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Decision about how much of society’s resources we want to take from the private sector to use for problems of broader public interest
line item -- emphasize control pushes policy into background minimizes conflict
program budget -- emphasize policy what should government do requires more analysis
performance budget -- emphasize management productivity of specific tasks, not overall goals administrative outcomes
Federal: economic and political perspectives expenditure driven entitlements defense
State/Local: organizational and administrative perspectives revenue driven more unified executive control more issues concerning citizen input
Theory: a framework for accumulating knowledge
Normative, descriptive, positive normative -- what should be descriptive -- what is positive -- what will be (predictions)
V. O. Key 1940 question in search of normative theory:
“On what basis should it be decided to allocate X dollars to activity A instead of B”
Aaron Wildavsky
◦ normative theory impossible -- utopian
◦ descriptive theory: incrementalism how decisions are made (process or outcome?) how strategies selected main theory today but partially discredited
how much can revenue estimates be politicized before other means are found?
how much of the political can be treated technically without loss of political accountability?
how does the political or technical become more dominant at one stage or another or in various circumstances?
when does executive v legislative have upper hand?
does citizen participation in resource allocation increase support for government?
Traditional
focus on control centralized private exercise of admin
power line item format formulas minimal flexibility for
managers accountability for inputs
Contemporary
Focus on policy/performance
decentralized public sharing of
information program format priorities maximum flexibility for
managers accountability for
outcomes
Greater executive control than in Federal process
Budget balance requirement Focus on agency programs and policy One committee, one bill, one process in each
house Senate Budget and Fiscal Review Assembly Budget Appropriations committees no budget bill role
Trailer Bills Governor’s Budget sets agenda for budget
hearings LAO gives item by item analysis (not done by
CBO)
Governor Department of Finance (equivalent of
federal OMB) Executive agencies Senate and Assembly budget
committees/subcomm. Legislative Analyst’s Office (equivalent of
federal CBO) Timeline (about 12 months)
Initial preparation: July-August Agency budget development (BCPs): Sept - Dec Governor’s Budget Presented: January 10 LAO Analysis published: mid-February Budget subcommittee hearings: February - May May Revise Conference Committee/”Big Five”: June Constitutional Deadline for Legislature: June 15 Start of fiscal year: July 1
Assembly Education Resources Health and Human
Services State Administration Information
Technology / Transportation
Senate
Education
Resources
Health
General Government
Energy
Purpose: how do issues rise and fall on the agenda? how do agendas translate into policy? how can non-incremental change be explained?
Key feature: distinction between agendas (problems) and alternatives (policies) different processes different participants and roles Major challenge to linear models of policy
making!
Three streams or processes problems (agendas) policies (alternatives, solutions) politics
Two types of participants visible cluster (dominate agenda and political
streams) hidden cluster (dominate policy stream)
Window of Opportunity predictable, e.g. elections, budget process unpredictable, e.g. natural disaster
Three streams must converge Being on agenda is necessary but not
sufficient need solutions and ripe political conditions
Role of the policy specialists form communities and work on alternatives look for opportunities to match to problems
policy entrerpreneurs bring the solutions together with problems importance of framing
key concept: understanding budget problems as policy problems◦ not a question of economic efficiency but values◦ allows application of Kingdon
how do budget issues get on the agenda? how does budget policy get made? State Budget Offices play a key role
◦ gatekeepers◦ how do they make decisions? (micro model)
Control orientation◦ Compile agency requests◦ Don’t question policy orientation◦ Budget execution emphasis◦ Far removed from Governor’s policy staff
Policy orientation◦ Analyze agency proposals against Governor’s policy◦ Develop alternatives◦ Proactive on major policy/budget issues◦ Focus on agency mission and effectiveness◦ Closer involvement with Governor’s policy staff
Budget analysts are like Kingdon’s policy entrepreneurs◦ nexus of macro and micro budgeting
manage top down and bottom up information flow◦ bring together problems, solutions, politics◦ part of “hidden” cluster of actors (institutional
memory)◦ two major deadlines provide windows
Skills used◦ efficiency analysis: technical/economic◦ effectiveness analysis: political, social, legal
More constrained—less discretionary Less political executive influence More managerial/staff-driven
◦ city manager drives budget◦ mayor policy positions not very public
More expectation for direct citizen access and participation
More or less ideological?
