The Ups and Downs of State Budget Process Reform: Experience of Three Decades

From zero-base budgeting to the Government Performance and Results Act, state budgeting systems have been synonymous with budgeting reform for over 30 years. This article examines the trends, both long-term and short-term, which have been identified through analysis of state budgeting office practices. Particular emphasis has been placed on understanding the changes in performance measurement over the period of 1970 to 2000. The findings reveal trends such as changes in the makeup of budget office personnel, a lack of budget offices in moving toward cost accounting, and trends in budget preparation and budget documents. Some budget reforms seem to have plateaued, beginning in the mid-1990s, while other reforms have exhibited "backsliding." It is clear that the states are not all marching in unison in reforming their budget systems. As with earlier phases of this study, the 2000 data raise many questions that will be explored in future research.     

The Use of Executive Guidance in State Budget Preparation

The method by which a state budget is developed is critical to the policy-making process. A longitudinal study of states finds an increasing use of budget guidance techniques that control how agencies may propose policy changes and request funds to support those changes. The article examines whether the use of budget guidance is associated with several factors, including regions of the United States, state socio-economic characteristics, state government characteristics, various aspects of state budgeting (such as the use of policy analysis by the executive), and the educational characteristics of the professional staffs in state budget offices.     

Educational Characteristics of Budget Office Personnel and State Budgetary Processes

Although the importance of budget office personnel to the performance of state budget systems seems to be self-evident, few studies have been conducted of this important subject. Using data from state budget office surveys, this study reviews changes in the educational characteristics of budget office staff between 1970 and 1990. Educational characteristics are examined as possible predictors of how budget systems operate. Topics of concern are the use of program information, the use of program analysis, and the exercise of accounting control. Consideration is given to the implications of current trends for future personnel requirements of budget offices.     

Ethics and State Budgeting

Concern is increasing for ethics in government. Budget managers have a limited set of ethical concerns which are being met through a combination of formal codes at the state level and informal understandings at the budget office level. But a framework for ethics in budgeting would require a consensus on important ethical values and a reflection of these values in budget actions and decisions. This evolution might take place through a national code to be adapted by individual states.     

The Governor as Innovator in the Federal System

Until recent decades, governors seeking to provide innovativeleadership often did so despite being handicapped by inadequateinstitutional powers, leaving them to their own personal skills.Recent reforms have now provided many governors with greaterinstitutional powers, including more tenure potential, enhancementof the governor's office, a stronger budget capacity, and therise of policy and planning offices located in or close to thegovernor's office. Most important, governors are more aggressivein seeking answers to policy issues both within their own statesand in collaboration with other governors. The National GovernorsAssociation has been upgraded to assist governors in dealingwith the federal government and with state problems. RecentNGA efforts in the areas of education and economic developmentmay presage an even more significant change as governors addressmajor issues jointly.     

Public choice theory and petroleum policies in Canada, Britain and Norway

Abstract. It is assumed that the development of an economically promising resource such as petroleum would be amenable to analysis from an economic viewpoint, and that government initiatives in this area might reveal the essential economic interests of the state. If governments are assumed to have similar economic and political objectives (i.e., to attain the greatest revenues possible from the exploitation of a depleting natural resource and to maintain public office), then it is to be expected that the petroleum policy outputs in various states would likewise be similar. Such differences as do exist should be amenable to explanation by examining the differences in the political constraints and economic situations of the states in question. The study models petroleum policy in four areas: state participation, pricing, depletion (including exploration and production policies), and fiscal arrangements, based on assumptions central to public choice theory. A comparison of policy outputs in the three case states illustrates the usefulness of the public choice approach to comparative policy analysis.     

Helping Friends or Influencing Foes: Electoral and Policy Effects of Campaign Finance Contributions

Campaign finance contributions may influence policy by affecting elections or influencing the choices of politicians once in office. To study the trade‐offs between these two paths to influence, we use a game in which contributions may affect electoral outcomes and signal policy‐relevant information to politicians. In the model, a campaign donor and two politicians each possess private information correlated with a policy‐relevant state of the world. The donor may allocate his or her budget to either an ally candidate who has relatively similar preferences or a moderate candidate whose preferences are relatively divergent from the donor's preferred policy. Contributions that increase the likelihood of the moderate being elected can signal good news about the donor's preferred policy and influence the moderate's policy choice. However, when the electoral effect of contributions is too small to demand sufficiently high costs to deter imitation by groups with negative information, this informational effect breaks down.     

