Biennial Budgeting: Three States' Experiences (Letter Report, 10/27/2000,
GAO/GAO-01-132).
Members of Congress periodically have expressed interest in converting
the federal budget process from an annual to a biennial cycle. Congress
feels that the time spent on these activities has come at the expense of
congressional oversight and authorization responsibilities. To get an
understanding of states' experiences with the biennial budget cycle, GAO
studied three states: Arizona, Ohio, and Connecticut. GAO found that the
states' reasons for changing their budget cycles varied. For example,
Arizona adopted a biennial cycle to increase legislative oversight and
reduce time spent on the budget, and Connecticut adopted it as part of a
fiscal reform effort. In order to execute a bienneial budget
successfully, the states' experiences suggest that the legislative and
executive branches must agree on how the off-year budget process will
work. Different approaches to managing the off-year budget have been
developed by states, including establishing formal guidelines for
off-year budget changes and relying on leadership control. Efforts to
increase legislative oversight in the off-year by converting to a
biennial budget process may be difficult. Ohio and Connecticut officials
have said they have not increased legislative oversight in the off-year,
and Arizona officials said that, while they formally included a process
for increasing oversight, they have faced considerable challenges.
Although state experiences can provide useful insights, the federal
budget has unique issues that must be considered before implementing a
biennial budget process.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GAO-01-132
TITLE: Biennial Budgeting: Three States' Experiences
DATE: 10/27/2000
SUBJECT: Congressional oversight
Balanced budgets
State budgets
Budgeting
Future budget projections
IDENTIFIER: Arizona
Connecticut
Ohio
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GAO-01-132
A
Report to the Chairman, Committee on Rules, House of Representatives
October 2000 BIENNIAL BUDGETING
Three States' Experiences
GAO- 01- 132
October 27, 2000 The Honorable David Dreier Chairman, Committee on Rules
House of Representatives
Dear Mr. Chairman: Members of the Congress periodically have expressed
interest in converting the federal budget process from an annual to a
biennial cycle. These proposals stem in part from frustration over the
amount of time spent on the annual budget and appropriations process and the
feeling that budget- related actions are both endless and repetitive. Some
in the Congress feel that the time spent on these activities has come at the
expense of congressional oversight and authorization responsibilities. A
biennial budget cycle has been advocated as a way to advance several
objectives: (1) provide more focused time for congressional oversight and
authorization activities by streamlining the congressional budget process,
(2) shift the allocation of agency officials' time from the preparation of
budget documents to improved financial management and analysis of program
effectiveness, and (3) provide federal managers and state and local
recipients of federal funds more certainty in funding over the longer 2year
period.
However, proposals to move to a biennial budget cycle raise a number of
concerns. Opponents of biennial budgeting argue that achieving any
timesavings depends on a willingness to make few changes in the off year
and, absent such restraint, there may be little or no time saved. They also
suggest that even if such a shift does save time it may not increase
congressional oversight or improve the authorization process. Some have even
argued that biennial budgeting could reduce congressional oversight by
decreasing the number of times Appropriations Committees review executive
budget requests. Furthermore, they suggest that reducing the number of times
the Congress considers budget matters may only raise the stakes of budget
negotiations- and hence how long they may take- especially when significant
policy or program differences exist. Some argue that the limited ability to
project future conditions and the inevitability of unforeseen events will
lead to a budget process that is biennial in name only or to the Congress
delegating greater authority to the President to make off- year budgetary
adjustments. Finally, opponents note
that significant oversight occurs during the appropriations process. By
converting this process to a biennial exercise, the Congress will reduce the
number of established opportunities it has to examine, direct, and influence
executive branch activities.
Although the general trend among states since World War II has been toward
annual budgeting, both opponents and proponents of a federal biennial cycle
have used states' experiences to support their positions. Currently, of the
43 states with a legislature that meets annually, 16 have at least a portion
of their budget on a biennial basis. The seven states with legislatures that
meet biennially of necessity have a biennial budget. (See appendix I for a
list of states and their legislative and budget cycles.)
To better understand the states' perspectives, you requested that we study
the biennial budget processes of Arizona, Connecticut, and Ohio in detail.
Arizona and Connecticut were selected because they are the only two states
that have converted to biennial budgeting in the last 10 years. Ohio was
included because among the five states with the highest general fund
expenditures, it is the only one that has both a biennial budget process and
a legislature that meets annually. In addition, Ohio has been cited as a
successful model by advocates of biennial budgeting.
Specifically, you asked that we examine how (1) Arizona and Connecticut
implemented their transition from an annual to a biennial cycle, (2) each of
the three states budgets in the off year of its cycle, and (3) each of the
states incorporates legislative oversight and program evaluation into its
budget cycle. In addition, you asked that we note issues other than those
identified by these states that should be considered if the federal budget
is converted from an annual to a biennial process.
Results in Brief Proposals to switch to a biennial budget process at the
federal level share a common goal with the states we reviewed- to reduce the
time spent on
budget matters. Whether a biennial cycle offers the benefits sought in this
area will depend on the ability of the Congress and the President to reach
agreement on how to design and enforce the off- year process and how to
respond to unanticipated needs. If it is easy to trigger a
“reopening” of funding decisions, the process could look very
much as it does now. Although the three states differed in the degree to
which they achieved consensus on an off- year process, none were able to
limit changes to technical and mandatory adjustments. If any shift to a
biennial process is to
lead to increased oversight, there must be commitment to such oversight
activities over and above any time- savings.
Officials in Arizona and Connecticut said that they did not experience
significant transition issues or technical difficulties in shifting to a
biennial process. Arizona and Connecticut converted from an annual to a
biennial budget process during the 1990s for different reasons. In Arizona,
biennial budgeting was adopted to reduce the amount of time spent on budget
deliberations and allow more time for legislative oversight. Connecticut, on
the other hand, adopted a biennial budget process as part of a package of
fiscal reforms that accompanied legislation implementing a personal income
tax when the state was in fiscal crisis. In this context, biennial budgeting
was seen as a way to strengthen fiscal management by doubling Connecticut's
budget horizon from 1 to 2 years. The two states also differed in how long
they took to implement biennial budgeting. Arizona implemented biennial
budgeting over several years, beginning with a group of smaller agencies
before converting the entire budget, while Connecticut converted all
agencies to a biennial budget in the same year.
The experiences of all three states indicate that agreement between the
legislative and executive branches on how the off- year budget process will
operate and leadership commitment to enforcing that agreement are key to how
well a biennial budget process works. Each state has adopted a different
approach to budgeting in the off year. Ohio has relied more on leadership
control to discipline the budget process, while Arizona is attempting to
establish formal guidelines for the types of off- year changes to the budget
that may be considered. Legislators in these two states felt that
legislative control limiting off- year budget adjustments was important
given the political pressures to address policy needs. Connecticut, on the
other hand, has not formally placed limits on what can be proposed in the
off year; to date its off- year budget deliberations differ little from
those in the first year of the biennium. To help manage budgetary changes,
each state has delegated some authority to the executive branch and/ or to
joint legislative/ executive bodies. Executive branch agencies in all three
states also felt that it was important to have clear guidelines on what
budgetary changes could be proposed during the biennium and flexibility to
make adjustments when unforeseen events happen.
The experiences of the case study states also demonstrate how difficult it
is to use a biennial budget process to increase legislative oversight. Of
the three states, only Arizona has designed a new oversight process which
was incorporated into its biennial budget process. In Arizona, increased
oversight was a major goal in shifting to a biennial budget. Although
Arizona's new Strategic Program Area Review process has resulted in some
legislative changes, officials there said the oversight process could be
improved further. In the other two states, we were told that oversight has
not increased in the off year of the biennium. Officials to whom we spoke
described challenges to increasing oversight, including the following: (1) a
short legislative session may not allow sufficient time for in- depth
program review, (2) because the off- year budget process occurs in an
election year, decisions to reduce funding or eliminate programs are
potentially more difficult, and (3) budget surpluses for the past several
years have reduced pressure to use an oversight process to identify budget
savings.
Although state experiences can provide useful insights, the existing federal
budget process has some unique features and issues that will necessarily
affect the implementation of a biennial budget. In part, these reflect key
differences in the federal budget structure and process that a study of
states with biennial budgeting will not cover. Examples include the
following:
Mechanisms the federal government uses to adjust fund availability and
timing in response to program needs- such as multiyear funds, 1 forward
funding, and advance funding- are not found as frequently at the state
level. There are fundamental differences in how the federal government and
states budget and control spending. For example, the states use fund
budgeting, which separates operating, capital, enterprise, and various other
funds, while the federal government has a unified budget. Also, governors
generally have more unilateral power to cut spending than does the
president. States generally do not have separate budget, authorization, and
appropriations processes. Furthermore, there are several other important
issues to consider when implementing a biennial budget process at the
federal level. For example, if a goal of biennial budgeting is to increase
oversight, then it is particularly important to pay attention to how the new
budget cycle is integrated with
1 Multiyear authority is budget authority available for a period of time
longer than1 fiscal year. Forward funding is a type of multi- year authority
that covers periods of time that do not coincide with the start or end of a
fiscal year. Advance funding authority allows agencies to charge obligations
incurred in the current year to the next fiscal year's appropriation.
the strategic planning and performance reporting cycle under the Government
Performance and Results Act (GPRA). Also, upon the expiration of the Budget
Enforcement Act control regime, any proposal for a biennial budget cycle
will need to be considered in the context of the federal budget regime and
designed to work with whatever structure and control regime comes into
place. The experiences of the states we studied demonstrate the importance
of addressing these potential concerns during the design of any federal
biennial budget process.
Background In recent years many Members of the Congress have expressed
concern over the amount of time spent on the budget and appropriations
process, as
well as the seemingly repetitive process that includes concurrent
resolutions, reconciliation bills, authorizations, and many regular
appropriations bills. Some have proposed shifting the budget process from an
annual to a biennial cycle. Although budget resolutions, appropriations, and
authorizations do not all have to be on the same cycle, most proposals would
shift all three processes to a 2- year cycle. Typically, these proposals
would create a biennial appropriations cycle providing two 1- year
appropriations. Some also require authorizations to be completed prior to
the start of the next biennium. Although proponents suggest that biennial
budgeting will provide an opportunity for the Congress to improve its
oversight, most proposals do not specify how this will be achieved.
