Budget Strategy Justin Marlowe PUBPOL 522 Public Financial
Budget Strategy Justin Marlowe PUBPOL 522 – Public Financial Management and Budgeting Autumn 2016
Learning Objectives > Recognize the key components of a public organization’s budget timeline/calendar and formal/statutory budget process. > Recognize the many different ways that we define “budget balance, ” and the mission implications of those various definitions. > Know the basic strategies managers use to respond to potential cuts or expansions of their budget authority. > Recognize when and why an organization’s budget for a service might be quite different from what that service costs. > Acknowledge the effectiveness of “doing nothing” as a budget-cutting strategy. > Recognize that budgets ensure fiscal accountability, but do not guarantee financial solvency
The Wisdom of Budgeting > “In budgeting, you can have anything you want, but you can’t have everything you want. ” – Budgeting is the process of allocating scarce resources – It’s ultimately about priorities and trade-offs > “Budgeting is the process of managing conflict. ” – An organization’s budget is its “scorecard of political winners and losers. ” – Facts, data, and principles set the stage for budgeting; political “horsetrading” gets the budget passed – “Fair share, ” “turf-minding”, and “respect the experts” help expedite political solutions
Government Budget Process – Authority vs. Outlays Characteristic Budget Authority Budget Outlay How much money the government is legally authorized to spend in a fiscal year/biennium How much money the government will actually spend in a fiscal year/biennium Includes unspent authority from previous years? No Yes Includes authority granted for future years? Yes No Allows for long-term spending obligations? Yes No Granted to executive agencies through…. Budget Resolution Appropriations bills Long-term (“accrual”) budget impacts of policy decisions Annual budget surplus/deficit Definition Most useful when discussing….
Federal Budget Process – Fact and Fiction The Federal Budget Process, as outlined in the Congressional Budget Act of 1974: 1. November/December – Executive agencies prepare their budgets 2. February – President’s budget request, shortly after State of the Union 3. April/May – Congressional budget committees hold hearings on the President’s budget request; pass a budget resolution organized by 20 spending areas 4. May/June – Budget resolution is translated into “ 302(b) allocations”; those allocations become the 12 appropriations bills; Congress debates those bills 5. June/July – Congress adopts “reconciliation bills” that modify authorizing legislation that affects taxes, spending, and debt 6. September – Congress adopts and the president signs appropriations bills and reconciliation bills, in time for October 1 fiscal year start
Federal Budget Process – Fact and Fiction The (recent) actual federal budget process: 1. January – President’s budget request calls for “deficit reduction” accomplished by canceling previous year’s unused budget authority 2. January – Congress announces the President’s budget “dead on arrival” 3. February/May – Congressional Budget Committees debate and fails to pass a budget resolution; dismiss for summer recess 4. September – Congressional Appropriations committees debate and pass 4 of the required 12 appropriations bills 5. September 28 – Under threat of a government shut-down, Congress passes a continuing resolution to extend existing budget authority for 60 -90 days
Federal Budget Process – Fact and Fiction The (recent) actual federal budget process: 5. December 15 – Following two hours of debate, Congress passes a $1. 5 trillion (or more) “omnibus” spending bill that includes the requisite appropriations bills, and dozens of “policy riders” on unrelated issues like lifting the ban on exported US oil or cancelling federal funding for Planned Parenthood 6. January 10 – During a “lame duck” session, Congress passes a $250 billion “supplemental appropriations” bill to fund a special project like the war in Afghanistan 7. March – President passes a major tax cut or expansion of non-discretionary spending using the “budget reconciliation” procedure; passes with no amendments and a simple Congressional majority
Federal Budget Process – Fact and Fiction > So what’s the net effect? – – More power centralized in the budget process Less coordination across agencies Less emphasis on long-term planning Disconnect between budgeting, planning, and evaluation
Budget Presentation > Consider the following example budgets: – North Shore (WA) School District – Bellingham (WA) School District – City of Redmond (WA) School District > How are these budgets organized? How are they presented? What types of questions do they invite?
Full Cost vs. Budget Expenditures > See Benton-Franklin Public Health cost analysis example
In-Class Exercise > You are the LPN/Administrator for Coho Adult Day Services (CADS). It’s September 2017, and Mayor Bailey notifies you that the City Council is considering ending its subsidy to CADS in 2018. She also says Council members have heard complaints that CADS is unaffordable, so as a result, some Council members are considering capping CADS’ monthly tuition at $1, 500. – Groups 1, 3, 5, 7, 9: Prepare a three minute presentation to the City Council that responds to these concerns, using the budget strategy provided. – Groups 2, 4, 6, 8, 10: You are the City Council. Listen and respond to the presentation.
- Slides: 11