What is rationality? The economics/politics debate
◦ do concepts of economic efficiency and rationality apply to politics?
◦ do they apply to budgeting?
Market Model Polis Model
unit of analysis: individual community
motivations: self-interest public interest and self-interest
chief conflict: self v self self v common
source of ideas: self-generated from outside
nature of collectiveactivity:
competition cooperation andcompetition
nature of information: accurate, complete ambiguous, interpretive
sources of change: material exchange ideas, persuasion,alliances
Rational-Comprehensive Method:
1. Clarify objective apart from policy choices
2. Ends-means analysis3. Good policy is the best
means to the ends4. Analysis is comprehensive
--accounts for all relevant impact
5. Information is conclusive and authoritative
6. Outcomes projected with certainty
Successive Limited Comparisons:
1. Objectives and choices are linked
2. Ends and means not distinct3. Good policy is one on which
agreement can be reached4. Analysis is always limited5. Information is ambiguous;
subject to interpretation/framing
6. Outcomes rationalized afterward
economic, not political based on analysis comprehensive review of options orderly decision rules allocated funds where they are most
needed by objective measures promote reallocation from lower to higher
priorities
Practical critiques:◦ comprehensive analysis is impossible◦ asks analysts to do what they cannot
Normative critiques◦ budgeting is about choosing among values◦ political process does a better job of solving value
problems◦ political strength of program = deserving of $$
support◦ incrementalism/bargaining is the most fair◦ process reflects political system – change system
not process◦ analysis must serve, not replace, politics
Proposed to replace line-item budgeting – why?
Performance budgeting◦ links inputs with outputs
Planned Programming Budgeting Systems◦ link program goals/strategic plans with program costs
Management by Objectives◦ links manager-driven objectives with budgets
Zero-Based Budgeting◦ justify all costs above specified level---------------------------------------------------
Do the outcomes justify the efforts?
rationality fixes have failed◦ technique cannot substitute for political judgment◦ role of Congress must be honored◦ implementation problems
process fixes have failed◦ procedures cannot substitute for political judgment◦ always a circumvention strategy◦ procedures cannot force unwanted decisions◦ creativity and game playing
Other foils:◦ top-down, centralized process open to interest
groups/closed to citizens◦ anti-tax sentiment◦ divided party government
Solution: political leadership confront controversy promote vision and values promote citizenship and sense of fairness define the public interest other characteristics of effective political
leadership? Would a greater sense of fairness of tax and
spending policies help? disconnection between who pays and who benefits should there be a closer connection?
Does the state face the same pressures toward deficits?
Do process or rationality “fixes” have a better chance of success at the state level?
Current deficit what’s the constituency for budget balance? what strategies (gimmicks) are being used? real alternatives – who is proposing them?
Proposed reforms ZBB Commission on Government Waste and Inefficiency
Are politics and analysis antithetical? How can analysis serve, rather than replace
politics? What should analysis try to accomplish? If analysis is rejected by decision makers, is it
useless? What should budget analysts try to
accomplish? Would unlimited analysis achieve rationality?
