Reimagining Government Budgeting

All right, TGIF everyone! Welcome back to GovTech's In Case You Missed It. Joe and I are at it again. It's been a wild, uh, couple weeks and we hope everyone's having a great start to the new year. Today we got a big topic and we have some great guests on to help us break it down. We're gonna attempt to reimagine government budgeting. I think we've got about 30 minutes to, uh, to dig into this and we've got Stefan Berg from Invisio and Chris Fabian from Tyler Technologies, a returning guest Here to share this new collaboration between Tyler and Advizio, but more importantly, talking about how technology is just really reimagining this entire budgeting process. So for those of you that are net new to the show, we're going to also provide an opportunity for each of our guests to share a little bit about themselves and kind of their journey and trajectory in GovTech. So Stefan, let's start with you. Tell us a little bit about yourself.

Yeah, thanks, Dustin. Great to be here. This is my first time, so I hope I don't screw it up. So I've been in the GovTech space, I'm going to say 7 or 8 years now. I got my start working in a budgeting software company called Questica, which has undergone a few name changes now and exists under a different banner. And then recently, or somewhat recently, moved over to an organization called Invisio, which is where I am today. And we work in the strategic planning and performance management software space, very closely linked to budgeting, which is obviously why I'm here with my good friend Chris. And I'm not sure if you want any personal tidbits. I reside north of the border near the Greater Toronto Area, and that's about it.

We'll have to have you and Joe nerd out on hockey a little bit later. So, and Chris, welcome back, our Indiana Jones of the market. I know we got the figure behind you as well. So for those that haven't caught you on previous episodes, tell us a little bit about yourself.

Thanks, Dustin. Thanks, Joe. And thanks everybody for joining. My name is Chris Fabian and I'm with Tyler Technologies. My journey into all of this really started with just a desire to make a bigger impact in the public sector and ultimately came to discover that If you're going to try to make an impact on any outcome, public safety, economic vitality, all things lead back to the budget. So I found myself obsessed with why do we need to transform the budget in order to ensure we get the resources we need to fund key outcomes? And that has led me down a path towards developing technology, started a company called Resource Exploration, ResourceX. And just over a year ago was acquired by Tyler Technologies to bring priority-based budgeting to scale. And it's been an awesome year, so I'm thrilled to be back and really looking forward to the discussion today.

Well, thanks so much, Chris, for that. Stefan, you know, I think when you come to this episode, you're like looking at your 2 squares and you're saying, one says Invisio, one says Tyler. How did the 2 of them get to be on this episode together? Maybe you could share with our audience, how did Invisio and Tyler come to work together and And what's the nature of this partnership?

Yeah, sure. Um, it's actually maybe a bit of a funny story because, um, I've been courted and have been rebuffed by Mr. Fabian a few times. So, uh, going back, you know, to my time when I was at Questica, uh, we shared a lot of the same customers. And so I kind of had this keen interest. I'm like, okay, we're both in the budgeting space and we have these same customers. Like, what is it you do and how, how do we work together? And so tried to, you know, have some partnership conversations with Chris back then and, you know, got the cold shoulder. Not really, but, you know, nothing materialized. And then when I made the move to Invisio, it just honestly became so that there was just so much synergy, you know. So obviously still bumping into Chris at like events and conferences and realizing that, you know, the work— as I learned more about the work Chris was doing, that, you know, going to taking organizations through this priority-based budgeting process and helping them reallocate funds towards different priorities. Then tacking on a process at the end of that to actually measure the performance and the outcomes from that reallocation. It just was so synergistic, right? So I started chasing Chris again, cold shoulder again. Realized though later that it was because he was having these conversations with Tyler. And so anyways, once that all got consummated, then— Chris thankfully reached out to me and we, we got back together and we ended up forming this partnership. Now, um, I would say the, the nature of it is like on paper, you know, Tyler is a reseller of Invisio, right? So, um, it serves a benefit to agencies being able to buy, you know, both solutions in one place because they, they complement each other so well. Um, but really the work that we're doing, I, I like to— I mean, it's so much more missional than that. Like, we've been doing so much work together with with GFOA, and we've started a Rethinking Budgeting Trailblazers group with, I think, 6 or 7 different cities and counties that are really trying to progress in terms of how they do their budgeting. And we're just trying to provide them with resources so that they can do that. And so it's really led to some of this really cool, you know, groundswell work, you know, to help these organizations get there. So Anyways, that's a bit— I don't know, Chris, if you would add anything to that, but it's kind of how we got here.