Advocates of biennial budgeting generally contend that a 2- year budget
cycle will (1) reduce congressional workload by streamlining the budget
process, (2) provide an opportunity for the Congress to increase its
oversight and program review activities, and (3) allow better multiyear
planning by federal, state, and local agencies that spend federal funds.
Supporters of biennial budgeting envision a process that divides each
Congress into a budget and appropriations year followed by an authorization/
oversight year. Supporters believe this 2- year cycle would reduce
competition for members' time, allowing for more timely completion of the
authorizations process. Biennial budgeting has received the support of the
Reagan, Bush, and Clinton administrations. The 1993 report of the National
Performance Review pointed out that considerable time could be saved in both
the executive and legislative branches under a biennial budget cycle.
Advocates also suggest that the budget agreements providing a 5- year budget
control framework between the President and the Congress have provided
experience with multiyear budgeting.
Opponents of biennial budgeting argue that achieving any time- savings
depends on a willingness to make few changes in the off year, and absent
such restraint, there may be little or no time saved. They also suggest that
even if such a shift does save time it may not increase congressional
oversight or improve the authorization process. Some have even argued that
biennial budgeting could reduce congressional oversight by decreasing the
number of times Appropriations Committees review executive budget requests.
Furthermore, they suggest that reducing the number of times the Congress
considers budget matters may only raise the stakes of budget negotiations-
and hence how long they may take- especially when significant policy or
program differences exist. Some argue that the limited ability to project
future conditions and the inevitability of unforeseen events will lead to a
budget process that is biennial in name only or to the Congress delegating
greater authority to the President to make off- year budgetary adjustments.
Finally, opponents note that significant oversight occurs during the
appropriations process. By converting this process to a biennial exercise,
the Congress will reduce the number of established opportunities it has to
examine, direct, and influence executive branch activities.
Finally, although states can provide some important insights to those
seeking to design a federal biennial budget process, it is difficult to
translate state budget laws, practices, and experiences to the federal
level. As we noted in our review of state balanced budget practices, 2 state
budgets fill a different role, may be sensitive to different outside
pressures, and are otherwise not directly comparable. State budgets are
generally more constrained than the federal budget as a result of balanced
budget requirements and borrowing restrictions. Coupled with budget
disciplines imposed by bond rating agencies, balanced budget requirements
encourage states to budget conservatively. Moreover, governors generally
have broader authority than the President to reduce spending. For example,
15 states give their governors full authority to cut program spending when
there is a revenue shortfall, and most of the remaining states give the
governor limited authority to cut spending.
There are also important differences in legislative process and
appropriations practices. State legislatures generally do not separate the
authorization and appropriation functions. It also appears that states use
2 Balanced Budget Requirements: State Experiences and Implications for the
Federal Government( GAO/ AFMD- 93- 58BR, March 26, 1993).
tools like multiyear funding much less than the Congress does. Even in the
one- third of the federal budget that is discretionary, multiyear funding is
widely used at the federal level. Some have argued that the availability and
use of multiyear funding reduces both the need for and the potential
benefits of a move to biennial budgeting at the federal level.
Scope and To address our objectives, we collected and analyzed budget-
related
Methodology information on the three case study states. To determine the
legislative
perspective on biennial budgeting we interviewed state officials in
legislative budget offices and members of the state legislatures (including
majority and minority party leaders and appropriations chairs). We also
interviewed officials from the executive budget office and one or two
executive branch agencies to gain an executive branch perspective. To
understand the federal issues, we reviewed recent federal legislation,
relevant reports and studies, and congressional testimony. We conducted our
work from March 2000 through October 2000 in accordance with generally
accepted government auditing standards.
Arizona and Arizona and Connecticut converted from annual to biennial budget
Connecticut processes during the 1990s for different reasons. In Arizona,
biennial
budgeting was adopted to reduce the amount of time spent on budget
Implemented Biennial
deliberations and to allow more time for legislative oversight. Arizona
Budgeting Differently
developed a strategic program review process to complement its budget
process. Connecticut, on the other hand, adopted a biennial budget process
as part of a package of fiscal reforms that accompanied legislation
implementing a personal income tax at a time when the state was in fiscal
crisis. Although advocates promoted the potential benefits such as
timesavings and increased oversight, biennial budgeting was primarily
adopted as a way to improve fiscal management by doubling the budget horizon
from 1 to 2 years. In hindsight, establishing spending caps, which were also
part of the fiscal reform package, proved to be more important than biennial
budgeting in affecting the state's fiscal management.
The two states also differed in how long they took to implement biennial
budgeting. Arizona started with a large number of smaller agencies before
converting the entire budget, while Connecticut converted all agencies to a
biennial budget in the same year. Officials with whom we spoke in these
states did not cite specific transition issues or technical difficulties in
shifting to a biennial process. However, in Arizona, we were told that
beginning the conversion to a biennial budget with smaller, relatively
stable entities allowed the legislature to develop a level of comfort with
biennial budgets and that facilitated political support for the transition
of the entire budget to a biennial cycle. The transition occurred over a 6-
year period beginning in fiscal year 1994 when 26 small regulatory agencies,
which are almost all fee funded, were converted from an annual to a biennial
cycle. In fiscal year 1996, all agencies except the 15 largest were moved to
a biennial cycle. Although these represented the bulk of state agencies,
they accounted for less than 10 percent of the state's general fund
expenditures. In the current biennium, which began in fiscal year 2000, the
remaining 15 largest agencies representing more than 90 percent of the
general fund expenditures were converted. Although it may be too soon to say
how well the biennial process works for the largest agencies, officials felt
that the staged/ phased move to a biennial process helped build more support
for biennial budgeting than there had been in the past.
Connecticut changed its budget cycle from biennial to annual in 1971 when
the legislature shifted from meeting biennially to meeting annually. As
noted above, the recent move back to a biennial process was part of a larger
package of changes that included the imposition of an income tax and
spending caps. All state agencies were converted to a biennial budget at the
same time in fiscal year 1994, 2 years after the state's fiscal reform
legislation was adopted.
Designing an Off- Year The experiences of all three states indicate that
agreement between the
Budget Process Is legislative and executive branches on how the off- year
budget process will
operate is likely to play a critical role in determining how well a biennial
Important
budget process works. Each of the states has adopted a different approach to
budgeting in the off year. Ohio has relied more on leadership control to
discipline the process whereas Arizona is attempting to establish formal
guidelines for what types of changes may be considered. Legislators in these
two states felt that limiting off- year budget adjustments was important
given the political pressures to address policy needs. In contrast,
Connecticut has not formally placed limits on what can be proposed in the
off year. Each of these states also delegated some authority to make changes
in the off year to the executive branch and/ or to joint legislative/
executive bodies. In addition, executive branch agencies in these states
also felt that it was important to have clear guidelines on what budgetary
changes could be requested and flexibility to make adjustments when
unforeseen events happen.
States Developed Different The experiences of these states demonstrate the
importance of reaching
Approaches to Making OffYear agreement on a process for the off year and of
having leadership
Changes commitment to limit changes. Each of the states we studied has a
different
way of managing the off- year process. Ohio and Arizona both attempt to
limit off- year budget changes, while Connecticut generally “opens
up” the off- year budget to consider any changes. Attention to this
issue seems especially important given that officials faced pressures to
provide new funding in a time of surpluses, particularly since the off year
of the budget occurs in an election year. Although Arizona and Ohio
ultimately moved beyond adjusting funding levels for existing programs to
using some of their surplus to fund policy initiatives in the off year,
officials in both states felt that it was important to stick as closely as
possible to the biennial budget as it was originally passed.
Ohio does not statutorily limit budgetary changes in the off year, but the
executive and the legislative branches have traditionally agreed to limit
budget changes in that year. Both legislative and executive branch officials
described a strong working relationship between legislative leadership and
the executive branch and a commitment to reach agreement on the budget.
Consequently, the off- year budget debate has generally been limited to
corrective items, technical adjustments, and small policy initiatives. It
has been a long- standing practice to try to stay within the overall limits
of the biennial budget as it was originally passed and to wait until the
next biennium to introduce new policy initiatives. The fact that Ohio funds
its capital budget in the second year of the biennium has provided a way for
officials to respond to perceived pressures in that year.
In Arizona, which is in its first full biennial budget cycle in 50 years,
both branches agreed that technical and mandatory formula adjustments should
be made in the off year, but they differed on whether to consider new policy
initiatives in the off year. We were told that the executive and legislative
branches did not work together to reach agreement on guidelines for off-
year budget changes before agencies submitted their budget requests. The
governor included new policy initiatives in the budget package, but the
legislature took the position that the off- year budget package should
contain only mandatory and technical changes. Although the House and the
Senate did not initially agree on a process for considering policy
initiatives, the legislature eventually limited the final supplemental
package to mandatory and technical changes and passed several new policy
proposals as separate measures.
Connecticut has not developed a process to limit changes in the off year.
Officials told us that there was no prior agreement with the governor or
within the legislature on the guidelines for proposing and approving offyear
adjustments. Consequently, beginning with the first biennium, each
administration has introduced new policy proposals, and the legislature has
placed no limits on what budgetary changes may be considered in the off
year. Officials in Connecticut partially attributed the number of off- year
changes to the fact that the budget reform legislation requires that the
governor provide a detailed update of the original budget and that the
Appropriations Committee report at least one bill adjusting expenditures for
the second year of the biennium. Additionally, both former and current
legislators described a lack of commitment to the biennial budget process.
Most said that as a result, there has been little difference in time spent
on budget- related activities in the first and second years of the biennium.
State Legislatures Delegated In the three states we studied, the
legislatures delegated some authority to
Some Authority move funds or adjust funding levels (1) to committees made up
of
legislators and executive branch representatives or (2) directly to the
executive branch in the form of transfer authority, reprogramming authority,
or the ability to cut spending to address budget deficits. The delegation of
authority was not limited to the off year of the budget process, but was
also carried out in the first year of the biennium. Officials in Ohio felt
that delegating authority to its Controlling Board enabled them to reduce
their workload because the budget could be adjusted in the interim without
full legislative involvement. In the two states with joint legislative and
executive boards, the board allowed a subgroup of the legislature to monitor
and review executive branch transfers.
