Find out what your city and state really spend, a citizen's budget guide

Let me tell you about the most exciting event in American politics, the one that draws crowds, cameras and a satellite truck. Is it a presidential debate? Nope. It is a Tuesday night budget hearing at city hall, attended by four people, one of whom is asleep and another of whom is the court reporter. Folks, that is where your money gets spent. Not in Washington, at least not all of it. Right there, under fluorescent lights, between the item about the parking study and the item about a drinking fountain.

State and local governments spend an enormous sum, and most of that spending happens with almost no public attention. The Founders would have found this puzzling. They built a country on the idea that the people closest to the government are best placed to watch it. The tools for watching are free. The documents the council uses are the same ones you can read. This post is a short manual with numbered steps for finding them, and I will keep the jokes to the opening and the close.

Why local money is your business

Start with the Constitution. The Tenth Amendment reads: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Most of the ordinary functions of government, police, schools, roads, water, courts, zoning, are state and local. If you want to influence what government does to you and for you, a very large share of the action is at the level where a single citizen can make a difference.

Alexis de Tocqueville, the French visitor whose Democracy in America appeared in the 1830s, wrote in Democracy in America that the township was the strength of free peoples, the place where citizens learned the habits of self-government. That is a paraphrase of a famous theme in the book, and I urge you to read it yourself. The point still stands: a citizen who has never read his own town's budget has not yet started to practice self-government.

And the Declaration of Independence, in its list of grievances against the King, complains: "He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people, and eat out their substance." Substitute your own favorite agency in that sentence if you like. The principle, that officials who spend other people's money ought to be watched by those people, is as American as the bill of rights.

Here is the argument in three numbered premises.

1. Local and state governments spend a great deal of money that comes from you, through property, sales, income and fee revenue, and through borrowing you will repay.
2. The people who decide how it is spent are chosen by a small number of voters and watched by a small number of reporters, because turnout in local elections is low and local news has thinned out.
3. Therefore the citizen who reads the documents has more influence per hour than almost anywhere else in politics.

I am not telling you that your local officials are crooks. Most are decent people doing a hard job. I am telling you that a government that is not watched will spend more, and that watching is a duty of citizenship, not a hobby for cranks.

Step 1: Find the Annual Comprehensive Financial Report

The single best document about your local government's money is its Annual Comprehensive Financial Report, which the profession abbreviates ACFR. Older documents call it the CAFR, for Comprehensive Annual Financial Report; the name changed but the idea did not. It is the audited financial statement of the government, prepared under standards set by the Governmental Accounting Standards Board and examined by an outside auditor or, for states, often by the state auditor.

Where to find it: go to your city's, county's or school district's website and search for "annual comprehensive financial report," "ACFR," "CAFR" or "audited financial statements." It is usually posted under the finance department, the clerk or the comptroller. Many state governments also publish a statewide report on the website of the state comptroller, controller or treasurer. If you cannot find one, call the finance office and ask. Most governments of any size have their books audited, and the report is generally a public record.

What it contains: a letter from the finance director summarizing the year, then the audited statements, then notes, then statistical tables. Do not try to read it cover to cover. Use the steps that follow.

Step 2: Read the statement of net position, and the pension notes

Find the statement of net position. It is the government's balance sheet: what it owns, what it owes, and the difference. Look at three lines.

• Total liabilities. This includes bonds the government has issued and promises it has made. Compare it with total assets.
• Long-term debt. Bonds, loans and notes. The footnotes list each issue and its schedule of repayment.
• Net pension liability. If the government runs a pension plan for its employees, its accounting standards require it to report the shortfall between the promised benefits and the plan's assets.

Then go to the notes, the numbered pages after the statements, and find the one headed something like "Pension Plans" or "Defined Benefit Pension Plan." Read for four things.

