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Statehouse
Insider
The term “state budget” conjures many impressions –
some positive, some not so positive – often depending upon
one’s degree of knowledge about the process. The state budget
is formulated in a way totally different from your company’s
or, certainly, your family’s budget. That is, it is deliberated
in a political environment – with many competing interests
fighting over pieces of a pie of a particular size. But even that
statement may be somewhat misleading. The fact is that lawmakers
and state officials don’t know exactly how big or small the
pie actually is until the end of the year when expenditures have
already been made. By then, according to the state constitution,
the overall budget must be balanced or else more extreme measures
must be taken.
This year, it’s hard to avoid seeing television news accounts
or reading newspaper stories about the extent to which new funding
levels for primary and secondary schools may limit funding for other
state agencies or programs. To those unfamiliar with the budget
process, these explanations may be unsatisfactory because they are
inundated with confusing numerical data and arcane terminology.
Consequently, many of our members don’t understand how the
process is initiated or driven and when these forces emerge from
behind the scenes.
The fact is that the process of putting together the state budget
begins a year in advance of the date it becomes effective. Around
July 1 of the even-numbered years, the director of the Office of
Budget & Management (OBM) sends a “budget guidance letter”
to all agencies funded in whole or part by the state. The letter
outlines some of the governor’s intended priorities or campaign
commitments, certain parameters or limitations on agency funding
requests, and procedures for appealing OBM’s evaluation of
those requests. Hearings conducted by OBM with representatives of
requesting agencies begin in early September and often continue
through December. During this time, OBM is beginning to shape the
governor’s budget proposal with input from the governor himself,
as well as his policy/legislative staff and cabinet directors.
The question arises, though, how do budget officials know the amount
of money with which they have to work? The easy answer is that they
don’t really know but, absent unusual circumstances, they have
a pretty good idea. In late November of the even-numbered years,
the governor’s Council of Economic Advisors meets in Columbus
to examine key economic indicators for the next two-year budget
period.
The council is comprised of volunteer private sector economists
and Federal Reserve Board members knowledgeable about the state’s
economy. They analyze forecasts of gross state product, inflation,
auto sales and employment growth, for example. In addition, information
regarding the growth potential of industries crucial to the state’s
economy is presented. They also study econometric reports that suggest
the probability that particular economic assumptions about inflation,
personal income growth, unemployment, etc., will occur. Finally,
OBM takes all the information gathered and does a formal revenue
forecast based on these refined assumptions which is incorporated
into the governor’s budget proposal submitted to the legislature.
Usually by the end of January, the governor’s budget has been
submitted to the House of Representatives. This is where the legislature
begins to leave its imprint on both the education and general operating
budgets. Agency and public testimony on every department’s
proposed budget, helps to identify potential problems that must
be corrected. The chairmen of the respective House and Senate Finance
Committees wield significant influence in molding the budget bills,
both in terms of advancing legislative priorities that may differ
from or enhance those of the governor, and deciding on amendments
advocated by lobbyists, agencies, local government representatives
and even other legislators.
It is during the amendment process where political interests and
substantive policy differences most directly clash for all to see.
Regardless of whether they are proposed by a member of the majority
or minority party, some amendments are clearly intended to embarrass
the other side. In other words, they are blatantly political and
are tabled or outright rejected in committee vote often along partisan
lines. While this kind of political gamesmanship does happen, as
one former legislator has said, “You can find many ways to
restrain the zealots – on either side of the aisle.”
More often, amendments are offered proposing quantum changes in
a certain program or agency’s operations. These are tougher
calls because they often involve policy judgments that aren’t
necessarily borne out by simple cost-benefit analyses. Unfortunately,
sometimes the biggest winner is the status quo, either because the
cost of change is perceived as too high, the benefits are not immediately
apparent, or for a host of other reasons.
However in the end, to finally enact this behemoth called the state
budget, it takes 50 votes in the House and 17 votes in the Senate.
Nearly every legislator has at least one if not more pet issues
he/she wants addressed in the budget bill.
Therefore, legislative leaders at the end of the day must find consensus
among their colleagues and be willing to compromise, at the right
time. Even then, the governor still has his line-item veto authority,
which he is often strongly encouraged to use by the same interests
who were defeated at each step of the process. Now you know why
the administration and General Assembly is glad this process happens
only every other year.
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