It's a great story. And maybe the latest chapter is, as you mentioned, with the Trailblazers group, just envisioning for all of the organizations who really do want to follow GFOA's vision and rethink budgeting, having practical tools to help them along the way is where we fit best in our offering and also our commitment to the impact that everybody's hoping to make.

Yeah, so we're going to dig into that in more detail. I think, Stefan, kind of, you know, a question to maybe set the stage before we talk about reimagining budgeting. You know, as you think about the traditional methods of budgeting, tell us a little bit about some of the challenges and issues that you're kind of seeing agencies encounter. I mean, I'm a former CFO of a city as well, and it was you know, very problematic at the time. We didn't have, you know, all of the great technology that we have now. Excel was basically my best friend. But tell me a little bit about what you're seeing in the trenches now.

Yeah, I mean, probably, Dustin, a lot of it hasn't changed, which is part of the challenge. You know, local governments, I think by and large, the default practice has been, and in many ways continues to be, incremental budgeting, right? Which is You take last year's budget, you roll it over, maybe you make a slight tweak here or there. But the challenge inherent with that is that as time goes on, you know, a couple years, 5 years, 10 years, and these budgets have been rolled over for, in some cases, generations. The challenges that they were designed to address, you know, 10, 15 years ago are totally different than the challenges today, you know. maybe they weren't struggling with affordable housing or green spaces or whatever the causes are today. That requires an entirely refocus or renewed approach to your budget, a priority-based budgeting process. And so that's part of the challenge is that today's cities and counties are trying to solve new challenges with legacy funding. And so PBB, which obviously is close, near and dear to Chris's heart, is a great way to address that. I think from a technology perspective, Dustin, one of the challenges is that the technology has kind of evolved, has been built alongside that incremental budgeting process. It was built to accommodate that. And so we have these great budgeting systems now, software, cloud-based software that, you know, do a great job of line item budgeting, allocating for everything, and you can do amazing reporting with these things. You can even go as far now as you can tag each line item with a strategic priority, right? And then run a report on that and say, here's how much dollars I'm spending according to this strategic initiative. But what's missing is the process element, right, of actually reallocating that funding and saying, wait a second, it's not just that I've got, you know, this many thousand dollars allocated towards, you know, policing. It's, wait a second, we need to rethink that because we're trying to achieve a different outcome than we were before. And that's where technology is lagging. But I think there's a lot of cool stuff happening, and that's why I'm jazzed with what Chris is doing. And I know we're going to get into that a little bit, but, you know, some of the PBV work and the AI that's able to kind of take that to the next level.

So, I mean, Chris, I mean, no better setup than what we just heard. We heard that it's close to your heart. We all know, I think it's a space that you've operated in a while, but maybe you could break it down for the audience. Yeah, at a high level, what is it for those that don't know, and how does priority-based budgeting really address the long-term limitations that we've seen in the traditional budgeting method.