1. The funded ratio. That is plan assets divided by promised benefits. A plan with assets equal to its liabilities is fully funded. A plan with half the assets it needs is half funded. Check the arithmetic: if a plan owes $2 billion in benefits and holds $1.5 billion in assets, it is 75 percent funded, and the shortfall is $500 million.
2. The assumed rate of return. The plan assumes its investments will earn a certain percentage each year, and the higher the assumption, the smaller the liability looks. A plan that assumes a very high return can look healthy on paper and still miss. Ask whether the assumption is reasonable.
3. The required contribution. How much does the government have to put in each year, and did it put in the required amount?
4. Other post-employment benefits. Retiree health care is often reported separately, under a title like "OPEB," and is frequently funded much less than pensions.

For readers who want the larger argument about pension money and politics, see ESG investing with your pension money bends the fiduciary duty owed you. The same fiduciary question applies at the local level: the people running a pension plan owe a duty to the retirees, and the taxpayers behind them.

Step 3: Find the adopted budget and the capital plan

The audited report tells you what happened. The adopted budget tells you what the government planned to spend, and it is the document the council or legislature voted on. Search your government's website for "adopted budget," "approved budget" or "budget in brief." Many jurisdictions publish a shorter summary for citizens, sometimes titled "Budget in Brief" or "Citizens' Guide." Start there, then read the full document for the parts you care about.

Look for these items.

• The general fund. This is the main operating account, and it pays for police, fire, administration and much else. Find its revenue sources and its largest spending categories.
• Fund balance. This is the reserve. A government with a thin reserve is one bad year away from a tax increase or a service cut.
• Personnel costs. The line for salaries and benefits is typically the largest category. Check how it has grown, and how the number of positions has changed.
• The capital improvement plan. Often a separate document, usually called the CIP, it lists planned construction and equipment purchases, how each will be financed, and what it will cost to operate afterward. A new building costs far more in its second decade than its ribbon-cutting suggested. Look for the project that has been in the plan for years without being built, and ask why.

Compare the adopted budget with the audited report from a year or two earlier. If the budget said the government would spend a certain amount on a function and the report says it spent more, you have found a question worth asking.

Step 4: Use your state's comptroller or auditor website

Most states run a website that publishes spending data, usually under the comptroller, controller, treasurer or auditor. Many offer a searchable "open checkbook" or transparency portal, where you can look up payments to vendors by agency and year. The tools vary widely from state to state, and I will not pretend to list them. Search your state's name with "comptroller" or "state auditor" and look for the words "spending," "transparency" or "checkbook."

A few other places to look:

• The state auditor's reports. Auditors publish performance audits of programs and agencies, and these are often the most readable documents in state government. They tell you whether a program did what it said it would.
• EMMA, the Municipal Securities Rulemaking Board's Electronic Municipal Market Access site. When a local government issues bonds, it publishes a disclosure document, usually called an official statement, and annual updates. EMMA, at emma.msrb.org, is a free public library of them, and it will show you the debt your town has taken on.
• The U.S. Census Bureau's Annual Survey of State and Local Government Finances. It lets you compare the spending categories of governments across states and over time.

Use the comparison with care. Governments differ in what they provide: one city runs its own hospital and another does not. But a surprising gap between neighbors on a single line, such as administration or legal costs, is a fair thing to ask about.

Step 5: Go to the budget hearing, and speak

Now the part nobody wants to do. Budgets are adopted in public meetings, usually with a required hearing before the vote. The notice must be posted, in most places, on the government's website and sometimes in a newspaper. Find the date and read the agenda ahead of time.

If you decide to speak during public comment, here is how to be effective. These are practical tips and not legal advice.

1. Read the budget item you care about first. Speak about one line, one program, one page. A general speech about taxes will be forgotten by the next speaker. "Page 214 shows a 19 percent increase in consultant contracts" is remembered.
2. Keep to the time limit. Public comment is often limited to three minutes. Write your remarks, time them and bring a printed copy for the clerk.
3. Ask a question that has an answer. "Can staff explain why the fund balance has fallen in each of the last three years?" gets a response on the record. A denunciation gets a nod.
4. Say what you would do. Name a cut, a delay or a different source of money. Officials hear complaints all night; a concrete alternative stands out.
5. Be civil. Public officials in your town are your neighbors. You want to win the argument and keep the standing to make the next one.

