Political Science 102State and Local GovernmentBureaucracy and Budgeting

Public ManagementConstraints: Politics, opinionClients: Citizens, legislatures, executivesAccountability:To elected and appointed officialsPurpose: Serve public interest, common good

Private ManagementConstraints: Markets, resourcesClients:Customers Accountability:To customers, shareholdersPurpose:Make profits, grow organization

Budgeting in State and Local GovernmentBudget CycleActorsPervasive IncrementalismTypes of BudgetsReform

The Budget Cycle fiscal yearsnot calendar years 7/1 to 6/30

The Actors in Budgeting Executive drafts the budget, legislature gets to mark it up, review process follows; Interest groups, agencies also participateBudget is adoptedMust be approved by legislature and governorAgencies carry out their duties

Pervasive Incrementalism one of many tacticsAlways ask for moreSpend before end of fiscal yearCreative namingEx. Of calling sex ed Teaching Values of FamilyDelay by studyingUnneeded items to pad budgets

Types of Budgets line-itembudget for mgmt. & planning Not just spending whats allocatedEnsuring agencies comply with goalsperformance budgeting Ensuring efficiency and cutting wasteCapital budgetsBig expendituresMulti-year projectsOften involves bonds

Budget Reform balanced budgets ways to circumvent mutli-year capital budgets, "off-budget" spending, pension borrowing, rainy day funds

Bureaucracy is a Growth Industry10% of U.S. workers are employed byStates 3 Million employeesLocalities7 Million employees10 Million out of 100 Million in the Workforce

Hiring PrinciplesSpoils systemMerit systemFitness system

Why Spoils?IncentivePower to hire and fireReplacing, not removing, interest

Merit SystemCreated by 1883 Pendleton ActCuring the evils of party machinerySpoils/Merit controversy actually killed a presidentJames A. Garfield killed by a disgruntled office seeker

Components of Merit SystemNeutral competencyNo politics becoming involvedCategorizationSpecialization of jobsHierarchy of positionsHelps in writing the merit testsMerit system patronage?Governor appoints Civil Service Commission chairCentralized controlPay scales, raises, and duties are controlled in a single area

Representative bureaucracyWhy representative bureaucracy?Representative = responsive?active representation and passive representation. Passive representation is simply another term for descriptive representation, where it consists of the degree of congruence between the composition of a public bureaucracy and the society in which it exists (Hindera 1993). Active representation is another term for substantive representation, referencing the agency decisions that benefit the group of interest Where representative?ElitesStreet-level bureaucratsAffirmative actionUnions and collective bargainingState bureaucracies are strongly unionized in comparison to rest of workforce

Illegal PatronageTemporary appointmentsPerson stays if no replacementSpecific job descriptionsTailor the description so only preferred person fitsIgnoring described dutiesMoving people from one duty they are qualified for to the one you wantStacking testsIf no test exists, write it to conform to your candidateWait out the RegisterInterview people higher than your preferred, then pass them over until your person comes up

Changes in BureaucracyTotal Quality ManagementTQM is a management approach for an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to societyFocuses on consistencyBusiness abandoned this in late 1980sQuality processesDifferent from TQM, current modelBased more on customer feedback and efficiencyPrivatizationUtilities are the current controversy

Responsiveness:1)Objective formal, written responsibility for the bureaucrat 2)Subjective a personal moral feeling of obligation 3) Professional Dedication to personal skills and expert knowledge.

Arkansas BureaucracyState rates highly in all categoriesA Average overallHighly rated on financial and capital managementScores lowest on human resources

State Organizational Model

9th grade civics taught us that there are three separate branches of government: Executive Legislative Judicial Our Constitution states that one branch cannot perform the duties of any other one. This is called the separation of powers. Lets first review what each of the elected offices does . . . .

What are Arkansas agencies?Correction Economic Development Education Environmental Quality Finance and Administration Health Highway and Transportation Human Services Labor

Organization of Arkansas BureaucracyNine departmentsSome areas are funded mostly from federal governmentTransportationHealthSocial ServicesEconomic DevelopmentLabor and Industrial relations

Administrative StrategyAdministrators must maintain good relationsWith governorsAnd with legislatorsBut must isolate themselvesSo they dont get political flak

Administrative PowerInformationLegislators rely on bureaucracy for informationSelective or strategic distribution of info is wise for a bureaucratFiscal NotesBureaucrats must write up analysis of a proposed laws costsLegal vaguenessLegislature lacks specific knowledge, must defer to bureaucracy in implementation.

Arkansas Budget ProcessThe State Fiscal Year Begins on July 1 and Ends on June 30. A Biennial Period or Biennium is a two year period that usually begins July 1 of the odd-numbered year and ends June 30 of the next odd- numbered year.