In Ohio, the Controlling Board made up of legislators and a representative
from the governor's Office of Budget and Management (OBM) was established at
a time when Ohio's legislature met biennially- with the responsibility to
approve transfers of funds within appropriations accounts. Originally, the
Controlling Board was established to function primarily in the legislature's
off year, but now it performs its functions throughout both years. The OBM
representative serves as president, reviews requests for Controlling Board
approval, sets the agenda, and chairs the meetings. The board may authorize
increased spending from dedicated revenues, fees, federal reimbursements, or
private grants, and it can provide emergency resources to an agency. The
board cannot increase or decrease general revenue fund appropriations or
transfer funds between agencies. Board actions must be consistent with the
legislative intent of the
General Assembly. The Controlling Board also has delegated some authority to
OBM to approve transfers within agency budgets, and the governor has the
authority to restrict spending in order to maintain a balanced budget.
In Connecticut, the Finance Advisory Committee (FAC), which is chaired by
the governor and consists of the lieutenant governor, the treasurer, the
comptroller, and five legislators, approves transfers between appropriations
accounts within an agency. The FAC cannot increase the total amount of an
agency's appropriation, except in very limited instances. Also, the governor
has the authority to approve transfers of amounts below 10 percent of an
appropriation, or $50,000, whichever is less. The governor also has the
authority to reduce allotments by up to 5 percent of an individual account,
but not more than 3 percent of the total appropriation of any fund, in cases
where a deficit is projected or in cases where there is a change of
circumstances. 3 The FAC can approve reductions of somewhat larger amounts,
but any change that would result in a reduction of more than 5 percent of
the total appropriation for any fund requires legislative approval.
In Arizona, we were told that agencies have a fair amount of flexibility in
the use of funds within their budgets, and the governor's budget office has
the authority to move funds within an appropriation and between
appropriations, but not between agencies. The governor also has the
authority to reduce spending in order to maintain a balanced budget.
Executive Branch Views on Executive branch officials we spoke with felt that
it was important to have
the Off- Year Process a clear process in place for addressing budgetary
needs in the off year and
the flexibility to make adjustments for unforeseen events. Although Ohio
does not formally prepare an executive budget request in the off year, we
were told that the governor's budget office closely monitors agency budgets
throughout the biennium and works with agencies to resolve budget needs, but
that agencies are expected to manage within their budgets. Even though
agencies have little flexibility to transfer or reprogram funds within their
budgets, officials we interviewed at one agency said that they are able to
use additional funding sources (e. g., to make use of federal funds that
arrive during the year). Those agency staff
3 However, grants to municipalities and funding for the Auditor of Public
Accounts may not be reduced.
also said that they spend less time on the budget and more time on planning
and program implementation in the off year. From an agency perspective, the
biennial budget generally worked well.
In Arizona, the Governor's Office of Strategic Planning and Budgeting issued
guidelines to agencies on allowable budget requests, which were primarily
for mandatory increases in statutory programs and technical corrections.
However, the legislature did not formally issue its guidelines until the
executive branch agencies had already completed their budget requests.
Although state officials said they generally could move funds within
appropriations accounts in their budgets, one official expressed concern
about the lack of guidance on how to meet budgetary needs if funds from
transfers were insufficient and additional funds were needed for other than
technical or mandatory changes, such as unexpected increases in workload, as
opposed to unexpected caseload increases in entitlement programs.
In Connecticut, the off- year budget process was described to us as very
similar to an annual budget process, including a requirement that agencies
submit detailed estimates updating the budget in the off year. As a result,
the agencies had a clear process for requesting funding, but officials
agreed that the expected benefits of the biennial budget process were not
realized and that the biennial process did not work well. In Connecticut,
the main difference between the annual and biennial budgets appeared to be a
shift from budgeting for a single year to budgeting for 2 years and
providing budget estimates for an additional 3 years.
Increased Legislative One of the arguments often cited in favor of biennial
budgeting is that it
Oversight Required offers the opportunity for the legislature to spend less
time on the budget
process and more time on oversight and program evaluation. However, Planning
only one of the three states we studied had designed a new oversight
process, which was incorporated into its biennial budget process. Officials
in the other two states told us that they did not spend more time on
oversight activities in the off- year than in the first year of the
biennium.
State officials described challenges faced in attempting to increase
oversight in the off year, which include the following: (1) a short
legislative session may not allow sufficient time for in- depth program
review, (2) because the off- year budget process occurs in an election year,
decisions to reduce funding or eliminate programs are potentially more
difficult, and (3) budget surpluses for the past several years have reduced
the pressure to use the oversight process to identify budget savings.
Of the three states studied, only Arizona has developed a model designed to
increase oversight in the off year. In Arizona, increased oversight was an
integral part of the budget reforms originally enacted in 1993. In 1999,
Arizona adopted the Strategic Program Area Review (SPAR) process, which was
designed to look at program areas that cut across numerous agencies and to
recommend efficiencies. The SPAR process takes place in the off year of the
biennium to allow legislators more time to review selected program areas.
The SPAR process evolved from the Program Authorization Review (PAR)
process, begun in 1995. The PAR process included a self- assessment by each
agency and a joint legislative and executive budget review with joint
findings and independent recommendations submitted to the Joint Legislative
PAR Committees for action. From 1995 through 1998, the legislature made
decisions on a total of 88 programs and subprograms; most of these decisions
were to modify or retain programs.
The SPAR process was designed to have a broader focus than the PAR process
by looking at strategic program areas, such as domestic violence, which cut
across numerous state agencies, rather than individual programs. For the
first biennium, Arizona conducted SPARs on three areas: ports of entry,
domestic violence, and university extended education programs. While it is
still too early to tell how effective the new SPAR process will be, the
first SPAR reports did lead to hearings and some legislative changes.
According to the Joint Legislative Budget Committee, eight committees held
hearings on the SPAR reports, and bills were introduced in both houses
related to all three SPARs. Ultimately, legislation on two of the SPARs was
enacted. Although officials mentioned ways in which Arizona's oversight
processes could be improved, they did so in the context of a state with a
continuing effort to increase oversight activities as a part of the state's
budget reforms.
In contrast, Ohio and Connecticut have neither mandates nor plans for
increased oversight in the off year. In Connecticut, the biennial process
has not resulted in more oversight, although some of the original proponents
of biennial budgeting envisioned greater opportunities for oversight in the
off year. We were told that the requirement for a detailed update of the
budget in the off year and the shorter legislative session has meant that
time has not been saved. Reports on program effectiveness by Connecticut's
Program Review and Investigations Committee- in place before biennial
budgeting- continue but have not seen increased use.
In Ohio, the legislature has a shorter session in the off year of the
biennium, which officials said is spent primarily on passing a capital
budget along with small adjustments to the operating budget. Consequently,
the legislature does not conduct more oversight in the off year either
through standing committees or the Appropriations Committees. Although some
oversight mechanisms are in place, such as legislative committees and the
Legislative Service Commission, which perform studies on specific topics for
the legislature, oversight activities generally were described as minimal
and unstructured.
State officials observed that increasing oversight activities requires the
interest and sustained commitment of legislators, particularly the
legislative leadership. In Arizona, biennial budgeting was accompanied by a
new oversight process, although officials believe the oversight process can
be improved further. However, in all these states oversight continues to
occur primarily during the appropriations process.
Observations on Although state experiences can provide useful insights as
the Congress
Implementing a considers proposals to shift to a biennial budget process,
some issues are
unique to the federal government. The differences between states and the
Biennial Budget
federal government must be considered in deciding whether the federal
Process at the Federal
government should shift to a biennial cycle and, if so, how such a process
Level
should be designed. Proposals to switch to a biennial budget process at the
federal level share a common goal with the states we reviewed- to reduce the
time spent on budget matters. Whether a biennial cycle offers the benefits
sought in this area will depend on the ability of the Congress and the
President to reach agreement on how to design and enforce the off- year
process and how to respond to unanticipated needs. If it is easy to trigger
a “reopening” of funding decisions, the process could look very
much as it does now. Although the three states differed in the degree to
which they achieved consensus on their off- year processes, none were able
to limit changes to technical and mandatory adjustments. Further, it is
clear from the three states studied that achieving time- savings- even for
Ohio and Arizona who claimed some success- did not guarantee greater
legislative oversight. If any shift to a biennial process is to lead to
increased oversight, there must
be commitment to such oversight activities over and above any timesavings.
It is also important to note the extent to which all three of these states
delegate authority over funding levels and allocations to their governors or
to joint legislative/ executive branch entities acting in their behalf. It
is unclear whether such approaches would be constitutionally available
options at the federal level. Further, it should be recognized that the
federal government also has mechanisms to manage changing needs that are
either not available to or used less frequently by states. The Congress
routinely authorizes multiyear funds as well as forward or advance funding
in response to program needs. 4 When the Congress chooses to do so, it
provides lump- sum appropriations that allow agencies, as a matter of law,
to distribute funds among some or all of the permissible purposes of a
particular appropriation account as they see fit. Lastly, the Congress may
provide agencies with transfer authority as a way to shift resources between
accounts. If the Congress wishes to provide increased flexibility or
stability to agencies, it could use these existing mechanisms either
temporarily to smooth the transition from an annual to a biennial process or
permanently to increase the percentage or amount that can be transferred
without additional congressional action. In addition, if the Congress has
imposed reprogramming restrictions that limit the movement of funds within
an agency's appropriation account, it may alter the restrictions to provide
an agency with greater flexibility.
There are other fundamental differences between how the federal government
and states budget and control spending that will affect the design and
implementation of a biennial budget process. Most states use fund budgeting,
which separates operating, capital, enterprise, and various other funds,
whereas the federal budget is shown on a unified basis. In addition,
distinctions for budgetary control at the federal level are made for those
programs for which funds flow directly from program legislation (“
direct spending” or “mandatory spending”) and those
programs whose funding flows through the appropriations process (“
discretionary spending”). Proposals for biennial budgeting at the
federal level would apply only to the one- third of the budget controlled
through the
4 Multiyear authority is budget authority available for a period longer than
1 fiscal year. Forward funding is a type of multiyear authority that covers
periods that do not coincide with the start or end of a fiscal year. Advance
funding authority allows agencies to charge obligations incurred in the
current year to the next fiscal year's appropriation.
appropriations process. In contrast, states also feel constrained- either by
balanced budget requirements or by concerns about their bond ratings- to
balance annually the operating portions of their budgets (or general funds),
which include formula or caseload driven programs, such as schools and
prisons. These distinctions present different challenges and have practical
consequences in designing a biennial budget process.
