by Chris Fabian, CEO, ResourceX
To prevent a “climate catastrophe,” the focus of local, regional, national, and international government leaders has been to keep temperature rise in check – no more than 2.0°C increase above pre-industrial levels.
Last fall, the 26th annual “Conference of the Parties” (COP26) summit in Glasgow ushered in global commitments to emission reductions, like the Local Governments for Sustainability launch of Race To Zero - a global campaign established to rally ambitious leadership from all sectors of society (including businesses, cities, regions, investors) to achieve carbon neutrality.
At the local level in the United States and Canada, the Government Finance Officers Association (GFOA) has published best practices for disclosure as to how Environmental, Social and Governance criteria are now woven into bond ratings.
Still, for all of local government’s well-intentioned urgency in goal-setting and planning for climate action, leaders must fortify their commitment with resources. Without considering the environment in the budgeting process, all the commitments to change will be little more than words.
As the International City/County Management Association’s executive director Marc Ott makes clear, "while local governments – together with community groups, local nonprofits, and universities – have set aggressive goals in moving their communities to clean energy, they struggle to find ways to cover the capital and operating costs of implementing the changes."
Luckily, there are cities that are transforming the budget process to align resources with climate action.
Consider Pittsburgh, which established laudable goals to help with climate change. But with goals in hand, city leaders had to find a way to fund them.
Grant Ervin, Pittsburgh’s Chief Resilience Officer, recalls a conversation with colleagues on the budget and finance side of Pittsburgh in 2017 “We were so excited about what we wanted to do, and they kept calling our projects ‘unicorn projects,’” recalls Ervin. “They spoke a whole different language: budget cycles and bond ratings. I realized we needed common terms, and synchronized timing. We needed a climate budget to meet our climate targets.”
The City took this discovery to heart and applied it to the development of its 2022 budget. In the past, departmental budget requests would simply identify line items to increase or decrease. With the climate-focused budget, however, each request was tied to defined programmatic outcomes and detailed information on achieving the city’s climate goals. This allowed its Office of Management and Budget, in collaboration with the Sustainability and Resilience division of City Planning, to provide then Mayor William Peduto unprecedented insight into the city’s budget and its climate impacts.
This “priority-based budget” identified 249 discrete programs, services, and activities across 23 departments and scored each against the city’s climate and equity goals. Through this process, Pittsburgh freed up $23 million from its existing operating budget and identified another $18 million in revenue opportunities.
“Changing budgeting procedures can feel like an enormous task,” explains the city’s Climate Advisor Will Bernstein. “But in the end, the created tools actually streamlined work while simultaneously making budget decisions clearer for the mayor’s office.”
Similarly, the City of Flagstaff, Arizona has applied a Priority-Based Budgeting framework to ensure budget proposals are evaluated relative to their alignment with the City’s Carbon Neutrality Plan (CNP), which is intended to establish neutrality by 2030. The big question: Will the city be able to continue to build the resources necessary to the fulfillment of the plan into annual budgets as did this year’s which approved 27 requests and over $2 million in funding directly to prioritizing execution of the CNP.
(Truth in Advertising: Ervin and Peduto will both be speaking at our annual Priority Based Budgeting Summit in Denver, Colorado on August 10, 11 and 12.)
Local governments – many with the best of intentions -- face a perennial disconnect between elected officials; sustainability, resilience, and equity offices; and budget and finance leaders in aligning resources with climate initiatives. Integrating climate considerations into operating and capital budgeting decisions across the organization, strengthens resource alignment with climate action plans.
The application of program-level data through priority informed budgeting provides direct alignment between fiscal decision-making and climate action goals. It also provides the additional advantage of increased transparency and agility within the budgeting process by creating a shared language that connects departments to the finance and budgeting process.
The combination of the strategic pursuit of climate preservation and innovative budgeting practices positions municipalities for opportunities at all levels within the organization. Whether cities are looking for climate mitigation solutions or economic development opportunities that benefit their climate action plans, program-level evaluation is key to the process. By programmatically defining every dollar of the budget, local governments can strategically fund cutting-edge climate work for the benefit of residents, community, and region.
The contents of this guest column reflect those of the authors, and not necessarily those of Barrett and Greene, Inc.