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How to Stop Worrying and Love the Budget

Dec 01, 2010

"It does not matter at all how wonderful you are, how much service you provide, or what a great manager you are, if you do not have the budget under control. That really is the story. That really is, in the final analysis, how you will be evaluated.”
– A long-tenured ARL library director to a new library director

It is important for library administrators to have a solid understanding of how their budgets function. Understanding their budgets well can help library administrators guide their staff, services and organizations to success in good times and in bad. Understanding their budgets can also help library administrators lobby more effectively for funding, no matter what the economic climate. Understanding the budget is essential for any library administrator focused on developing a stronger budget.

Learning how to stop worrying and love the library budget is relatively simple.

Take a few preparatory steps

Those who haven’t dealt with budgets before may think they want to avoid this duty, especially if they didn’t do well in math classes. While one does have to do mathematics to work on the budget, it is very simple. It’s mostly adding and subtracting, with some occasional multiplying and dividing.

Thus, anybody who has graduated from elementary school should be able to do the necessary calculations. (Sometimes it’s a little trickier to know which numbers to use to get the needed answers.) In addition, the only tools you need are pencils, paper, a calculator and the software your institution uses for its bookkeeping. Thus, for newcomers to budgeting, the only thing you have to fear is fear itself.

Understand the two basic roles of library budgets

A budget estimates an organization’s revenues and expenditures for a specific period of time and helps accomplish its policy objectives by linking its financial resources with planned activities. Operational budgeting covers the day-to-day operations of the institution, as opposed to capital budgeting, which is for projects that demand particularly large infusions of money and will create something expected to have a long life, such as a building. A library director has an operational budget every year, but only occasionally deals with a capital budget. As a result, this article deals primarily with the former.

Understand the functions of a library budget

Budgets can be used to achieve many managerial functions.

  • Budgets help plan for levels of revenue and expenditure.
  • Budgets control library subunits from spending more than they expect to get.
  • Budgets coordinate the many activities an institution undertakes. For instance, a properly planned budget that significantly increases the acquisition budget for books also increases the money allotted for purchasing the materials needed for processing those additional titles.
  • Budgets reflect a library’s or its parent organization’s priorities by allocating funding to activities the allocators judge to be the most important and rationing it to areas deemed less vital. How well these budgetary priorities are set and followed makes up a crucial element in defining a library’s future success or failure.

Understand the library budget planning cycle

A typical budget planning cycle can be broken into a number of basic steps.

  1. First, an institution develops a budget by estimating the institution’s income.
  2. Then, its central administration communicates downward the parameters within which the units must work to create their budget proposals.
  3. Next, the units communicate upward what they want and why they want it.
  4. Then, the details are negotiated up and down the hierarchy.
  5. Subsequently, the budget is ratified and implemented.
  6. Finally, the budget is evaluated during and after the fiscal year, both to see if it is being followed and also to learn what changes need to be made for the next budget (Dickmeyer, 1992).

Understand the parent institution’s resource allocation system

There are various types of systems for allocating resources, and each can accomplish this task in very different ways. Although every library’s parent organization’s allocation system probably has unique aspects, most fall into one of almost a dozen general categories. I’ve compared and contrasted these elsewhere (Linn, 2007). Library directors who know how resources are allocated to their budgets can more easily determine how to influence the system so their budgets get more money.

Appreciate the proper approach to cutting the budget

During those unfortunate times when one must cut the budget, library administrators must do so in the strategically most prudent way. Sometimes when faced with having to cut a budget, an administrator makes an across-the-board reduction, for example, 10% in all areas, instead of making greater cuts in some areas than others. This is the politically easiest approach. However, this approach comprises a failure to properly manage one’s finances.

Instead, one should strategically decide which areas are the most important to protect and which can be cut. If one has an up-to-date strategic plan, this can be used to guide which areas to cut. Otherwise, one just needs to carefully consider what areas are expected to grow and where demand is slackening or growing less. Just because a part of the library has received more funding in the past does not mean that it should in the future.

Understand that the budget reveals the true strategic plan

One might think that a strategic plan sets an organization’s priorities. In reality, however, the creation of a strategic plan is a meaningless waste of time unless it is then used to help decide what activities to fund and to what degree they are funded. This is because one must have resources to implement the strategic plan’s priorities and, except for volunteer labor or donated materials, these resources will have to be purchased using money from the budget. For example, if a plan’s highest priority is to replace the decrepit old furniture with new, but if no money is budgeted for that, then that part of the plan might as well not exist. It is the allocation of funds in the budget, not the words in a strategic plan, that demonstrate what one’s true priorities are.

Appreciate the value of experience

Although those who have never dealt with budgets might be wary of venturing in, those who have experience know that one just needs some basic knowledge and the ability to think the process through logically. The ability to understand and control the budget is increasingly important the further up one goes in library administration and is key to a library’s survival.

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