Yeah, I have a cool story to share. It's pretty recent. Just yesterday, the city of Kansas City, Missouri, who's into their implementation of priority-based budgeting, issues a press release on their adoption of priority-based budgeting. And Krista Morrison, their budget officer, was reflecting, saying, you know, when do we issue press releases that highlight a new way of budgeting? to make the public aware this is different, something, something different is at play. Mayor Lucas from Kansas City had a— his quote saying priority-based budgeting allows us to move away from simply carrying over expenses from one year to the next, that's the incremental budgeting that Stefan was just talking about, and instead budget more responsively, directing resources and dollars to areas important to the residents of of Kansas City. And that's exactly what priority-based budgeting does, is it changes this approach to traditional budgeting where we take last year's budget at the line item level and make incremental changes, and instead opens up opportunity to ask the key questions of the budget. How does this budget deliver on the priorities we're trying to fund, and is it optimized? So technically, down to the details, We had to make a shift from the line items that we all know so well. How much money are we spending on travel and training? How much are we spending on supplies and postage? Those are very difficult to use as decision units in the budget and have an answer to the question, what outcomes are we funding with this postage budget? It's a question that doesn't make sense, or it's hard to answer with line items alone. But by taking line items in the budget, translating them around the programs and services that we choose to invest in— those are our choices, our vehicles for change, if you will— and taking those programs and understanding how they align with our key community priorities, now we can have a discussion around how much of our budget is actually being invested to bring about the key priorities that we're striving to accomplish. So if you think about it, it's this translation effort from line items to programs, programs to priorities, and ultimately with Invisio to performance. One more P for the alliteration. How are we performing with the programs that we choose to fund? I'll add, I'll add one more thing. In the same press release from Kansas City, their city manager Brian Platt had to say priority-based budgeting ensures we're investing in what matters most, To Kansas Citians, and this approach makes us more efficient, accountable, and focused on delivering the best results for our community. And I'm honing in on this issue of efficiency and accountability. If all we have are line items in the budget, we can talk about how much we squeezed out of postage last year or how much we're trying to streamline travel and training, but it doesn't really tell the story and doesn't offer us substantial kinds of opportunities for true massive budget savings that we need. When we can get to the program level, we can talk about, are we even supposed to be providing this program? Is it aligned with our priorities anymore? Is it mandated? Is there another partner out there who we'd be better off combining forces with? In other words, by translating to this program and priority perspective, we can open the door on innovative, new service delivery models, different ways to fund programs. And that's what priority-based budgeting allows us to do. And that's why it's so transformational.

Chris, if I could stick with you for a second, you mentioned the Kansas City example and the press release and the optimism and the results that they're starting to experience. If you were to rewind back from that, I imagine there's a bunch of change. You also referenced change earlier that has to occur. So what hurdles do you see, whether it's Kansas City or anyone else that's implemented this to overcome and get to this new budgeting method, to move away from a process that they've done for years? And what do you see the big drivers being in terms of the reason why they're looking at this going forward?

That's a great question. And we experience this with every new organization. We were just in City of Olympia, Washington last weekend as well, and they described the inertia That can take place. We're used to doing business a certain way. Hey, it's easy to take last year's Excel spreadsheet with our budget and just change with inflation, add a certain percentage, and move it forward. So we get used to a process that we know how to do. But those are some of the major hurdles that you would see is just having an open mind towards what we might do differently. GFOA just published an awesome article called Budget Games, and if you haven't read it, I strongly encourage you to read it. It's a part of the overall Rethinking Budgeting initiative, and this is another hurdle, is there's a pessimism or skepticism overall about how departments or elected officials or any of our players might use games to ensure that they get all the resources that they need, and it seems disingenuous or it's not authentic towards optimizing resources to the achievement of our priorities. So you might think of priority-based budgeting as a game changer, changing the game in a way that we haven't seen before. And as you talk about the factors that provide impetus for the change. Look, people know those budget games and we're kind of tired of those budget games. So we're desperate for something new. We know that with ARPA funds drying up, we have real fiscal challenges. Beyond that, we have trends unfolding as we speak with the relationship between federal and state and local governments for how those cost-shifting efforts may take place, and we'll react to that in the trends in the local economy. Um, we, we as practitioners in the public sector, we got into this business to create substantial outcomes for our community, and we need something better than the game is raise taxes or across-the-board budget cuts and we'll figure it out. In order to move beyond those being our only options, raise rates or cut everybody's budget by 10%, We need solutions in the middle, and we want that innovation. We want alternative service delivery models. We want to know where we could be more efficient. We want to know where we could creatively, entrepreneurially generate new revenue. Washington County, Wisconsin— this is a community right outside of the Milwaukee metro area. They implemented priority-based budgeting, had an entire department, their parks, county parks department, which was trying to determine its fate for the future, 100% reliant on property tax revenue, so general fund resources, facing a fate where how does parks compete in a budget game with public safety? Not very well. That parks department took every program systematically analyzing how could we do this differently, how could we fund it differently, and today shifted to nearly 100% off of the reliance of general government resources and nearly over 90% fiscally independent, thereby providing the same value to their community just with a completely different business model. That's the kind of game changer I think we all want. And that's the impetus for change in an era of tight budgets but high demand for priorities.

Love it. It's data-driven, which we've talked about for a long time. Now we're applying it into practice. So that's great to see that. So Stefan, I want to bring you back in now because, you know, there's a ton of different things that are happening around the GovTech market. This is probably going to be one of the most active years as it relates to GovTech as an industry, which is incredible. So what's unique about this kind of collaboration and partnership related to GovTech and FinTech?

