This was found on the LNC Discuss email list. The initial letter was sent out by Aaron Starr, and the comments from others on the Executive Committee follow. I will update the article if more conversation is released to the LNC Discuss list.
Also, I’m not able to access the pdf of the LNC Historical Revenue Trends referred to at the end of Mr. Starr’s letter. If someone has access to that and can send that to me, I’ll post it here.
On Tue, 12/3/13, Aaron Starr <firstname.lastname@example.org> wrote:
Subject: Issues with the EC’s Budget Proposal
To: email@example.com, firstname.lastname@example.org, “‘Tim Hagan'” <email@example.com>, firstname.lastname@example.org, email@example.com, firstname.lastname@example.org, email@example.com, firstname.lastname@example.org, email@example.com, Norman.Olsen@lp.org,firstname.lastname@example.org, “‘Vicki Kirkland'” <Vicki.Kirkland@lp.org>, Doug.Craig@lp.org, Sam.Goldstein@lp.org, Daniel.Wiener@lp.org, Scott.Lieberman@lp.org, Brett.Pojunis@lp.org, Audrey.Capozzi@LP.org,email@example.com, “‘Jim Lark'” <James.Lark@lp.org>, Scott.Spencer@lp.org, Dianna.Visek@lp.org, firstname.lastname@example.org, email@example.com, firstname.lastname@example.org
Dear LNC Members, I want to extend my thanks to
the Executive Committee for preparing and submitting in
advance a recommended budget for the LNC’s approval
this coming weekend. There have been occasions where
the EC has not done that. I want to bring your attention
to some issues with this budget. I have been reviewing
the document and I note that the budgeted amount for
revenues appears to violate Section 2.03.3 of the Policy
Manual, which states, “No budget shall be submitted to
the LNC for approval that exceeds 110% of the actual revenue
over the immediate past 12 months prior to the date of the
Previous LNCs had
problems with overly optimistic revenue forecasts, so this
provision was added long ago to the Policy Manual to prevent
that. The EC’s proposed budget
has revenues of $1,512,600. For this proposed budget
to be compliant with the policy, actual revenues for the
prior twelve months must be greater than $1,375,091
($1,512,600 / 110%). November 2012
$ 89,757December 2012
70,371YTD Revenues through
1,067,915Twelve Months Ending
$1,228,043 As you can see from the
calculation above, revenues for the twelve months ending
October 2013 are significantly less than $1,375,091.
By my calculation, the EC’s proposed revenues may not
exceed $1,350,847 ($1,228,043 * 110%).
Also, I notice that there are
mathematical errors in the calculations on this
document. The summary figures on the first page do not
tie to sum of the details on the supporting pages. For
example, the Total 2013 YTD extrapolated revenues of
$1,271,268.23 on the summary page does not tie to
$1,281,498.08 on the supporting detail page.
Finally, I assume that the Project
Program Revenue of $135,300 is money raised for the building
fund. Because these are restricted funds, it would be
misleading to show that this money as part of the
year’s Net Operating Surplus. To make this
clearer to the reader, other organizations will have
separate columns for restricted and unrestricted
funds. You may also want to increase by a like
amount the capital expenditures line — or include an
additional line at the bottom for debt repayment, if that is
what the $135,300 will be used for — to make it abundantly
clear that this budget is cash-flow negative for the
apologize for not noticing these issues earlier, as I was
only recently provided with the EC’s budget
If I am
correct, can the Executive Committee please resubmit a
budget such that it corrects the mathematical errors and is
in line with the Policy Manual? If I can be of further
assistance, please let me know. Thank you. Aaron Starr(805) 583-3308 Home(805) 404-8693 Mobilestarrcpa@gmail.com
LNC Historical RevenueTrends 1992 — 2014.pdf>
From: William Redpath <email@example.com>
Date: 12/03/2013 3:58 PM (GMT-06:00)
To: firstname.lastname@example.org,email@example.com,’Tim Hagan’ <firstname.lastname@example.org>,email@example.com,firstname.lastname@example.org,email@example.com,firstname.lastname@example.org,email@example.com,firstname.lastname@example.org,Norman.Olsen@lp.org,email@example.com,’Vicki Kirkland’ <Vicki.Kirkland@lp.org>,Doug.Craig@lp.org,Sam.Goldstein@lp.org,Daniel.Wiener@lp.org,Scott.Lieberman@lp.org,Brett.Pojunis@lp.org,Audrey.Capozzi@LP.org,firstname.lastname@example.org,’Jim Lark’ <James.Lark@lp.org>,Scott.Spencer@lp.org,Dianna.Visek@lp.org,email@example.com,firstname.lastname@example.org,email@example.com,Aaron Starr <firstname.lastname@example.org>
Subject: Re: Issues with the EC’s Budget Proposal
Thank you, Aaron.