Budget Calendar

The Preparation PhaseA Budget Request - Line Item Format

Sheet1

TitleActualBudgetedBaseTotal

Regular Salaries$200,000$352,000$361,856$486,856

No. Positions$12$16$16$22

Personal Svs Match$42,000$73,920$75,990$102,240

Operating Expenses$665,000$541,530$529,604$728,354

Conf Fee & Travel$58,776$60,000$60,000$78,000

Capital Outlay$123,241$101,0000.0$300,000

Prof. Fees & Services$82,150$71,550$71,550$171,550

Advertising0.00.00.0$300,000

Total$1,171,167$1,200,000$1,099,000$2,167,000

FUNDING

Fund Balances$2,100,000$1,365,833$689,833$689,833

General Revenue$400,000$474,000$474,000$474,000

Special Revenue$37,000$50,000$61,000$61,000

Federal Funds0.0

Total Funding$2,537,000$1,889,833$1,224,833$1,224,833

A Budget Request Change Level FormatReplace Old ComputersNew InspectorsTraining SeminarsOverseas AdvertisingCurrent Year Budget Plus PayPlan Less One Time Costs

Arkansas Budget ProcessYearlong processAgencies prepare their own proposed budgetsSubmits them to Governors OfficeGovernor Reviews and makes recommendationsSet Policy for Agency RequestsForecast State RevenueRecommend Budget For Next Biennium to ALC/JBCRecommend Added Revenues as Needed Governor makes decisionsIssues budget message to Assembly

Legislative Council / Joint Budget84 membersConsider Agency Requests & Governors Recommendation Recommend Budgets to General Assembly Recommend State Employee Salary Levels Have Bills Prepared for Introduction

Joint Budget CommitteeLegislature holds hearingsCommittees and subcommittees allowed to mark upConference to resolve interchamber differencesJBC:Consider ALC/JBC Recommendations Consider Governors Revisions and New Programs Consider Member-Sponsored Bills Recommend Fiscal Bills and Pay Levels to General Assembly Prepare Revenue Stabilization Amendment

Budget in the LedgeLegislators get caught spending inordinate amounts of time trying to save relatively trifling sums.Changing State Budgeting: S. Kenneth Howard, 1973

Budget Process

AppropriationsAn appropriation gives the agency the authority to spend money if and when it becomes available.

THE CONSTITUTIONAL REQUIREMENTSThe Authorization Phase

Constitutional Restrictions

2 Year Limit on Appropriations Single Subject General Appropriation Bill must "embrace nothing but appropriations for the ordinary expenses of the executive, legislative and judicial departments of the state & be passed first Appropriations must be in dollars and cents Appropriations (except for education, highways, and debt of the state) must be approved by 3/4 affirmative vote

AppropriationsOur State Constitution puts some very strict requirements on enacting the budget. There is a two year limit on appropriations. One legislature can't bind another. Every session makes its own budget. The appropriation bill must have only one subject. The courts have ruled that the word "subject" is very narrow. Therefore, we have an appropriation bill for every agency. This results in Arkansas leading the nation in the number of appropriation bills. Last session we had 1,496 bills appropriating money compared to 1-5 for most states. We must pass the bill for the expenses of the elected constitutional officers before any other appropriation bill is passed for the next biennium. We failed to do that in 1989 and had to have a special session to reenact every appropriation measure passed during the regular session. Appropriations must state a maximum amount and can't be open ended. Most appropriations require 3/4ths of the vote to pass.

Introduced Appropriation Bills

Types of Appropriation BillsRegular Biennial Appropriation 2-year period Effective July 1 Supplemental Appropriation Effective before July 1 & usually immediately Usually adds to an existing authority State Funds usually come from an Accumulated Surplus or recovered Fund Balances Construction State Funds usually from General Improvement Fund (Surplus & Interest Earnings) Reappropriations Allows the Agency to spend the balance of an appropriation provided by another General Assembly. Not new authority to spend : usually for old construction projects

The Budget Process

TOTAL STATE REVENUE 2006 FY General Revenue$ 5,180,059,838 Special Revenue 1,656,660,858 Cash Funds 3,489,121,218 Federal Funds 3,952,819,022 Trust and other Non Revenue 2,540,912,688 TOTAL STATE REVENUE$16,819,573,624

TOTAL STATE REVENUE 2006 $16.8 Billion General Revenue 31%Trust & Other Non Revenue 15%Federal 24%Cash 21%Special 10%

SPECIAL REVENUES - 2006$ 1,656.7 Million

The Budget Process

...since the practice of review and advice violates the separation of powers doctrine, [it] is unconstitutional. CHAFFIN v. ARK. GAME & FISH COMM'N, 296 Ark. 431 (1988)

CAUTION!!!

Review / AdviceCHAFFIN v. ARK. GAME & FISH COMM'N, 296 Ark. 431 (1988) 757 S.W.2d 950 The legislative practice of reserving the power of review and advice in an appropriated bill is the equivalent of approval or consent and the "advice" is tantamount to a legislative order on how to execute a contract; since the practice of review and advice violates the separation of powers doctrine, section 17 of Act 939 is unconstitutional. Some appropriation bills contain language which require approval of the Legislative Council or Joint Budget Committee for various types of appropriation and fund transfers. The language further states that if the requirement of approval is ruled unconstitutional by a court jurisdiction, then the section containing the language is void.

Review / Peer SubcommitteesThe Review Subcommittee looks at an average of 900 contracts per year. PEER (Performance Evaluation and Expenditure Review) reviews about 120 Misc Federal Grant Requests and 100 Interagency Contracts per year.

Contracts Methods of Finance Leases Budget Adjustments Misc. Federal Grants Interagency Contracts Legislative Council SubCommittees

Budget FocusUnder this system the agencies, the Governor and the Legislature spend most of their energy in justifying increases in the purchase of commodities, services or in payroll. The legislature and the DFA monitor the agencies, almost exclusively, on the basis of the money spent for those items compared to the amount that the Legislature appropriated.

GovernorFinal Bill Submitted to GovernorSignVeto