 Crisis and How North Carolina Local Governments are Budgeting for It

Recently the North Carolina League of Municipalities (NCLM) and the North Carolina Local Government Budget Association (NCLGBA) partnered on a survey of county and municipal governments across the state to better understand how local governments are budgeting for FY21.  There are 142  responses.  29 are from counties and 113 are from municipalities.  See the map below to see the number of jurisdictions from each county area (total of the county and municipal responses).


Continue reading

2021 Virginia Cup Effort

“I can’t think of anything that shows you are more committed to your work and your profession than a professional designation. A job applicant who has a professional designation earns an automatic interview from me.”
Marcus Kinrade, AAS, RES
Wake County Tax Administrator

Continue reading

Social Impact Bonds: A Magic Tool for Financing Innovation?

Have you heard about social impact bonds (SIBs) yet?  If not there are a lot of resources and discussion out there regarding this magical fix of financial woes of government.  While many have viewed these as too good of an opportunity to pass up (for example, see here and here), others have been slightly more skeptical.

Continue reading

Older posts

© 2024 Copyright,
The University of North
Carolina at Chapel Hill.

Theme by Anders NorenUp ↑