In my opinion, that provision of the Policy Manual should be deleted. I think the EC should be able to propose anything it wants to the LNC. The budget is ultimately passed by the LNC, and it can make whatever changes to the proposed budget it wants. I don’t think that provision makes sense in that revenue can logically be expected to vary from year to year by more than 10%, depending on whether it is an even numbered year.
In part because of the upcoming LNC meeting, my schedule between now and Friday evening is rather busy. An EC phone meeting at this late date might not be easy, and the whole LNC now knows of two items re: the proposed budget that need to be addressed. I respectfully suggest the LNC make note of Mr. Starr’s comments and address them during deliberation on the budget.
From: Geoffrey Neale [mailto:email@example.com]
Sent: Tuesday, December 03, 2013 8:20 PM
To: William Redpath; Geoff Neale; firstname.lastname@example.org; ‘Tim Hagan’; email@example.com; firstname.lastname@example.org; email@example.com; firstname.lastname@example.org; email@example.com; firstname.lastname@example.org; Norman.Olsen@lp.org; email@example.com; ‘VickiKirkland’;Doug.Craig@lp.org; Sam.Goldstein@lp.org; Daniel.Wiener@lp.org; Scott.Lieberman@lp.org; Brett.Pojunis@lp.org; Audrey.Capozzi@LP.org; firstname.lastname@example.org; ‘Jim Lark’; Scott.Spencer@lp.org; Dianna.Visek@lp.org; email@example.com;firstname.lastname@example.org; Paulie Cannoli; Aaron Starr
Subject: Re: Issues with the EC’s Budget Proposal
Every two years we run a convention. The average revenues for a convention are about $175K. The only way this policy can be complied with is to not budget our conventions. If we drop convention revenues from the proposed budget, it would probably be in compliance.
On Dec 3, 2013, at 9:17 PM, Aaron Starr wrote:
“Every two years we run a convention. The average revenues for a convention are about $175K. The only way this policy can be complied with is to not budget our conventions. If we drop convention revenues from the proposed budget, it would probably be in compliance.” – Geoff Neale
Or we could not budget for building fund revenues, which is the way we handled the 2013 budget, and use a less ambitious figure for board solicitation major gifts.
I hope the policy (“No budget shall be submitted to the LNC for approval that exceeds 110% of the actual revenue over the immediate past 12 months prior to the date of the budget approval”) will remain unchanged.
The policy is useful in that it forces the EC to take a very disciplined approach to crafting a budget for the LNC’s consideration. There is nothing that prevents the LNC from modifying the EC submitted budget (or even having members of the EC recommend changes to the EC submitted budget). The problem with breaking the 110% rule is that it puts the LNC in the awkward position of having to figure out on-the-fly where to cut the higher expense levels that inevitably are presented with optimistic revenue projections. This is especially a challenge because LNC members will not be able to see all the details (e.g. staff salaries) and question in a deliberative manner the assumptions that make up the budget until the day of the meeting.
Conservative budget estimates for revenues are important because they force hard decisions to be made concerning priorities in spending. Without this discipline in place, we will find ourselves in a position where we cannot reverse spending that has already taken place, if optimistic revenue projections are not met.
You may recall the concerns I expressed during the last budget meeting. I stated that revenues historically drop 30% on average from the year after a Presidential election, ranging from a 9% decrease to 42% decrease. The budget adopted, the revenues of which were very close to what was proposed, anticipated $1,163,000 of unrestricted revenues (i.e. excluding money raised for the building fund). Of 2013’s projected $1,270,0000 in revenues, the unrestricted revenues are on target to reach only $1,000,000. We have not seen a revenue number that low in nominal dollars since 1994; inflation adjusted dollars are much worse. While it’s difficult to determine the extent to which the extrapolated $270,000 in building fund revenues are cannibalizing 2013 operating revenues, it is clearly not insignificant.
We should not assume that 2014 revenues will be better than 2013 just because we are going into an election year. The off-cycle election-year revenue change from the previous year is historically all over the map, averaging only a 6% increase and ranging from a 38% decrease to a 37% increase.