The Impact of State Rainy Day Funds in Easing State Fiscal Crises During the 1990–1991 Recession

This article examines the degree to which rainy day funds eased the fiscal stress experienced by states during the 1990–1991 recession. In the first section, a state fiscal policy of neutrality over the business cycle is used as a benchmark for evaluating the use of budget stabilization funds. The next section looks at data from the last three recessions to see how recessions have affected the taxes and expenditures of states. A measure of degree of fiscal stress experienced by each state during the 1990–1991 recession is then calculated. These results are used to empirically investigate the impact of explicit state rainy day funds in easing state fiscal stress. Next, the article examines whether states that had rainy day funds in 1989 were more likely to have less fiscal stress, and whether the specific deposit and withdrawal provisions of these funds made a difference.     

U.S. State Budget Directors: Characteristics, Experience, and Attitudes

Much literature exists on state government budgeting, but until now, none existed on state budget directors. This article reports on a survey of these individuals. Their ages, genders, race, education, and work experience are reported. Their work week is discussed in terms of number of hours worked and interactions with their staff, the governor, and the legislature. Attitudes about the job and about their personal lives as related to their jobs are discussed. Their plans for when they leave office are considered. The characteristics and attitudes of the directors are compared with data about their respective states in search of possible linkages.     

Tax Expenditure Budgets, Budget Policy, and Tax Policy: Confusion in the States

A tax expenditure budget should contribute to efficient and effective public decisions by quantifying the division in the tax structure between provisions that represent revenue policy (distribute the cost of government according to the legislated tax base) and parts that represent budget policy (substitute for direct spending). For this transparency to have the desired impact, however, the tax expenditure budget process and the direct expenditure process must be properly integrated and the tax expenditure budget must make an accurate division between the parts of the tax structure. A review of the 33 states with tax expenditure systems shows many weaknesses in application of the concept and poor linkage to the direct spending budget system. Their most significant flaw is in dividing the tax structure into normal and preference elements; states need greater attention to defining their basic tax structure if they are to have a meaningful tax expenditure budget.     

The Variety of State Capital Budgets: A Survey

In 1986 the staff of the U.S. Office of Management and Budget reviewed issues concerning the possible development of a federal capital budget. As part of this study, a survey of all 50 states was conducted concerning state capital budgets. This paper summarizes the results of the survey. According to the survey responses, 42 states have capital budgets. Of these 42, 37 generally borrow to finance some public capital and 5 generally do not. Of the 8 states that said they do not have a capital budget, 4 generally borrow to finance some public capital and 4 generally do not. The survey also found that the form of a governor's capital budget, the way legislatures enact capital spending, the coverage of the capital budget, and the method of financing capital vary widely among states, making it virtually impossible to define a state capital budget in a precise way. Large amounts of state capital spending, especially for transportation, are generally not included in state capital budgets.     

Budgeting for Fiscal Stability over the Business Cycle: A Countercyclical Fiscal Policy and the Multiyear Perspective on Budgeting

This essay is a theoretical exploration of a new budgetary system to cope with fiscal uncertainty and instability. ¹ It examines policies requiring positive year-end balances and infers that annual budget cycles lead to a mismatch between the budget cycle and the continuity of public service provision. The author considers a multiyear perspective on budgeting as a potential solution, with countercyclical fiscal reserves to help ensure stability during fluctuating economic conditions. By adopting budget stabilization funds and keeping sufficient reserves, states can better maintain trend-level public services during recessions. Panel data analysis provides empirical evidence that such funds helped stabilize state general expenditures during downturns. The adoption of countercyclical fiscal policy and budget stabilization funds is a step toward a longer-term perspective on budgeting, thus promoting fiscal stability over the economic cycle.     

A User's Guide to State Revenue Forecasting

One of the most difficult tasks in preparing a state budget is forecasting available revenues. An overly optimistic forecast may subsequently require unpopular budget cuts, tax increases, or both. A pessimistic forecast may trigger a political controversy over the size of the budget surplus, or may encourage additional spending that cannot be sustained in the future. Forecasters have always informally shared their experience with each other. Only in recent years, however have scholars begun to document those experiences.
A forecast user is an elected official, program manager, reporter or private citizen involved in the budget process who uses a forecast prepared by someone else as a basis for making or influencing policy decisions about state taxes and spending levels. __ While the objectives of these forecast users may vary depending on their role in the budget process, they all share one need in common: a sound forecast which provides them with the information they need to participate in the budget process. The first part of this article briefly reviews the status of revenue forecasting in the states. The second part reviews five specific forecasting issues. The third section, discusses limits of revenue forecasting. The concluding section is a summary and checklist of good revenue forecasting practices.     