Uh, yeah, probably a couple ways I could go with that question, uh, Dustin, is, um, I mean, first off, I would just say that we're We're, as far as I'm aware, the only 2, you know, public sector-focused organizations that do what we do, right? And so just us coming together is really 100% centric around serving local government. I think another thing I would highlight is the— and we found this through partnering together, I think it's one of the reasons why Chris and I were kind of drawn to each other— is that we're both very focused on the service element of what we do. Um, and, and, um, we're seeing a lot of, you know, trends in GovTech as there's new, you know, new dollars being invested in GovTech by, you know, by private equity, by VC. There's a real strong, you know, push for, you know, rapid scale and, and ARR being part of that, driving valuations up. And, and we're both intent to lean into the services component of what we do because we don't think that the technology is going just do it on its own. And, and so we've both built our businesses around making sure that the, the support mechanisms are there. We're not just dumping software on people and wishing them luck with it. So philosophically, I think that's kind of what makes us unique. But I think one of the most exciting things is getting back onto the technology side is our, our data repositories. So, you know, Chris has got data from working with— I don't know what your customer count is, but, you know, hundreds of organizations that he's now worked with doing PBV. And we've worked with hundreds of organizations, you know, from a planning and performance management perspective. And when you take the combination of those 2 datasets and now you start to apply a layer of AI on top of that to say, hey, how can we get more predictive with, you know, where should we be able to find budget savings? Where are reallocations? What kind of outcomes can that lead to? and start to use it as a decision architect tool is, I think, really fascinating. So I think that's something that's unique to us because of the spaces that we're both in already today. And then I was hoping you'd ask me a question that would lead me to the ability to show our mascot, and I think it fits in really well here. We're the only ones that have a mascot that's a teddy bear. So we have Budget Bear right here. So that's got to be worth something.

Indiana Jones and a bear.

Yeah, as long as we don't get into football mascots, I think we're safe. So, uh, um, so, you know, looking at— you've done a lot of work, Stefan, uh, with GFOA over the years too. So maybe tell us a little bit about kind of the intersection point there, uh, especially around budget guidance kind of towards the future.

Yeah, I mean That's kind of really the genesis of this for us. Like, probably turn the clock back about 3 and a half years ago when, you know, GFOA first started kind of pumping out guidance around what they called Rethinking Budgeting. And, you know, Shane Cavanaugh obviously was the real leader of that. And there's a group of us vendors that kind of looked at this and said, hey, wait a second, like, if we come, you know, we all have point solutions that kind of tie into what this is advocating. How can we help? How can we navigate this space? So we, in Columbus at ICMA, so this would've been 2022 maybe. Anyways, we brought together a group of city managers there and just kind of interviewed them and said, hey, help us understand how you're looking at rethinking budgeting and what this means for your communities. And what we heard was, you know, actually one of the city managers made this comment. It's stuck with me ever since, is he said, You guys all make great software, but we can't use it. And I was— it kind of stopped me in my tracks. I was like, okay, help me understand that a little bit. And we started to understand that there's so many challenges that they're facing in order to try to implement something like Rethinking Budgeting. It's a people challenge, right? It's a process challenge. It's a culture challenge. It can be a technology challenge, like all these things. And so that actually led us to GFOA. We got in, we went to Chicago, met with, you know, Chris Morrill, Shane, their team, and we said, how do we collectively help the local governments with this? And that was the genesis of something that we've called the readiness assessment. We ended up spending the next year partnering with GFOA to actually build a readiness assessment, and we had the help of Colco as well. The, the data scientist Michelle Kobayashi did a tremendous job working with us on that. And, and now we spent the last year, 2024, basically co-facilitating this readiness assessment. So us and GFOA working together to co-facilitate this with multiple communities. And the, the impact has been, I think, a much higher awareness of, of what neat steps need to be taken within their organizations to really truly be effective with with doing something like this. Um, so it's been really exciting. That whole journey basically of doing this together with GFOA over the last 3 years has been, been phenomenal. And, um, you know, they've also, I would say, been very— that their approach to redeveloping their, their budget guidance, like their capstone for budget guidance, which hadn't been redone in, uh, might get this wrong, but it's like 25 years or something like that. Um, they basically scoured the, the, the industry for voices coming from all avenues to contribute to that. And I think, you know, Chris and I were both fortunate to be part of that. Um, and they've now— their board's now approved it, it's published, and they have this new budget guidance out in the, in, in the market. So, um, it's just been a really cool journey. Have not worked with an association like that before. And I'll give a shout out to Mr. Chris Morrill. I think his His leadership there is amazing in terms of allowing something like this to happen.