Remember also that minutes of public meetings are generally public records, so your comment can become part of the record the next time the question comes up, and so does your name.

For a related skill, see Asking a Town Hall Question a Member Has to Answer on the Record, which covers how to ask a question that gets an answer.

Step 6: File a public-records request for a contract

Sometimes the budget line is not enough and you want to see the actual agreement. Every state has a law that gives the public a right to inspect government records, usually called a public records act, an open records act or a freedom of information law. The federal Freedom of Information Act covers federal agencies only; your state's law covers your state and local government. The details vary, including what is exempt, how fast the government must respond and what it can charge, so find your own state's statute and read it.

A simple request has these parts.

1. Identify the government body and the office that handles records requests. Many post a form or an email address.
2. Describe the record in specific terms. "A copy of the contract between the city and [vendor] for [service], including all amendments and the invoices paid under it from [date] to [date]." A narrow request is quicker and cheaper than a broad one.
3. State the format you want, such as an electronic copy by email.
4. Keep a copy of the request and the date you sent it.
5. Follow up if the deadline passes. The statute usually sets a deadline, and the agency's failure to meet it is itself a ground for appeal.

A contract is a good first request because it shows the price, the term, the termination clause and any automatic renewal, and because a contract is a specific, easily described record. If a request is refused, the refusal normally has to state the exemption relied on, and most states have an appeal route, whether to an agency, an ombudsman or a court. Ask the records office what it is.

A worked example, clearly invented

Picture a hypothetical town, Maplewood, population 40,000. Nothing here is a real place. The audited report says the general fund spent $80 million last year, and the pension note shows a plan with $300 million in assets against $400 million in promised benefits. The funded ratio is $300 million divided by $400 million, which is 75 percent, and the shortfall is $100 million. That is $2,500 for every resident ($100 million divided by 40,000), a debt nobody voted on at a hearing.

The adopted budget shows a capital plan that includes a new $30 million recreation center, with annual operating costs listed as "to be determined." The citizen who read the budget asks the question in public comment: what will the center cost to run, and what will it cost in year ten? If staff says the operating cost is $2 million a year, then over ten years the operating cost alone is $20 million on top of the $30 million, a total of $50 million, and the center that looked like a $30 million proposition is a $50 million one. That is two steps and an arithmetic check, and it is how a citizen outworks a consultant.

The objection, and my answer

The strongest objection to all of this is that governments are complicated, officials are professionals, and an amateur with a spreadsheet may misread a document or ask a foolish question. That is true. You will occasionally get something wrong. When you do, the staff will correct you, and you will know more than you did.

The cost of the alternative is higher. A town in which nobody reads the budget is a town in which the budget is written for the convenience of the people who write it. The citizen's job is not to run the finance department. It is to ask whether the choices made on the public's behalf are the choices the public would make if it could see them. For the broader federal picture, see Seven myths about the national debt that Washington finds convenient, and for the tax code's complexity and who benefits from it, tax complexity is a subsidy for lobbyists, and the code shows how it works. For a case study in local spending that cities keep repeating, read taxpayer-funded stadiums are the billion-dollar bet cities keep losing. And the federal analog of this post is Read a CBO cost estimate yourself before you believe the headline.

I will close the way I opened, with a mild complaint. The most powerful tool in American self-government is a folding chair in the back of a city hall meeting room, and it is almost always empty. Take the chair. Bring the page number.

The case in brief

1. State and local governments spend a great deal of your money, and the Constitution leaves most ordinary governing to them and to you.
2. The audited Annual Comprehensive Financial Report shows what was actually spent, owed and promised, including pension shortfalls.
3. The adopted budget and capital plan show what officials intend, and the gap between plan and report is where good questions live.
4. State comptroller and auditor sites, and the EMMA bond site, let you check spending and debt for free.
5. A short, specific comment at a budget hearing and a narrow public-records request for a contract are the tools that move officials.

What you can do: this month, find your city's or county's most recent audited financial report and read the pension note, then put the next budget hearing on your calendar.