Given the differences between federal and state legislative processes, state
experiences with biennial budgeting cannot be generalized broadly to the
federal budget. For example, states do not have separate budget,
authorization, and appropriations processes. In Connecticut and Arizona,
moving to biennial budgeting extended their entire budget horizon from 1
year to 2. In contrast, the federal government routinely displays budget
information for 10 years, or more.
In recent years, some in the Congress have expressed concern over the
frequency with which the Congress has waived its rules and passed
appropriations without authorizations. Some feel that this is the result of
the time- consuming budget and appropriations process crowding out the
legislative calendar. Others feel that authorizations of some programs are
not completed because they contain sensitive issues that take time to
reconcile. Recent proposals for a biennial cycle have envisioned a process
in which the first year of the biennium is devoted to budget and
appropriations measures and the second year is devoted to oversight and
authorization activities, with the authorizing committees playing a more
active oversight role. In some ways, the debate about whether a biennial
budget process would improve the timeliness of authorizations mirrors the
debate about whether it would improve oversight. Having a more complex
federal process means that any biennial budget proposal will need, at the
very least, to conform the legislative calendar for these three processes.
Careful thought should be given to whether a biennial budget process also
changes the relationship between these activities, especially how this
change might affect the oversight roles of authorizers and appropriators.
Since much of the recent interest in a biennial budget cycle reflects an
interest in increased oversight, it is important to see this goal in the
context of what the Congress has already enacted. The Congress has put in
place a statutory framework to instill performance- based management into
federal
agencies. 5 In particular, it will be important to give close attention to
how the biennial budget cycle should be integrated with the strategic
planning and performance cycle that currently exists under GPRA. Integration
of GPRA with a biennial cycle raises a number of questions beyond adjusting
the dates, which include the following.
Will agencies still be expected to submit annual performance reports, and
how are these to be used in a biennial cycle? Will the President's
governmentwide performance plan submitted with
his biennial budget reflect performance goals and measures on an annual or a
biennial basis? Will agencies be expected to prepare performance plans
including
annual goals and measures covering each year of the biennium- and if so how
will these affect the governmentwide performance plan?
To be fully useful, this information must become a routine component of
congressional authorization, oversight, and appropriations processes.
Finally, any proposal to change to a biennial budget process will need to be
considered in the larger context of the federal budget regime. The control
regime embedded in the Budget Enforcement Act expires in 2002. 6 Any
biennial budget process must be designed to work with whatever control
regime is retained or created at that time.
State experiences cannot be translated wholesale to the federal government,
nor can the experiences of the states we examined be seen as determinative
for the federal government. However, the experiences of the states we
reviewed do offer insights into implementation and design issues that must
be addressed if the federal government is to consider shifting to a biennial
budget cycle. Further, the recent experiences of Arizona and Connecticut
illustrate that if these issues are dealt with early, the transition to a
biennial budget cycle is likely to be smoother.
5 This framework includes the Chief Financial Officers Act and related
financial management legislation; information technology reform legislation,
including the Clinger- Cohen Act of 1996 and the Paperwork Reduction Act of
1995; and GPRA.
6 The Budget Enforcement Act of 1997 extended pay- as- you- go (PAYGO) rules
and discretionary spending limits through 2002. PAYGO rules require that new
direct spending or revenue legislation be deficit neutral. Discretionary
spending limits are statutory caps on the level of budget authority and
outlays determined through the annual appropriations process.
State Comments We provided a draft copy of each state appendix of this
report to officials from that state to review for accuracy. They generally
concurred with our
characterizations, and we incorporated their comments where appropriate. We
are sending copies of this report to the Honorable John Joseph Moakley,
Ranking Minority Member, House Committee on Rules; the Honorable Pete V.
Domenici, Chairman, and the Honorable Frank R. Lautenberg, Ranking Minority
Member, Senate Committee on the Budget; the Honorable John R. Kasich,
Chairman, and the Honorable John M. Spratt, Jr., Ranking Minority Member,
House Committee on the Budget; the Honorable Ted Stevens, Chairman, and the
Honorable Robert C. Byrd, Ranking Minority Member, Senate Appropriations
Committee; the Honorable C. W. Bill Young, Chairman, and the Honorable David
R. Obey, Ranking Minority Member, House Appropriations Committee and other
interested parties. We will also make copies available to others upon
request.
Please contact me at (202) 512- 9573 if you or your staff have any questions
concerning this report. Key contributors to this assignment were Denise
Fantone, Bryon Gordon, and Amelia Shachoy.
Sincerely yours, Susan J. Irving Director for Federal Budget Issues,
Strategic Issues
Appendi Appendi xes xI
State Legislative and Budget Cycles States with biennial legislative States
with annual legislative
States with annual legislative States with annual legislative and budget
cycles and budget cycles and mixed budget cycles and biennial budget cycles
1. Arkansas 1. Alabama 1. Kansas a 1. Arizona 2. Kentucky 2. Alaska 2.
Missouri b 2. Connecticut 3. Montana 3. California 3. Hawaii 4. Nevada 4.
Colorado 4. Indiana 5. North Dakota 5. Delaware 5. Maine 6. Oregon 6.
Florida 6. Minnesota 7. Texas 7. Georgia 7. Nebraska
8. Idaho 8. New Hampshire 9. Illinois 9. North Carolina c 10. Iowa 10. Ohio
11. Louisiana 11. Virginia 12. Maryland 12. Washington 13. Massachusetts 13.
Wisconsin 14. Michigan 14. Wyoming 15. Mississippi 16. New Jersey 17. New
Mexico 18. New York 19. Oklahoma 20. Pennsylvania 21. Rhode Island 22. South
Carolina 23. South Dakota 24. Tennessee 25. Utah 26. Vermont 27. West
Virginia
a In Kansas, 19 agencies are on a biennial budget cycle. b In Missouri, the
operating budget is on an annual cycle while the capital budget is on a
biennial cycle. c Although statutorily North Carolina has a biennial
legislature, in practice, the legislature meets annually with a shorter
session during the second year.
Appendi xII
Arizona Biennial Budget The state of Arizona is currently in the second year
of its first biennial budget. Arizona began its transition to a biennial
budget cycle in fiscal year 1994 1 when it moved 26 smaller regulatory
agencies 2 to a biennial basis after attempts to enact legislation to
convert the entire budget to a biennial cycle at one time had failed. Based
on their experience with these smaller agencies, legislators said that they
became more comfortable with biennial budgeting, and in fiscal year 1996 all
agencies except for the 15 largest were moved to a biennial cycle. The 15
largest agencies, which represent more than 90 percent of general fund
expenditures, were converted to a biennial cycle in fiscal year 2000.
Arizona adopted a biennial budget process primarily as a way to free up
legislative time to increase its oversight activities. In 1993, Arizona
enacted a Program Authorization Review (PAR) process that required each
state agency to develop plans and performance measures to support its budget
requests. In 1999, the Arizona legislature replaced the PAR process with the
Strategic Program Area Review (SPAR) process, which was designed to have a
broader focus than the PAR process by looking at strategic program areas
that cut across numerous state agencies rather than individual programs. The
SPAR process was specifically designed to coordinate with the off year of
the state's biennial budget process.
Legislature Arizona's legislature is composed of a Senate with 30 members
and a House of Representatives with 60 members. Both senators and
representatives are
elected for 2- year terms with elections held each even- numbered year.
Arizona is divided into 30 electoral districts, with each district electing
one senator and two representatives. Currently, there is a Republican
majority in the House and Senate and a Republican governor. In 1992, Arizona
voters amended the state constitution to limit senators and representatives
to four consecutive terms in office. 3 Each legislative session covers a 2-
year period. Arizona has a part- time legislature that meets for about 100
days
1 Arizona's fiscal year runs from July 1 to June 30. For example, fiscal
year 1994 began on July 1, 1993. 2 These agencies receive their funding
primarily from user fees, not from general fund appropriations. They retain
90 percent of the fees they receive, and the remainder is returned to the
general fund. Hence, these agencies are referred to as 90/ 10 agencies.
3 A representative or senator may be reelected to his or her seat after
sitting out for a full term.
each year. 4 The Senate has 11 standing committees and the House has 25. The
Joint Legislative Budget Committee (JLBC) was established in 1966 and has
responsibility for making recommendations to the legislature regarding all
facets of the state budget, state revenues and expenditures, future fiscal
needs, and the organization and function of state government. The
Appropriations Committees in each chamber have jurisdiction over any bill
that contains an appropriation of public money.
Budget Overview Arizona's total operating budget for fiscal year 2001 is
expected to be about $14.5 billion, which includes about $6. 5 billion in
general fund
appropriations and the remainder for other appropriated funds,
nonappropriated funds (which are generally separate funds with their own
source of revenue), and federal funds (which also are generally not
appropriated). About 50 percent of general fund appropriations go toward
education spending (K through 12 and universities combined). Sales tax
revenues comprise 47 percent of general fund revenues, with individual and
corporate income taxes accounting for 40 and 9 percent of general fund
revenues, respectively.
Arizona has several legal restrictions and budgetary mechanisms that affect
its ability to spend. First, Arizona has a balanced budget requirement. The
governor must take actions to prevent a projected deficit. To help ensure
that the budget is balanced, the governor has been given the authority to
unilaterally cut spending or use funds from the Budget Stabilization Fund
(BSF) to prevent a projected deficit. There is no specific limit on the size
of the cuts the governor can make, but we were told that the governor would
be expected to seek legislative approval of large cuts. The governor also
has the ability to transfer funds between programs within budgetary
accounts. Secondly, Arizona's constitution restricts appropriations of
certain state revenues to no more than 7. 41 percent of Arizona personal
income. In general, revenues derived from taxes, university collections,
licenses, fees, and permits are subject to the limit. Appropriations derived
from other revenue sources, such as federal grants and interest income, are
not subject to the cap. Finally, in 1990 Arizona established the BSF for the
purpose of setting aside revenues during periods of above- trend economic
growth and using accumulated balances during periods of below- trend
4 The President of the Senate or the Speaker of the House may, by rule,
extend the session for an additional 7 days, after which time a majority
vote is required to extend the session. The governor may also call a special
session of the legislature at any time.
growth. Funds are automatically deposited or withdrawn from the BSF based on
a formula that compares the annual growth rate of inflationadjusted personal
income to trend growth rate. 5 The size of the BSF is capped at 7 percent of
the prior year's general fund revenues. The fund is projected to equal about
6.8 percent of general fund revenues at the end of fiscal year 2001.
