Why State Budgets are Broken

The state budget processes in the 50 states are broken. Governors, state legislators, journalists, and political pundits all know that the process is broken. Taxpayers are feeling the pinch and are starting to get organized through Tea Party and other rallies. Legislative credibility is at any all time low. Last year six states (Arizona; California; Connecticut; Mississippi; Ohio and Pennsylvania failed to meet their June 30 deadline to pass the state budgets.

Debating, writing and approving a state budget is the primary task legislators must accomplish because the budget drives all policy. Governors and state agencies can’t spend even one dollar without legislative approval. Conventional thinking says lawmakers take the existing budget, add to it an inflationary increase, add caseload increases, splice in new initiatives, and call it good for another legislative session. If revenue drops, the same conventional thinking allows for three budget balancing options: 1) raise taxes, 2) cut important services, or a combination of both.

When budgets are built in this manner, without deliberative efforts to develop core governing principles first, legislators become “enablers” for agencies and programs that likely have fundamental design flaws, or that may be providing services in direct conflict with lawmakers’ policy values. Even when agencies or programs “accidentally” are complying with what lawmakers would choose as their core governing principles, building budgets the conventional way assures overspending. It virtually guarantees an upward spending spiral, as individual bills are passed in committee without regard to whether or not they fit into the bigger picture.

The entire focus is on inputs. For example, how much money do we have; how much do we think we can raise taxes; what is the projected inflation; what are the projected caseload increases? There is little, if any attention, paid to outcomes or what is the actual return on the investment in the various agencies. Few questions are asked regarding agencies actually meeting their goals?

In many states few legislators are actually involved in the key decisions on the budget. At times state budgets may be written by 1 or 2 legislators and the other legislators may be asked to vote on the budget before they have had time to read or review it.

Questions to ask legislators or governors

1. Does you state have core functions of government? If so what are they.
2. Do the major agencies have mission statements?
3. Does the legislature hold hearings on the how the exisitng budget has met or not met the agencies’ mission and key outcomes.

Recommendations

For budgeting to change, state legislators must ask the following questions:

1. How much money does the state have? What is the revenue forecast for the current budget cycle and the forecast for the next budget cycle? these questions are rarely asked at the beginning of the budget process. Often key legislators working on the budget wait until the last minute to see if the revenue forecast has increased. In many of the legislative standing committees policy legislation is passed without considering the financial impact of the legislation. Then, in the closing days of the session the budget committee determines how much funding, if any, is available for the various policies that have been passed. We recommend the standing committees be given a budget and that they hold hearings on how the funds that were appropriated in the previous budget cycle were spent and what were the actual outcomes.
2. What does the state want to accomplish? What are the essential services state government must deliver to its citizens? We urge legislators to develop no more than 10 core functions of government. Developing a meaningful set of core governing principles requires time and courage.
3. How will the state measure its progress in accomplishment those goals?
   a. What will success look like?
   b. What measurable outcomes can be identified? We can’t stress enough how critical it is that a careful review be made of both the core functions and the indicators of success. They must be measurable
4. What is the most effective way to accomplish the state’s goals with the money available?
   a. If a service/program is a core function of government, what level of government should provide it?
   b. How can services be provided efficiently and effectively?
   c. How can market forces and competition be introduced into core functions, assuring costs are controlled and quality enhanced?

Answers to these questions would provide a logical place to begin a meaningful debate.