Written by: Jack Ryan-Feldman, Director, Baker Tilly Municipal Advisors, LLC
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Budgeting, long-term financial planning, and financial resiliency are even more critical as financial, economic, and climate events continue to make headlines.  Planning for uncertainty, and developing a long term financial strategy is important to ensure we can provide services to our communities. We essentially need to become more resilient, but many face the question, “how do I become more resilient?”  The Government Finance Officers Association (GFOA) has conducted research and published multiple articles to assist governments with long-term financial planning and resiliency strategies.  Conducting a budget “stress test” is one activity organizations can do to “test” their budget for resiliency.  The below steps are derived from a recent article by Jack Ryan-Feldman published in GFOA’s Government Finance Review magazine.

A budget stress test will primarily reveal three things: the susceptibility of certain revenue streams, the flexibility of expenditure decisions within the budget, and the margin a system has for enduring this new reality. The importance of conducting a stress test is to determine whether your organization’s budget is capable of handling crises of different magnitudes.


Follow these steps to conduct a stress test on your system’s budget:

  1. Start with your 5-year model, including baseline assumptions.
  • This understanding will help you understand your organization’s history as it relates to all revenue sources, historical economic drivers, and obligations such as debt and pensions
    • Understand what assumptions are in your baseline long-term financial plan.
    • What does your budget look like if those are removed?
  1. Develop alternative scenarios for the stress test.
  • What if your economic development patterns change?
  • Is your community susceptible to natural disasters?
  1. Think about realistic budget adjustments. This is difficult, but very informative.
  • Develop a list of the budget adjustments and their related impacts.
  • Develop a list of budget solutions and then rank solutions based on ease of implementation.
  1. Summarize and report results. This exercise will help you understand you level of resiliency, including your strengths and weaknesses.


Click here for the Government Financial Review article on resiliency.