While doing my income tax return last week I realized that I was going to have to adjust my 2021 ‘level of service’ - as they say at City Hall.
I keep a spreadsheet comparison of income and expenses just for my amusement and for justification to Martha that we really could afford that new Smart TV. I tried to downplay the fact that the family income was declining while the expenses were increasing, but it didn’t work. Apparently, years ago when we retired, I said I thought we could maintain our lifestyle – living on the interest of our savings and our RRSPs and pensions. I guess that was a little like too many politician’s promises.
Who knew that interest rates would crater? Who knew that investment fund managers would make more on the accounts than the investor?
Apprised of the reduced income, Martha said we would have to go to a ‘zero-based’ budget. That’s the problem with academics – these things work in theory but there is always the Uncertainty Principle to consider.
We had tried a zero-based budget years ago at City Hall and the results were less than stellar.
At first, the Managers thought this was just a November election joke, but it turned out that the Mayor (I can’t remember if it was Stan or Jack) was serious about a zero-increase budget. Now, we accountants know that is not true zero-based budgeting where one has to start from scratch and justify every penny, but we knew what the Mayor wanted. We had to find savings to cover the increase on contracted wage costs and inflation.
First, we cut out all conferences and travel for staff. No money for training courses or certification classes.
We put a freeze on new hiring; no summer students. Office supplies budget would be cut by 15% so no more taking home paper, pens, pencils, paper clips, or staples. No more photocopying of recipes, minutes for social clubs, or printing posters for sports events. No more buying coffee out of office miscellaneous expense accounts. Cardlocks and cameras on the gas pumps; account for work gloves, work boots, and shovels. Defer capital projects. No more roast beef or chicken salad sandwiches with imported cheese and veggies platters on the side for the noon-hour council meetings: peanut butter and cheese sandwiches only. No more butter tarts or lemon meringue pie to cheer councilors at noon meetings.
You may surmise how morale went downhill at City Hall. We survived, but boy did we make up for lost time in the next two years! That was the last we heard of zero-based budgeting.
It may not be fair to draw comparisons between a City budget and a household one, however we might look at that ‘level of service’ premise.
Do I have to drink single malt scotch or could I step down to blended scotch? Martha, that’s akin to telling councilors to eat peanut butter sandwiches! Okay, I can drop back from Wolf Blass cabernet to a Chilean merlot wine and drink only one glass. We can dine out twice a month instead of three times (Covid permitting). I can buy Family-size corn flakes even though the box doesn’t fit in the cupboard. I can cut back on the peanuts for the squirrels but the lads are not going to be happy that I cut that from our budget.
Sure, one less play at Stratford will work. One less charity golf tournament. We can drive to the Reserve and save a few cents on gasoline. That old, beat-up Rapala is good for a couple more casts. Used golf balls are okay – I just lose them anyway. No-name is okay but I do like my Maille mustard. I have enough tee shirts and heaven knows enough ball caps. I can try wearing my jeans with holes in the knees, but you know I think that is a silly fad and a person could skin their knee whilst changing a tire or fixing the chain on the bicycle.
I suppose one cannot make valid comparisons between a personal budget and a government budget, but I can see our RRIFs dwindling away much like the 25-million-dollar golden egg from North Bay Hydro will fade into history. Alas, my time is finite while the City will survive physically and financially for many years. The tax well will not run dry, although one must expect seasons of drought which may mean a little unheard-of restraint.
Governments can budget deficits but my creditors are less generous – they expect me to live within my means. The Provincial and Federal governments have no restrictions when it comes to spending money they do not have (yet). Municipal governments are closer to financial reality but they have ways up running ‘deficits’ – like bleeding Reserve Funds to finance capital projects that we can really defer until better times.
One wonders how many small businesses in our area are facing the same choices as many individuals in this time of turmoil: change, innovate, and reduce spending in the hope of surviving for another year.
A zero-based budget? Pass the peanut butter, Martha.