Balanced budget requirement More intense efforts to hide deficits Fewer macroeconomic issues to consider Greater influence of environment on
balance/deficit Deficits don’t (usually) accumulate--
problems more tractable Temporary, not structural deficits -- more
fixes available
The problem: getting support for increasing revenues is much harder than getting support for spending proposals
1. Public officials must go about getting support very carefully
2. “anti-revenue” politics: politics of protection from taxation, tax reductions, exceptions
3. Attention to protecting individuals, interest groups, regions from taxation leaders to piecemeal, complicated, inconsistent, inequitable structures => pressures for reform
Confront issues of fairness, public good, options
Accountability for use of funds Timing – e.g. crisis Earmark revenues
example: California Lottery Temporary increases Tax politically weak/outsiders Gimmicks (smoke and mirrors)
Equity◦ similar situations treated similarly◦ differential burdens fair
Administrative feasibility◦ efficient, uniform◦ high degree of voluntary compliance
Appropriateness ◦ sufficient; stable; predictable
Political feasibility (acceptance) Accountability/Visibility
◦ payer understands charges
Logic: capacity to pay as measured by earnings
Importance: over half of State General Fund
Policy issues◦ tax rates v tax base (deductions, exclusions,
credits)◦ simplification (relates to acceptance)◦ reliance on volatile source
Logic: capacity to pay as measured by consumer spending
Importance: provides about 1/3 of state and city revenues
Policy issues: Role in local finance (regional growth) Exemptions of household purchases Tax expenditure programs Include services in addition to goods –
erosion of base Internet sales
fairness and revenue issues
Logic: capacity to pay as measured by property holding
Importance: about 30% of local revenues
Policy Issues public opposition – ideological reasons equity allocations by state among local governments assessment methodology (subjectivity leads to
public opposition) importance to school finance (other states)
Purposes Promote certain economic behavior
e.g. research and development Prevent harmful activity
e.g. tax benefits for alternative fuel Tax relief for certain segments of society
e.g. low-income tax credits Facilitate tax administration
e.g.conform to Fed taxCriteria Efficient accomplishment of policy goal Subject to review and periodic reporting
Similarities to budgeted expenditures aimed at accomplishing public policy objectives cost to the taxpayer subject to interest group pressure pork for constituents
Differences from budgeted expenditures not directly measurable--must estimate (indirect
effects) subject to far less analysis less visible; beneficiaries harder to discern more resistant to cuts -- become entitlements
Board of Supervisors used to set a countywide property tax rate to fund countywide services
Counties had a greater share of the costs of human services programs
VLF was a much less significant revenue source
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Board of Supervisors had discretion over property tax rate & property tax revenue
There was a political balance between taxing and spending.
An elected official could gain political credit for keeping tax rates down
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Property tax rate reduce to 1% Base growth capped at 2% System forced to use growth to maintain
base spending Subsequent Ballot Initiatives:
◦ Shifted of property taxes from schools to local government
◦ Had the State of California assume greater share of human services
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The state’s support of local government was withdrawn in the early 1990s
Realignment -- share of sales tax replace shares of support for human service programs
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Funding mandates◦ County shares of state & federal programs
Honoring contracts◦ County workforce◦ Debt
Political priorities◦ Some are more equal than others
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The Budget Cycle
Revenue Growth Caseloads
Requirement◦ Appropriations◦ Reserve
contributions
Financing◦ Fund Balance◦ Revenues◦ Reserve releases
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Net cost of programs is determined & compared to general purpose financing
Net cost is equal to program expenditures less program revenues
General purpose financing is not linked to specific programs or groups of programs
No link between program net cost & availability of general purpose financing
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baseline cost/workload data (which base year to choose?) justify changes from base (e.g. quantify workload increase) comparisons (relevant) formulas and standards (appropriate and inappropriate
uses) “fair share” research on cause and effect best practices pilot (where research may be lacking or inconclusive) fit under budget office guidelines, strategic plan, etc. propose accountability measures check to avoid “the big mistake”
Frames request in terms of program priorities/strategic plan
Provides baseline data for a few years, for context Clearly lays out different parts of request Deals with each part in turn (and they add up!) Provides quantitative justification for dollar
amounts Makes logical arguments Reflects research – not the easy way out Doesn’t try to fool the analyst Honest about current resource availability Addresses issues of priority within the department Acknowledges recent history of budgeting in the
unit Addresses one-time v on-going needs openly Includes objectives, expected results, and
performance measures