Budget Process The budget process begins the summer before the start of the
biennium, when the governor's Office of Strategic Planning and Budgeting
(OSPB)
issues budget development guidelines to the agencies. State agencies are
required by law to submit their operating budget requests to OSPB by
September 1. OSPB then sends a copy of each agency's budget request to the
staff of JLBC. OSPB and JLBC staff then analyze agency budget requests and
develop separate budget recommendations for the upcoming year. Arizona's
legislative budget process has been characterized by state officials as very
strong because of its ability to develop budget recommendations and analysis
at the same time as the executive branch.
Not later than 5 days after the regular legislative session convenes in any
odd numbered year, the governor must submit a budget to the legislature.
Shortly thereafter, JLBC must prepare an analysis of the governor's budget,
with recommendations for revisions and expenditures. The Appropriations
Committee of each house has responsibility for developing its own budget
recommendations. Each committee is divided into three subcommittees, which
have responsibility for developing budget recommendations for each state
agency. The full committee then develops its final appropriations package,
which the majority caucus debates before it goes to the floor for final
approval. All operating budget appropriations are contained in one general
appropriation act. It is generally the goal of the legislature to pass the
general appropriation act within 65 calendar days. The legislature also
passes a capital outlay bill, which funds construction and major maintenance
and repair of state facilities. The budget process for the capital outlay
bill is similar to the general appropriation act process.
5 The legislature, with a two- thirds majority and the concurrence of the
governor, can decrease a deposit or increase a withdrawal.
Off- Year Budget Arizona officials said that it may be too soon to tell how
well its biennial
Process budget process is working since it is in the second year of its
first biennial
budget covering all state agencies in 50 years. For example, the biennial
budget legislation did not establish a process identifying how budget
adjustments would be made in the off year of the biennium. As a result,
while there was general agreement that changes needed to be made to the
budget, Arizona experienced some difficulty in making budget adjustments in
the off year as the governor, the House, and the Senate adopted differing
approaches to what they would consider.
For their off- year budget proposals, each branch developed new revenue
estimates to determine what funds would be available to be spent. Their
estimates differed for the second year of the biennium. Then each branch
determined how much of the projected surplus would be dedicated to
previously enacted “triggers”- tax reductions or spending
increases- which occur automatically in case of excess revenues. Remaining
funds were then made available to finance other needs or to be retained as a
yearend balance.
There was general agreement that available funds should be used for
increases in federal or state programs funded by statutory formulas and to
correct any technical errors in the previous appropriations language. OSPB
attempted to limit off- year budget requests for additional funding to
statutory or court- ordered mandates and increases in program caseloads.
Agencies were not allowed to request new funding for inflation or program
enhancements. However, the legislature did not formally issue its guidelines
until the executive branch agencies had already completed their budget
requests. Ultimately, the Appropriations chairmen decided to take a narrow
view of what changes the legislature would consider to keep with the spirit
of a biennial budget process. Specifically, the Appropriations chairmen
limited changes to (1) fully fund existing federal or state statutory
formulas, such as the K through 12 student count, (2) correct technical
errors, and (3) adjust spending for smaller agencies that receive their
revenue primarily from user fees in response to higher- than- expected
receipts. However, the governor introduced new policy initiatives in her
Mid- Biennium Update. The legislature was willing to consider policy
initiatives on their own merits, but not as part of the off- year
supplemental budget process. The two chambers adopted differing approaches
to deliberating policy proposals. In the Senate, the Appropriations chairman
solicited policy proposals from members in anticipation of funds being
available, while in the House, the Appropriations chairman waited until the
end of the process when he would better know how much was available for new
programs. According to JLBC, the legislature ultimately passed into law
budgetary changes totaling about $245 million- about 2 percent of general
fund appropriations- that included funding for several new policy
initiatives enacted separately from the main off- year supplemental funding
package. (See table 1 for a summary of Arizona's budget process.)
Table 1: Arizona Biennial Budget Cycle Date Budget year
June OSPB issues budget preparation instructions to agencies. September 1
Agencies submit biennial budget requests to OSPB. September 1January OSPB
and JLBC review agency requests and prepare separate budget
15 recommendations. a January 15 b Odd- numbered year: Governor submits
proposed biennial budget to
legislature.
Even- numbered year: Governor submits proposed adjustments to biennial
budget.
January 15- Legislative appropriations committees in each house review
governor's March proposal and JLBC recommendations, hold hearings, and enact
appropriations. March The differences between House and Senate versions of
the legislation
are resolved. By end of
Odd- numbered year: Legislature appropriates funds to agencies for
legislative
the biennium beginning on July 1. session c
Even- numbered year: Legislature enacts supplemental appropriations and may
enact other appropriations bills that adjust the biennial budget.
July 1 Fiscal year begins. a JLBC also prepares an analysis of the
governor's proposed budget with recommendations for revisions shortly after
it is submitted to the legislature. b In the odd- numbered year, the
governor transmits the budget to the legislature no later than 5 days
after the session convenes on the second Monday in January. c The
legislature is part- time and meets for about 100 days each year. The
session usually ends in midApril.
Although officials we spoke with expressed some concern about how the
process worked in the first biennium, many stated that it was an improvement
over an annual process. Officials at executive branch agencies were not sure
how they were going to address unexpected needs, especially in those
programs not funded by statutory formulas. One agency official assumed they
would have to wait until the next legislative session to ask for
supplementals to cover their increased costs. Some members of
the legislative branch expressed disappointment that the governor broke with
the spirit of the biennial budget legislation by including policy proposals
in her Mid- Biennium Update. Despite these concerns, officials we spoke with
felt that it was still too early to tell how well Arizona's biennial budget
process was working.
Legislative Oversight Legislative oversight of executive branch agencies is
carried out through several formal and informal processes in Arizona.
Standing committees can
conduct their own oversight of programs and agencies within their
jurisdiction. Also, the Appropriations Committees conduct oversight as a
routine part of the budget and appropriation process. Arizona also has a
sunset review process for agencies when their legislative authorization
periodically expires. The state's auditor general conducts sunset reviews of
agencies with expiring authorizations and issues reports that may be used as
part of the reauthorization process. In the 1990s, Arizona also put in place
a structure for conducting program reviews.
In 1993, Arizona enacted the PAR process that required each state agency to
develop plans and performance measures to support its budget requests. The
agencies conducted a self- assessment covering six areas: background
information, program funding, strategic planning, performance measurement,
performance results, and other issues posed by the legislature. The self-
assessments were then submitted for review and validation to OSPB and JLBC.
OSPB and JLBC together developed a report with joint findings and
independent recommendations, which was delivered to the governor and the
legislature. Finally, joint program authorization review committees held
hearings on the PAR reports to recommend whether to retain, eliminate, or
modify the programs. Officials we met with in Arizona said that the PAR
process was initially developed to identify programs that could be
eliminated. In the first year of the PAR process, the legislature was able
to eliminate just two programs, and in subsequent years they eliminated only
portions of other programs. Consequently, many legislators felt that the PAR
process was not as effective as it could have been.
In 1999, the Arizona Legislature replaced the PAR process with the SPAR
process, which was designed to take a strategic approach to reviewing broad
program areas, such as domestic violence, that cut across numerous state
agencies and programs. The SPAR process was also designed to complement the
off year of the state's new biennial budget process. The legislature
intended to focus on budget actions during the first session of
the biennium and to carry out the SPAR process during the second session.
For the first biennium, Arizona conducted SPARs on three areas: ports of
entry, domestic violence, and university extended education programs. While
it is still too early to tell how effective the new SPAR process will be,
its first reports did lead to hearings and some legislative changes.
According to JLBC, eight committees held hearings on the SPAR reports, and
bills were introduced in both houses on all three SPARs. Ultimately,
legislation on two of the SPARs was enacted.
Appendi xI II
Connecticut Biennial Budget The state of Connecticut implemented a biennial
budget process beginning in fiscal year 1994. 1 Prior to fiscal year 1972,
Connecticut had both a biennial legislature and a biennial budget process;
in 1971 the state shifted both its legislative and budget cycle to annual.
The shift back to a biennial budget cycle was only one element of a larger
package of budget initiatives enacted in 1991. In 1991, during a fiscal
crisis in which Connecticut had depleted its budget reserve fund and ended
the year with a deficit of nearly $1 billion, the state enacted a
controversial personal income tax. In order to gain support for the personal
income tax, the state also instituted several other budgetary changes that
were viewed as ways to ensure better fiscal management. The provision with
the greatest impact on the budget was a spending cap on general budget
expenditures; other changes included a cap on bonded indebtedness and a
shift to a biennial budget process. Along with the shift to a biennial
budget process, which required the state to budget for the second year of
the biennium, the new law required estimates of revenues and expenditures
for 3 fiscal years beyond the biennium. In contrast, under the annual budget
cycle, budgets did not include estimates beyond the fiscal year covered by
the budget. Therefore, a biennial budget process was viewed as a way to help
decisionmakers consider the longer term impact of their budget decisions. It
was also expected to reduce time on budget deliberations and to increase
legislative oversight.
Legislature The General Assembly of the state of Connecticut operates
through a bicameral legislature currently composed of a Senate with 36
members and
a House of Representatives with 151 members. Connecticut has a part- time
legislature; when it shifted from a biennial to an annual schedule in 1971,
it established a shorter session in the even- numbered year. Both senators
and representatives are elected for 2- year terms with elections held each
evennumbered year. The state constitution sets a range for the numbers of
electoral districts of not less than 30 and not more than 50 districts for
the Senate and not less than 125 and not more than 225 districts for the
House. Currently, there is a Democratic majority in both the House and the
Senate and a Republican governor. The legislature has 17 joint standing
committees, two of which are involved in the budget process. The Committee
on Appropriations consists of 54 members- 11 senators and 43
representatives- and 12 subcommittees and has responsibility for all
1 Connecticut's fiscal year runs from July 1 to June 30. For example, fiscal
year 1994 ran from July 1, 1993, to June 30, 1994.
matters relating to appropriations and the operating budgets. The Committee
on Finance, Revenue and Bonding consists of 47 members- 10 senators and 37
representatives- and two subcommittees and has responsibility for all
matters relating to finance, revenue, capital bonding, and taxation.
