ALMOST EVERYTHING YOU ALWAYS WANTED TO KNOW

ABOUT BUDGETS, BUT WERE AFRAID TO ASK

Presented by: Lori Albin, DirectorFiscal Policy CenterNational Juvenile Justice

Network

Leads and supports a movement of state and local juvenile justice coalitions and organizations to secure state and federal laws, policies and practices that are fair, equitable and developmentally appropriate for all children, youth and families involved in, or at risk of becoming involved in, the justice system.

The Fiscal Policy Center is supported by generous grants from the Public Welfare Foundation, Tow Foundation and John D. and Catherine T. MacArthur Foundation.

THE BUDGET

Why do we care?

The Budget is about making choices

WHAT GOES INTO A BUDGET Projections

Revenue projections

Expenditure projections

Five parts: Operating budget Capital budget Tax expenditure budgets Forecasting Adjustments

BUDGETING IN TIMES OF FISCAL STRAIN

Projections problematic Shortfall in revenues Increase in demand for some services

Government must make adjustments Increased revenues (i.e., taxes) and Cut spending

Budget debate moves from marginal changes vis a vis prior budget to in-depth examination of whether programs (spending) should be continued

THE PLAYERS

The Chief Executive The Executive Budget Office

Develops and defines the budget process Presents a plan that considers program priorities

The Legislature Budget Committees Leadership

Executive and Legislative Budget Staffs Provide Technical Assistance during process Often draft fiscal notes

FUNDING STATE SERVICES

FUNDING STATE SERVICESGenerally, numerous sources

Federal Funding Debt Financing Lotteries/GamingFees/LicensingIncome TaxesAd Valorum Taxes

Federal Funds27%

Income Taxes19%

Other Special10%

Higher Ed11%

Ad Valorem19%

Busi-ness and

other3%

Lottery

2%

Trans-fers

3%Other6%

State RevenuesState of Maryland FY 2012

Legis, Jud., Legal2%

Health Care28%

Education20%

Human Resources8%

Pub. Safet

y5%

Transpor-tatio

n10%

Other6%

Pub. Debt3%

Higher Ed16%

Nat. Res.2%

State SpendingState of Maryland FY 2012

Higher Ed14%

Transporta-tion10%

Oper-ations

6%DSHS31%

Other8%

Public Schools24%

Nat Resources3%

Special App4%

Washington State 2009-11(total funds)

Med Assist43%

Long-term care16%

ESA12%

MH8%

DDA9%

Child & Fam6%

Juv Rehab1% Other

4%

Washington State DSHS

OPERATING BUDGETS

OPERATING BUDGETS

The portion of the budget that addresses program activities and services authorized by the state’s legislature and governor.

The construction and renovation of buildings and the purchase of major equipment is not included in the operating budget, but is instead addressed in the capital budget.

OVERALL PROCESS1. Executive

Preparation –Executive agency reviews,

prepares and presents budget to Governor and

Governor presents budget to General

Assembly

2. Legislative Consideration –debate and

approval

3. Budget Execution –

Agencies spend their allotted

money to support public structures

4. Audit and Evaluation –

Examination of agency records,

Ensures legal compliance

Prior FY Budget +Audit/Evaluation

Governor + Executive Budget Dept.

Agency

Governor + Executive Budget Dept.

Internal Hearings

Published(made public and sent to legislature)

PLANNING PROCESS

LEGISLATIVE PROCESSPublic

Release of Budget

Legis. Considers Budget

Comm. Hearings

Votes-Reconcilia

tion

Sent to Gov for Signature;

Veto

FINDING THE NUMBERS(MORE TO COME IN FUTURE TRAININGS)

Budget Bill is Published (enrolled) Reconciliation Bill is Published (enrolled) Budget by agency is published (Budget

Books) Agency Publications Grant proposals C/B studies

Look at related issues – drug courts Public Information Act requests

FUNDAMENTALS OF BUDGETING

THE WORK OF GOVERNMENT The work of government can be depicted as

a system of: (1) obtaining resources (or inputs); (2) putting those resources to work (or

processing them) so that; (3) a service (or output) is provided, and, as a

consequence; (4) a desired result (or impact) is produced for

the people of the jurisdiction.

input process output impact

BUDGET FORMATS

Different methods of looking at the work of governmentLine-item budgetPerformance budgetProgram budget

Most states use a mixture of the above

Why?

I want to hire more probation officers. input

inputBecause we need to lower caseloads.process

Why?”

So that we can increase public safety.output

input process output impact

LINE-ITEM BUDGETING

PROGRAM BUDGETING Looks at spending proposals in terms of

services the programs are intended to provide

Program (and sub-program) refer to Provides information on what is produced Budget is focused on: What does government want accomplished –

Lower recidivism rate

impact

output

process

input

output

impact

impact

output

process

input

How do we reduce recidivism by 10%?

By implementing realignment.

What is involved in realignment?

What is the monetary effect of realignment? input

process

output

impact

PERFORMANCE BUDGETING Allocates money to various activities or

programs Describes the work output that the

organization will produce with this money

Advantage: Shows activities of government and Service levels of the activities

PERFORMANCE BASED BUDGET EXAMPLES

PERFORMANCE/PROGRAM BUDGETS(AND A LITTLE LINE-ITEM THROWN IN)

Most states use a combination of the presented formats

Here are some examples: Oregon Texas

Check: Uncodified language Riders Reconciliation Bill (BRFA) Conference Committee Report

PROGRAM PORTION

PERFORMANCE PORTION

RIDER

ZERO-BASED BUDGETING Process (or tool for creating budgets) The key characteristics of zero-based

budgeting process are: It begins at zero resources. It forces the ranking of organizational

purposes and programs. It requires a clear focus on the priorities of

and alternatives to the entity’s operations. Analyzes the essence of a program, agency,

department to determine its value and worth to residents.

Limited use

CAPITAL BUDGETS

DEFINITIONS

By statute For state governments, the span of capital

projects typically includes: state buildings, special use state facilities such a prisons and mental hospitals, life safety, modifications to conform with the Americans with Disabilities Act (ADA), public infrastructure such as water systems and wastewater treatment, and other basic requirements.

In some jurisdictions, capital items also include major items of equipment, technology systems, and special use items such as aircraft.

PERFORMING FINANCIAL ANALYSIS OF CAPITAL PROJECTS

Needs analysis is often/sometimes required for certain capital projects.

In some jurisdictions, there is a regular or prescribed cost benefit analysis model that is followed in evaluating capital projects.

When the final recommendations are made, the strength of the needs analysis, the financial analysis, and the ability to document that analysis will allow it to stand up to scrutiny from policy makers and staff in both the executive and legislative branches.

CAPITAL BUDGET EXCERPT

POST BUDGET PROCESS

Capital Budget Signed

Budget Board

Agency Requests

Public Hearing

Decision

FINANCING OPTIONS Gift or GrantPay cash or borrowPrivatize Project (followed by

lease/purchase)Still uses RFP/IFB system

ADDITIONAL RESOURCES

www.njjn.org http://www.vera.org http://www.nasbo.org http://www.pewcenteronthestates.org http://www.naco.org http://www.ncsl.org http://www.gfoa.org http://www.cbpp.org http://www.wsipp.wa.gov/rptfiles/costbenefit.pdf http://www.usgovernmentspending.com http://www.census.gov/govs/estimate/

CONTACT INFORMATION Lori Albin

Director, Fiscal Policy Center National Juvenile Justice Network 1710 Rhode Island NW 10th Floor Washington, DC 20036 202-467-0864 ext. 126 albin@juvjustice.org