That's great. So Chris, I'm going to ask you to look forward and, you know, maybe give us a little bit of your outlook. What impact do you anticipate your work, this work, will have on the public sector? You shared some feedback from some of the early adopters and the work, you know, references to the press release, but maybe you could share a little bit of the feedback that you're hearing in terms of your journey now and And where do you think it's going?

Awesome. As we, as we look out towards the end of ARPA as a great anchor point, we have communities who have implemented priority-based budgeting and to what Stefan has been discussing, found a way to free up and reallocate resources from lower priority investments, high priority investments where they could have a partnership or a more efficient business process, upwards and beyond 10% of their operating budget freed up and reallocated to be reinvested towards priorities that really need funding overall. Bloomberg, who has the What Works Cities criteria, has developed a key metric in their measure of city excellence around resource repurposing. And this is a metric that we haven't always thought about, but in incremental budgeting, We don't think about resource reallocation. We think about growth from the base, but freeing up and reallocating resources is paramount. Collier County, Florida just implemented their very first year last year and discovered among all of the programs that they have been funding, having an open mind towards different business models overall, uncovering upwards of 22% of their budget At least potential for new resource reallocation and revenue generation and committed to their first 6%, which is enormous in an era, again, of dwindling ARPA resources. These 10% of a community's budget is on par with having ARPA restored on an ongoing basis, like ARPA every year. And to us, that's a— it's a very hopeful and optimistic metric to have in our minds as we think about improving our, uh, and fulfilling our commitment to our communities, from safer communities, economic vitality, sustainability, and environmental, uh, sustainability. We need readily available resources apart from perhaps federal investment, uh, or asking our, uh, residents for more money, and to have a— an engine, a tool to free up those resources and invest in the type of performance that you see Invisio working diligently to ensure is achieved. That's our aspirational vision, and that's a metric that we care a lot about.

So, Chris, I want to stick with you for this one. Where do you see that going next as you think about the future of priority-based budgeting, how it's evolving, you know, this partnership with Invisio? Like, what do you see next? I mean, it's very difficult to predict next year, but, you know, what's on the horizon here?

Well, I think the trajectory that we're on has very nicely, I think many people would feel this way, intersected with machine learning and AI and prediction machines. So if we're gonna make this impact that we desire so much of rethinking the budget, we need to make the process easier. And with AI and machine learning coupled with our unique datasets, today's implementers are able to bypass, we talked about those spreadsheets that used to be our tools of 10 years ago. Today's organizations can have a first prediction directly from their ERP, their general ledger data, which Tyler has so many organizations in that space to predict the program, see evidence in the ERP to predict service offerings, program costs, program alignment, and ultimately resource reallocation opportunities that streamline and accelerate the implementation process. And open up that realm of program insights where you can take different directions in a substantial way. If we can make this easier for organizations to get into, we believe that that value proposition is alluring. That's why GFOA is pushing Rethinking Budgeting to the entire industry between organizations like Invisio, Tyler, and Polco in the Rethinking Budgeting tech stack. We're creating a future where it's more attainable to rethink and reimagine the budget for any organization.

Well, perfect. Stefan, where does our audience go to keep up to speed with what you're working on?

There's a few places actually. I mean, obviously they can hit up each of our websites, so Invisio and Tyler, and then also GFOA has just Uh, put out, uh, relaunched their website, uh, specific for Rethinking Budgeting. And I know they've got a lot of cool applications or resources available there. But yeah, uh, hit up either one of our websites. We've got stuff specific to Rethinking Budgeting and the work that we're doing together.

Well, perfect. Well, Chris, Stefan, thanks so much for, for joining us on the, on the last day of January. So we not only did we make it to the end of the episode, but we made it to the end of the month.

Love it.

Very thankful. Thanks, everybody.

Yeah, thanks, guys. Appreciate it. Yeah, you as well.