Budget Overview In Connecticut, the general fund accounts for approximately
91 percent of the total operating budget; there is a separate transportation
fund and eight
other relatively small funds. The state budget for fiscal year 2001 totals
approximately $12.3 billion; of this total, the general fund is
approximately $11.3 billion, the transportation fund is $814.5 million, and
the remaining appropriated funds make up the balance of $209.7 million. The
major categories of spending in the general fund are human services and
education, which together make up nearly 50 percent of the total state
budget. Revenue for fiscal year 2001 totals approximately $12. 3 billion; of
this total, general fund revenue is approximately $11.3 billion,
transportation fund revenues total $854.1 million, and the remaining
revenues for the eight other appropriated funds total $213.9 million. The
major sources of general fund revenue are the personal income tax (which
makes up nearly 35 percent of gross revenues), sales and use taxes (26
percent), and federal funds (17 percent). 2
A major limitation on the size of the state budget is the spending cap on
general budget expenditures adopted by the legislature with the 1991 budget
reforms. The budget cannot exceed expenditures authorized for the previous
fiscal year by more than either the average increase in personal income in
the state for the preceding 5 years or the percentage increase in inflation
over the last year, whichever is greater. Some funds are excluded from the
calculation of the spending cap, such as debt service, some grants to
distressed municipalities, expenditures for first time implementation of
court orders or federal mandates, and budget reserve fund expenses. The
spending cap has been effective in limiting growth in spending, but some
officials said that it has restricted the state's ability to adequately fund
needs in some cases. Exceeding the spending cap requires a declaration of an
emergency or extraordinary circumstances by the governor and
2 This amount includes primarily Medicaid reimbursements and the Temporary
Assistance for Needy Families (TANF) block grant. Additional federal funds
that are included in agency operating budgets are not included as revenue.
approval by at least a three- fifths majority in each house of the General
Assembly.
Fiscal year 2000 marks the ninth consecutive year of budget surpluses in
Connecticut, and the third consecutive year in which the governor declared
extraordinary circumstances in order to exceed the spending cap to make use
of surplus revenues. The governor's fiscal year 2000 budget proposal
presented four criteria to justify exceeding the cap: (1) there are large
nonrecurring state budget surpluses, (2) the budget reserve fund would be
maintained at 5 percent of budgeted expenditures, (3) expenditures over the
cap are primarily of a one- time nature and do not require ongoing expenses,
and (4) expenditures over the spending cap are not used to inflate the base
for future years. In line with these criteria, the governor proposed to use
the estimated fiscal year 2000 surplus of $241.3 million to maintain fiscal
stability and fund nonrecurring initiatives. These proposals included $132.2
million to avoid issuing debt for school construction and education
technology initiatives, $33.4 million to maintain the rainy day fund at 5
percent of budgeted expenditures, and approximately $38 million in
nonrecurring initiatives. The legislature approved exceeding the fiscal year
2000 spending cap and modified some of the governor's proposals, most
notably decreasing the amount of debt avoidance to $84 million 3 and
increasing the new initiatives to $93 million.
Budget Process Connecticut transitioned all state agencies to a biennial
budget cycle simultaneously in fiscal year 1994, 2 years after the fiscal
reform legislation
was passed. Fiscal year 2001 is the second year of the fourth biennium since
the reinstitution of biennial budgeting. The budget process begins with
preparation of the budget request, which follows the same calendar for both
years of the biennial budget cycle. In preparation for the first year of the
biennial cycle, the governor's Office of Policy and Management (OPM) issues
budget preparation instructions to the agencies by August 1 of each even-
numbered calendar year. Agencies are required to submit to OPM a current
services biennial budget request by September 1 and
3 After the legislature adjourned, the final surplus was $265. 5 million
more than projected for fiscal year 2000. The legislature had provided that
any additional funds be appropriated for debt avoidance for education
technology and school construction projects. Ultimately, the amount of debt
avoidance totaled $349. 5 million.
program options by October 1. 4 The current services budget estimates
funding needed to maintain existing budgetary policies, including increases
for inflation as well as adjustments for changes in caseloads and legal
mandates. Program options are required for any changes in expenditures or
revenues beyond the current services level and may reflect (1) an agency
proposal for new or expanded initiatives, (2) a request by OPM for proposed
reductions, or (3) reallocation of funds within an agency or between
agencies. The following year agencies submit requests and revisions to the
biennial budget in preparation for the second year of the biennium. During
the fall months, OPM reviews the agency requests and makes funding
recommendations to the governor.
After the budget recommendations are finalized, the governor transmits the
budget proposal to the legislature. The budget for the next biennium is
submitted to the legislature by the first session day following February 3
in each odd- numbered calendar year. When there is a new administration, the
timeline is extended to the first session day following February 14. The
governor's proposal must contain a separate budget for each of the 2 fiscal
years and an estimate of revenues and expenditures for the 3 years following
the biennium. When the General Assembly convenes in early February in the
first year of the biennium, the governor transmits a report on the status of
the enacted budget and any recommendations for changes.
The legislature appropriates funds to state agencies, primarily in one bill,
for the two separate fiscal years of the biennium. The two joint legislative
committees- Appropriations and Finance and Revenue and Bonding- review the
governor's proposed budget. The Appropriations Committee holds public
hearings on each agency's budget, and the respective subcommittees develop
recommendations with staff assistance from the legislative Office of Fiscal
Analysis. Committee chairs and the legislative leadership review the
subcommittee recommendations, and the committees draft and report
appropriation and finance bills to the House and Senate for floor action.
The law requires that the Appropriations Committee report at least one bill
that adjusts expenditures and contains revenue estimates for the second year
of the biennium in the evennumbered year.
4 Although OPM prepares the budget request for submission by the governor,
the legislature also receives the agency budget requests independently.
Maintaining Budget Connecticut has several mechanisms for reducing general
fund
Balance expenditures so that it can maintain a balanced budget as required
by the
state constitution. Once the budget is adopted, the governor is responsible
for maintaining the budget in balance throughout the year. During the fiscal
year, OPM is required to report monthly on potential budget deficits and to
submit items to be included in a deficiency bill in order to adjust the
total amount of an agency's budget and total appropriations and revenues for
the current fiscal year. The governor has the authority to restrict the
allocation of budgeted funds due to a change in circumstances or in the
event that resources are insufficient to finance appropriations. 5 If the
state comptroller projects a deficit of greater than 1 percent of the total
general fund appropriation, the governor has the ability to restrict
allotments by up to 5 percent of an individual account within an agency but
not by more than 3 percent of total appropriations in a fund. The Finance
Advisory Committee (FAC) can approve reductions of somewhat larger amounts,
but any change that would result in a reduction of more than 5 percent of
the total appropriation from any fund requires approval by the General
Assembly.
The FAC has the authority to approve transfers of funds from one
appropriation account to another within an agency but does not have the
authority to increase the total amount of appropriations except in very
limited instances. This transfer authority covers funds in excess of 10
percent of the appropriation, or $50, 000, whichever is less; the governor
can approve transfers of funds below this threshold. The FAC, created in
1943, is a nine- member joint legislative- executive body composed of the
governor, lieutenant governor, treasurer, comptroller, and two senators and
three representatives- each with members representing both parties- of the
Appropriations Committee. The governor's budget office sets the agenda for
the monthly committee meetings, and the governor chairs the meetings. The
FAC approved 57 transfers totaling $82.0 million, or 0.7 percent of the
adopted budget, in fiscal year 1999, and a total of 44 transfers totaling
$121.1 million, or 1 percent of the adopted budget, in fiscal year 2000. The
social services and education budgets had the largest number of transfers in
both of these fiscal years, and the social services budget had the highest
value of budget transfers in both years.
5 However, the governor cannot reduce funds for the State Auditor of Public
Accounts or grants to municipalities.
In the event that the state is unable to maintain a balanced budget, there
is a budget reserve fund, which was created in 1978 to finance state
operating deficits at the end of the fiscal year and may have a balance of
up to 5 percent of general fund appropriations. This fund was depleted in
1990; it has been replenished with surplus funds each year beginning in 1995
and is currently maintained at the 5 percent level.
Off- Year Budget Connecticut officials said that the original intent of the
shift to biennial
Process budgeting was to limit off- year budget changes to technical
adjustments,
thereby reducing time spent on the budget process and allowing more time for
oversight activities. Technical adjustments are changes necessary to
maintain current services and include adjustments for items such as
inflation and collective bargaining, as well as funding for changes in
caseloads and legal mandates. In practice, however, beginning with the first
biennium, off- year changes have consistently included new policy
initiatives as well as technical adjustments.
Several circumstances provide the context for off- year changes to the
biennial budget. The 1991 budget reform legislation requires that the
governor submit a report on the status of the budget and that the
Appropriations Committee report at least one bill that adjusts expenditures
for the ensuing off year of the biennium. The law further specifies that the
governor's report include the same level of detail as that contained in the
original budget document and that the agency heads transmit recommended
adjustments to OPM. Because of these requirements, officials in both the
legislative and executive branches in Connecticut said the resulting budget
process was very similar to an annual budget process. In addition to the
legal requirement for a detailed budget update, which offers the opportunity
to propose policy initiatives in the off year, state officials mentioned two
other factors that have made limiting policy initiatives for the second year
of the biennium more difficult: (1) the existence of a budget surplus in
each year since fiscal year 1992 and (2) the fact that the off year is also
the election year for state legislators.
In the current biennium (fiscal year 2000- 2001), off- year changes adopted
by the legislature amounted to $148.2 million, or 1.2 percent of all
appropriations. These changes represent the net effect of an increase in
general fund appropriations of $195. 6 million, or 1.8 percent of the fund,
and decreases in the transportation and eight other appropriated funds. The
largest increases in appropriations in the revised budget provided $56.6
million more for health and hospitals, primarily for increased
community services and services to targeted populations, and $23.1 million
to the Department of Correction for population growth and staffing- related
costs. (See table 2 for an overview of Connecticut's budget process.)
Table 2: Connecticut Biennial Budget Cycle Date Budget process a
August 1 OPM issues budget preparation instructions to agencies. September 1
Even- numbered year: Agencies submit current services biennial
budget requests to OPM.