1994 13% Increase in revenues
1998 22% Increase in revenues
2002 38% Decrease in revenues
2006 06% Decrease in revenues
2010 37% Increase in revenues
Given the history, budgeting for a 19% increase in revenues for 2014 seems imprudent.
For your review I am including a chart of annual revenues from 1992 to 2014 (using the EC’s estimate for 2013 and the EC’s budget proposal for 2014).
I urge the LNC to be fiscally conservative in its revenue projections. There is no harm to doing so. We always have the option to spend more money if we are surprised by having more revenues than anticipated.On Dec 3, 2013, at 12:49 PM, email@example.com wrote:
Thank you Mr. Starr. This kind of stuff needs to be hashed out well in advance IMO.
Nick Sarwark also forwarded the following concerns:
“Looking at the charts, I would note that the party gets approx $4 in dues for every $1 of membership fundraising costs, but only $2 in donations for every $1 in fundraising costs. That said, I can’t tell if those numbers are apples to apples or what costs are applicable to recurring gifts.
I would also note that the proposed 2014 budget has some mighty big increases in some areas that are not (at least in this document) supported by evidence of how they are to happen. E.g. major donor solicitation is projected to bring in $60K of revenue even though it’s only brought in $1K in 2012 and $120 in 2013. 2010 numbers were $94K, but unless we have a plan for how to get back to that performance from a standing start, budgeting for that revenue seems like magical thinking.
I also note with concern that in 2013 the party spent $236K on fundraising expenses, compared to $62K across all program expenses (outreach, ballot access, LP News, events, etc.), a 4:1 ratio. 2014 proposed is $277K on fundraising, with $188K on program expense, closer to 3:2, but $123K is just for ballot access, which leaves just $65K for all other program expenses. There’s also a whopping $0 budgeted for candidate support in an election year.”
On Wed, Dec 4, 2013 at 1:33 AM, Starchild <firstname.lastname@example.org> wrote:
One thing that jumps out at me here is the statement that we are making $175,000 on a typical convention. If this is so, even less excuse to impose floor fees on our delegates!
If there’s that much money to be made by holding conventions — and I suspect we are only seeing a fraction of what would be possible with a better model — perhaps we ought to start holding them every year instead of every two years, or hold a different type of national event on off years.I agree with Aaron that the Libertarian Party should be fiscally conservative in its budgeting, and appreciate he and Nick Sarwark pointing out the issues they’ve identified. This is another one of those things that, just going by libertarian principles, one wouldn’t expect to be controversial in the LP. And yet…
Previous LNCs had problems with overly optimistic revenue forecasts…
Coincidence? I think not. Those in power are habitually tempted to spend more than they have, and one of the ways this manifests itself is in unrealistic budget projections. Libertarians know this. So we shouldn’t be falling victim to it ourselves!And yes I do realize that unlike the U.S. government, we are unable to print money and can’t spend more than we have — at least not without borrowing money that we actually have to repay. But I think overly optimistic budgeting is a bad habit nevertheless. Better to unexpectedly find we have more revenue than we budgeted for than to unexpectedly find we have too little!It might be a good exercise, as part of our budget deliberations, for each of us on the LNC to identify some potential spending in the budget that we’d like to see cut. One potential area for savings would be the disproportionate amount that Nick Sarwark points out we are spending on fundraising. If we get our crowdfunding approach up and running as we voted to do (any staff updates on this?), I believe it will enable us to bring in more money with less overhead and allow us to simultaneously give our members and donors more choices of how to give, and fewer annoying fundraising letters. Win/win!Remember, spending ≠ growth. It is possible to grow without spending more, and it is also possible to spend more without growing! Spending smarter and more frugally, not spending more, should be the objective.But the immediate issue is that the draft budget as prepared apparently violates our Policy Manual. I trust therefore that a revised version will be quickly forthcoming?
Love & Liberty,((( starchild )))At-Large Representative, Libertarian National Committee“Bureaucracies position the worker within closely supervised departments where success equates with doing a specific job according to specific rules. Within this limited world, one learns not to think outside the box, and so, except as applied to one’s task, critical thinking is discouraged and one’s worldview comes to conform to that of the bureaucracy. That is why bureaucrats are so often referred to as cogs in a machine.”– Rick Shenkman, History News Network ( http://www.alternet.org/tea-party-and-right/why-americans-are-so-ignorant-its-not-only-fox-news-there-are-some?page=0%2C0 )