Odd- numbered year: Agencies submit recommended adjustments and revisions to
biennial budget.
SeptemberNovember OPM reviews agency requests. November 15 In any year in
which there is a newly elected governor, OPM submits
budget recommendations to governor. February b Odd- numbered year: Governor
submits proposed biennial budget to
legislature.
Even- numbered year: Governor must report on status of enacted budget with
any recommendations for revisions and adjustments.
February- April Joint legislative appropriations and finance committees
review governor's proposal, hold hearings, and report bills for floor
action.
By end of
Odd- numbered year: Legislature appropriates funds to agencies for
legislative
the biennium beginning on July 1. session c
Even- numbered year: Legislature must report at least one bill that adjusts
expenditures and revenues for the second year of the biennium beginning on
July 1.
July 1 Fiscal year begins. a Requirements for the even- numbered and odd-
numbered years are specified in state law. b In the odd- numbered year, the
governor transmits the budget to the legislature by the first session day
following February 3. If the governor is newly elected, the date is extended
to the first session day following February 14. In the even- numbered year,
the governor transmits a status report on the Wednesday after the first
Monday in February, which is the day that the General Assembly convenes. c
In the odd- numbered year, the legislative session ends in early June; in
the even- numbered year, the
legislative session ends in early May.
Legislative Oversight Some of the original proponents of biennial budgeting
envisioned that the off year of the biennium would allow for increased
oversight and
evaluation of programs. However, both executive and legislative branch
representatives said that in practice, the biennial budget process has not
led to increased oversight, despite having a program budget format and
performance reporting that could facilitate oversight of executive agencies.
Officials explained that the requirement to update the budget, as well as
the shorter legislative session in the off year, has not allowed more time
for oversight. Furthermore, because of budget surpluses in each year since
the implementation of biennial budgeting, there has not been a demand to
identify areas for potential savings. Some officials added that there are
legislators who are interested in increasing oversight, but this would
require more support from the legislative leadership.
Although formal oversight has not increased as a result of the
implementation of a biennial budget process, oversight activities that were
in place in Connecticut before biennial budgeting continue. The Program
Review and Investigations Committee (PRI), established in 1972, is
responsible for determining whether state agencies and programs are
effective or require modification or elimination. PRI consists of 12 members
with equal representation from each party and each chamber and has a
professional staff of 12 who conduct 6 to 8 reviews a year, prepare reports,
and make recommendations. However, officials told us that the role of the
PRI has not expanded under the biennial budget process, and appropriators
generally do not make use of its reports. Standing committees also conduct
hearings, but we were told that these hearings focus more on policy issues
than agency performance. Overall, state officials said that most oversight
for executive branch agencies occurs when the Appropriations Subcommittees
conduct agency reviews as a routine part of budget deliberations.
Appendi xI V
Ohio Biennial Budget The state of Ohio has had a biennial budget process
since the early 1900s when the state had both a biennial legislative session
and a biennial budget process. In the late 1960s, the state shifted its
legislative schedule to an annual session but maintained the biennial budget
process. Ohio is the largest state in terms of general fund expenditures
with an annual legislature and a biennial budget process. Since Ohio has had
a biennial budget in place for a long time, it does not offer the same
opportunity to examine the transition to a biennial budget process as the
other states in this study. However, it does provide an example of a state
in which the biennial process has been described as working well by
representatives in both the legislative and the executive branches. Ohio has
what might be called a split biennial budget cycle: the timing of the
biennial budget is different for the operating and capital budgets. In the
first year of the session, the legislature adopts two 1- year operating
budgets, and since the mid 1980s, the legislature has adopted a 2- year
capital budget in the second year of the biennium. Revisions to the
operating budget in the second year of the biennium may be included either
in the capital bill or in a separate corrective bill. Off- year changes to
the budget are minor, and there is general agreement among state officials
to adhere closely to the enacted biennial budget.
Legislature The General Assembly of the state of Ohio operates through a
bicameral legislature composed of a Senate with 33 members and a House of
Representatives with 99 members. One senator is elected from each Senate
district and one representative is elected from each House district with
elections held in even- numbered years. Senators are elected to terms of 4
years with approximately one- half of the senators elected every 2 years.
Representatives are elected for 2- year terms with elections for the entire
House held in even- numbered years. Currently, there is a Republican
majority in both the House and the Senate and a Republican governor. Term
limits were instituted in Ohio in 1993, with the restriction that no member
of the General Assembly can serve in the same office for more than 8
consecutive years- two terms for senators and four terms for
representatives. After an absence of one term, a senator or representative
becomes eligible for reelection to the same office. 1 The General Assembly
meets during a biennium that is divided into two annual regular sessions;
bills introduced in the first year are carried over to the second year. The
1 These limits apply to terms beginning on or after January 1, 1993.
session in the second year is shorter. The Senate has 13 standing
committees; its Finance and Financial Institutions Committee has primary
responsibility for the budget and is composed of 12 members. The House has
22 standing committees; its Finance and Appropriations Committee has primary
responsibility for the budget and is composed of 31 members and five
subcommittees.
Budget Overview Ohio's operating budget for fiscal year 2001 is
approximately $40 billion; of this total, spending from the general revenue
fund is approximately
$20.5 billion with remaining operating budget revenues included in separate
restricted funds. The major revenue sources for the general revenue fund are
personal income tax (37 percent), sales and use taxes (29 percent), and
federal welfare reimbursement (19 percent). The major categories of spending
from the general fund are for human services and elementary and secondary
education, which together constitute 52 percent of the total expense budget.
Ohio's budget is structured as a traditional line item budget and is also
organized programmatically. Within an individual agency's budget, a program
series represents a major area of activity or goal for the agency and
includes all line items for programs within that series.
Ohio's spending is constrained by constitutional and legal requirements and
by restrictions on the use of surplus funds. The state constitution
prohibits the state from borrowing to fund operating expenses, and the
governor is required to present a balanced budget request to the
legislature. First, state law requires that any funds in excess of operating
expenses be used to maintain the budget stabilization fund, created in 1981,
at 5 percent of general revenue fund revenues. This fund has been maintained
at the 5 percent level since fiscal year 1996 but was depleted as recently
as fiscal year 1992. Nonappropriated funds in excess of the amount necessary
for a beginning carryover fund balance 2 and above the amount maintained in
the budget stabilization fund are considered surplus funds. Second, state
law requires that any additional surplus funds be deposited into the income
tax reduction fund created in 1996. In each fiscal year from 1996 through
2000, this fund has been used as a mechanism for providing a one- time
income tax reduction. Alternatively, during periods of declining revenues
the governor has the authority to restrict the expenditure of budgeted funds
in
2 A beginning carryover fund balance is defined as one half of 1 percent of
general revenue fund revenues.
order to achieve budget balance in the event that revenues are insufficient
to finance appropriations.
Budget Process In Ohio, the budget process begins in the summer prior to the
start of the next biennium, 3 when the governor's Office of Budget and
Management
(OBM) issues budget guidance on preparing budget requests to the state
agencies. Beginning in early August, budget requests are submitted by each
agency on a timeline according to the size and complexity of the agency's
budget. The smaller, less complex agencies submit their budget requests
first, and the largest agencies submit their requests in the fall. Agencies
are required to prepare a “core budget level” request for
funding that essentially maintains the base budget level. Supplemental
requests are required for funding above the core budget level for new
programs or expansion of services. In the budget request for the current
biennium, OBM limited the amount of supplemental requests to a 7 percent
increase from one fiscal year to the next for most agencies. In addition to
the agency budget request, which results in expenditure estimates, OBM and
the Legislative Budget Office (LBO) also develop revenue estimates based in
part on information from the governor's Council of Economic Advisors and the
Department of Taxation. Revenue estimates are updated in June before the
final budget is adopted.
The governor submits the proposed budget for the next biennium to the
legislature within 4 weeks of the organization of the General Assembly,
usually in late January or early February, in each odd- numbered year. When
there is a new governor, the date is extended to March 15. The governor's
executive budget document includes 6 years of budget information: 3 years of
actual expenditures, estimated expenditures for the current fiscal year, and
the proposed budget for the 2 years of the biennium. This budget document
does not include estimates of revenues and expenditures beyond the biennium.
Currently, there are five separate budget bills. Appropriations for most
state agencies are included in the main operating budget bill. In addition,
there are three budget bills for appropriations for state agencies with
separate funding sources, and there is a bill for the
3 For example, the budget process for the biennium for fiscal years 2002 and
2003 begins in the summer of calendar year 2000.
Department of Education. 4 Traditionally, budget bills are introduced in the
House and reviewed by the Finance and Appropriations Committee and its
subcommittees. The committee reports out a bill to the full House of
Representatives. The House passes a bill, which is then sent to the Senate
and reviewed by the Finance and Financial Institutions Committee. The bill
is redrafted and considered in full committee and is then submitted to the
full Senate for review. Usually, a conference committee, consisting of three
members from each chamber, resolves differences between the House and Senate
versions of the bill and prepares a report for approval by both chambers.
Approval by a majority in each house of the legislature is required to enact
a bill. In Ohio, the governor has the right to veto any item in an
appropriations bill, and the legislature can override a vetoed item with a
three- fifths majority affirmative vote of each house.
The capital budget process takes place in the second year of the biennium
and consists of a capital improvements bill, and a capital reappropriations
bill reappropriating any unspent capital funds from the previous biennium. 5
The capital budget is often the vehicle for updating the operating budget in
the off year by including expense and revenue adjustments in one of the
proposed capital bills. The operating budget can also be updated with a
separate corrective action bill.
The Controlling Board The Controlling Board is a joint legislative-
executive body with broad authority over state fiscal activities. The board
reviews and approves a
range of budgetary changes within a biennium, including (1) transfers of
appropriations between line items within the same agency and fund and
between years within the same line item, (2) increases in non- general
revenue fund appropriations, (3) providing of emergency resources to an
agency, (4) creating new funds and establishing new line items, (5)
releasing funds for capital construction, and (6) waiving the competitive
selection process for operating and capital contracts. The board does not
have the authority to transfer funds between agencies or to increase or
decrease the amount of general revenue fund appropriations.
4 Separate budget bills are prepared for the Bureau of Workers'
Compensation, the Industrial Commission, and the non- general revenue fund
portions of the budget for the Departments of Transportation and Public
Safety, and beginning in the current biennium, for the Department of
Education and other education- related agencies.
5 Ohio's constitution restricts appropriations to a 2- year period, which
results in the need to reappropriate unspent funds for projects that
continue past the biennium.
The board has delegated some transfer authority to OBM- the ability to
transfer appropriations between existing operating line item appropriations
within a state agency in amounts not to exceed a total of 10 percent of the
appropriation or $25,000, whichever is less- but more comprehensive transfer
authority remains with the Controlling Board. In addition to this ongoing
budgetary authority, the legislature can assign specific duties for
monitoring or reviewing agency activities to the Controlling Board. The Ohio
Revised Code requires that board action must carry out the legislative
intent of the General Assembly.
The board, originally created in 1917, is a seven- member body composed of
the director of the governor's budget office- or the director's designee-
who serves as the president of the board, the chair of the House Finance and
Appropriations Committee, and the chair of the Senate Finance and Financial
Institutions Committee; one majority member and one minority member of the
House appointed by the Speaker of the House; and one majority member and one
minority member of the Senate appointed by the Senate President. At least
four affirmative votes are required for board approval of an action. The
board generally meets on a biweekly basis. The executive branch, represented
by the board president, sets the agenda and chairs the meetings, and we were
told that all agenda items are reviewed in detail by OBM staff prior to
appearing on the agenda. The Controlling Board considers approximately 2,000
to 2, 500 items a year and generally approves most agenda items. We were
told that two common reasons for board action on the budget were (1) agency
requests to transfer funds within their budgets and (2) the appropriation of
additional funds- generally federal funds that have become available since
the budget was appropriated or fees generated by agencies. The board
approved increases in non- general revenue fund appropriations totaling
$647.5 million, or 1.8 percent of the adopted budget, in fiscal year 1999
and $534.5 million, or 1.4 percent of the adopted budget, in fiscal year
2000. The budgets for higher education and human services were among the
largest for which transfers within the budget were approved by the
Controlling Board in both of these fiscal years. The higher education
budgets also had the largest number of transfers in both of these years. We
were told, however, that more of the board's time is spent on reviewing
requests for exceptions to the competitive bidding process for goods and
services than on budget adjustments. Officials stated that the Controlling
Board was an effective mechanism for maintaining a level of legislative
approval over changes to the budget throughout the year. Without the board,
they said, the legislature would need to give more decision- making
authority over budget
adjustments to the executive branch or would need to pass more corrective
bills adjusting appropriations during the fiscal year.
Off- Year Budget Both executive and legislative branch representatives in
Ohio said that the
Process biennial budget process works well because there is a high level of
agreement and support for maintaining the biennial cycle between the
executive and the legislative leadership and within the legislature.
Although there are mechanisms for updating the budget in the second year,
the budget is not routinely updated, and adjustments to appropriations were
described as minor. Officials said that agencies are expected to manage
their budgets and, if necessary, to request transfers of funds within their
budgets from OBM in order to stay within available funding levels in the
second year. We were told that OBM closely monitors the budgets for every
agency and determines when adjustments are needed, but does not have a
formal process for agencies to request additional funding in the off year.
Off- year changes that are made to the operating budget generally include
technical adjustments and legal mandates, which recently have been
introduced to the legislature in the capital budget bill or the capital
reappropriations bill.
For fiscal year 2001, the second year of the current biennium, the governor
included changes to the operating budget in the Capital Appropriations Bill.
These proposals fell into the following categories: corrective items,
technical adjustments, other provisions, and new policy proposals. Of these
categories, corrective items mostly included transfers from one line item to
another within departmental budgets to adjust for changes in the estimated
need for funding for specific programs. Technical adjustments included
transfers of funds from one agency to another as the result of a merger of
state agencies and transfers of balances in inactive funds within an agency
to the general revenue fund. Other provisions included statutory changes as
a result of collective bargaining agreements and debt management
initiatives. New policy initiatives included additional funding for selected
programs in education and economic development. All of these categories of
changes amounted to a proposed increase of approximately $74.3 million, or
0.19 percent, in the operating budget, of which $51.1 million was the
increase in spending from the general revenue fund. When we asked officials
how this year's proposals compared to previous off- year proposals for the
second year of a biennium, we were told that there may have been more
proposals for policy initiatives than usual because the governor is newly
elected and just proposed his first biennial budget. We were also told that
the transfers of funds included as corrective
items and technical adjustments in the governor's proposal could most likely
have been approved by the Controlling Board, but that these items were
probably included in the capital bill for greater visibility within the
legislature.
Actual changes adopted by the legislature for fiscal year 2001 amount to an
increase of approximately $57.5 million, or 0. 14 percent of the operating
budget. This total represents the net effect of all budget adjustments and
interfund transfers. Of this total, $32. 1 million represents the net change
to the general revenue fund. Although small in comparison to the size of the
budget, these changes include funding for some education and economic
development policy initiatives.
The off- year capital budget process not only allows for adjustments to be
made to the operating budget but also provides funding for new capital
initiatives. As the off year of the biennium is followed by an election for
state legislators, one official noted that the capital budget serves an
important role in allowing legislators to provide funding for projects in
their districts without revising the operating budget. (See table 3 for an
overview of Ohio's budget process.)
Table 3: Ohio Biennial Budget Cycle Date Budget process
July Even- numbered year: OBM issues budget preparation instructions to
agencies.
AugustNovember
Even- numbered year: Agencies submit core budget level and supplemental
biennial budget requests to OBM. OBM reviews requests as they are received.
December OBM submits budget recommendations to governor. February 1 a Odd-
numbered year: Governor submits proposed biennial budget to
legislature.
Even- numbered year: Corrections and adjustments to biennial budget
appropriations may be included in proposed capital budget or corrective
bill. b
February- June Legislative appropriations committees review governor's
proposal, hold hearings, and report bills. Traditionally, budget bill is
introduced and passed in House first and then referred to Senate.
June Conference committee resolves differences between House and Senate
versions of bills and reports to full legislature.
By end of
Odd- numbered year: Legislature appropriates funds to agencies for the
legislative
biennium beginning on July 1. session
Even- numbered year: Legislature usually enacts adjustments to biennial
budget in capital budget bill or corrective bill.
July 1 Fiscal year begins. a In the odd- numbered year, the governor
transmits the budget to the legislature no later than 4 weeks after its
organization, usually by February 1. If the governor is newly elected, the
date is extended to March 15. b Since the mid- 1980s the capital budget has
been prepared in the even- numbered year of the
biennium, and the timing of the capital bill has been somewhat later than
the timing of the biennial budget in the odd- numbered year. In recent
years, the practice has been to include adjustments to the operating budget
in one of the capital bills. Alternatively, the operating budget can also be
updated with a separate corrective action bill.
Legislative Oversight Ohio has had a biennial budget process in place for
about a hundred years, and there is no mandate for increased legislative
oversight in the off year.
We were told that although there is more time available in the off year for
activities other than the budget, the legislature does not perform more
oversight through either the standing committees or the appropriations
committees. Overall, legislative oversight was characterized as minimal and
unstructured.
Ohio has some budgetary requirements for state agencies that could
facilitate oversight activities, and there are several formal structures in
place for performing legislative oversight. The movement toward program
budgeting includes goals for each agency and categorizes activities into
program series in the budget presentation. Within the General Assembly, the
Legislative Service Commission, a 14- member bipartisan legislative
commission created in 1953 to provide technical and research services to the
General Assembly, has staff available to perform studies on specific
programs. Special oversight committees, such as the Welfare Oversight
Council, have been developed to review and monitor state programs in
specific areas. Some of these committees have full- time dedicated staffs,
such as the Legislative Office of Education Oversight, which was created in
1989 to evaluate education programs. A review of administrative rules
performed by the Joint Committee for Agency Rule Review (JCARR) is another
means of legislative oversight. JCARR, created in 1978, is a 10- member
bipartisan committee with 5 members each from the House and the Senate and
is primarily responsible for reviewing proposed and adopted agency rules. 6
Some officials viewed the Controlling Board as an oversight mechanism,
mentioning the board's role in approving contracts and monitoring specific
agency activities. However, some officials also felt that the board could
play a greater oversight role. Although resources for performing oversight
exist, officials said that overall the legislature has not expressed
interest in increasing oversight activities and that most oversight occurs
through hearings on agency budgets during the appropriations process.
6 A rule is a formal written statement of administrative law established to
carry out certain policies or to administer certain programs that have been
statutorily assigned to that agency.
(935349) Lett er
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Contents Letter 3 Appendixes Appendix I: State Legislative and Budget Cycles
22
Appendix II: Arizona 23 Appendix III: Connecticut 30 Appendix IV: Ohio 38
Tables Table 1: Arizona Biennial Budget Cycle 27 Table 2: Connecticut
Biennial Budget Cycle 36
Table 3: Ohio Biennial Budget Cycle 45
Abbreviations
BSF Budget Stabilization Fund FAC Finance Advisory Committee GPRA Government
Performance and Results Act JCARR Joint Committee for Agency Rule Review
JLBC Joint Legislative Budget Committee LBO Legislative Budget Office OBM
Office of Budget and Management OPM Office of Policy and Management OSPB
Office of Strategic Planning and Budgeting PAR Program Authorization Review
PAYGO pay- as- you- go PRI Program Review and Investigations Committee SPAR
Strategic Program Area Review TANF Temporary Assistance for Needy Families
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Appendix I
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Appendix II
Appendix II Arizona
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Appendix II Arizona
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Appendix II Arizona
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Appendix II Arizona
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Appendix II Arizona
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Appendix II Arizona
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Appendix III
Appendix III Connecticut
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Appendix III Connecticut
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Appendix III Connecticut
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Appendix III Connecticut
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Appendix III Connecticut
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Appendix III Connecticut
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Appendix III Connecticut
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Appendix IV
Appendix IV Ohio
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Appendix IV Ohio
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Appendix IV Ohio
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Appendix IV Ohio
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Appendix IV Ohio
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Appendix IV Ohio
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Appendix IV Ohio
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Appendix IV Ohio
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United States General Accounting Office Washington, D. C. 20548- 0001
Official Business Penalty for Private Use $300
Address Correction Requested Bulk Rate
Postage & Fees Paid GAO Permit No. GI00
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