Prominent Role Models: High‐Profile Female Politicians and the Emergence of Women as Candidates for Public Office

Can prominent female politicians inspire other women to enter politics? A woman occupying a high‐profile office directly impacts women's substantive representation through her policy actions. Here, we consider whether these female leaders also facilitate a mobilization effect by motivating other women to run for office. We posit that prominent women in politics serve as role models for other women interested in political careers, causing an increase in female candidates. We test this theory with data from the American states, which exhibit considerable variation in the sex of state legislative candidates and the high‐profile offices of governor and U.S. senator. Using a weighting method and data spanning 1978–2012, we demonstrate that high‐profile women exert substantively large positive effects on female candidates. We conclude that women in major offices are crucial for women's representation. Beyond their direct policy impact, they amplify women's political voice by motivating more women to enter politics.     

State budget periodicity: An analysis of the determinants and the effect on state spending

Much of the public budgeting literature focuses on the institutional rules of budgeting and how those rules affect process and outcomes. This study focuses on a particularly rudimentary rule of budgeting: the length of the budget period. State budgets are dictated (constitutionally or statutorily) to recur over one-or two-year intervals. Statistical analysis of the determinants of state budget periodicity shows that the more states spend, ceteris paribus, the more likely they are to budget annually. I hypothesize that budget periodicity has the opposite effect on spending: Biennial budget states spend more, ceteris paribus, than annual budget states spend. Ordinary least squares analysis does not support the hypothesis, but with instrumental variable methods, biennial budgeting exhibits a positive and statistically significant effect on state spending.     

State Attorneys General, Entrepreneurship, and Consumer Protection in the New Federalism

Although many scholars have acknowledged the important roleof states in regulatory enforcement, few have studied the decisionsof the state attorneys general to pursue particular multi-statelitigation actions. State attorneys general act as politicalentrepreneurs because they aggressively seek out market failuresin society to justify stronger regulation. Their motivationto serve the public comes from the fact that they are electedin 43 states and the office is often used as a springboard intohigher political office. A probit model analyzing the decisionto join seven high-profile multi-state enforcement actions thatlook place between 1996 and 1998 reveals that state citizenideology and the institutional structure of the office havethe strongest effects on the decision to join a case.     

Disentangling the Value of a Ministry: Party Leaders’ Evaluations of German State Ministries

While the role played by ministries in the process of coalition government has been investigated from multiple angles, there is a clear lack of knowledge about which specific ministry features party leaders actually value as they assess different government posts. This paper aims at discovering whether, next to office considerations, the policy influence resting with a ministry does affect its value. A new survey of party leaders in the German states enables us to estimate the relative importance of specific office (e.g. public standing) and policy considerations (e.g. influence via legislation) for ministries’ values as well as to directly investigate differences between parties. The results show that both office and policy considerations matter for ministry evaluation generally, but also that different aspects have different weights. Furthermore, while all parties value the policy influence of a ministry, there is variation as to which type of policy influence (cross-sectional vs. within-jurisdictional) parties emphasise.     

A Race to the Bottom? Exploring County Spending Shortfalls under Welfare Reform in North Carolina

North Carolina's experiment with local control of Temporary Assistance to Needy Families programs provides a unique example of the budget implications of state to local government policy devolution. County‐level expenditure data indicate that after state to local government devolution, only 45 of 100 counties met welfare maintenance of effort (MOE) budget requirements. Several important factors, including control over program eligibility and benefit levels, were significantly associated with MOE spending variation. Counties given more flexibility spent dramatically less than others. Many failed to meet MOE requirements without penalty, year after year. These issues raise serious questions about decentralization from both the budget and policy perspectives.     

THE FINANCIAL MANAGEMENT STRATEGY OF THE VICTORIAN COALITION GOVERNMENT

Abstract: This article reviews the budget sector financial management strategy of the Victorian Coalition government in the crucial period from its election in October 1992 up to the 1993–94 budget. The twin goals set by the Coalition were the elimination of the current account deficit, and the reduction of debt levels. Given infrastructure pressures, the debt reduction goal will be a difficult one to achieve. More precisely, it will be a difficult one to achieve without relying upon instruments such as assets sales, which the Coalition has viewed as artificial debt reduction techniques. The capital expenditure plans embodied in the 1993–94 state budget were not consistent with the debt reduction plans specified only months earlier by the Coalition. Victoria's debt levels are quite moderate even by OECD standards. What makes debt levels a real issue for the state is the narrowness of the tax bases of the Australian states, and the fact that Victoria is taxing at something like its maximum levels (at least, without coordinated multi-state tax increases). It is argued that, if the states could be confident that their revenue positions would hold firm (concretely, that revenue and grants as a proportion of GSP would remain constant), the appropriate debt policy goal for Victoria would be stabilisation — rather than reduction — of its debt/GSP ratio. However, the foreshadowed trend reduction of real commonwealth grants, as part of the so-called national savings campaign, makes it appropriate for Victoria — given the circumstances in which it finds itself — to target the reduction of debt/GSP levels.     

Performance Measurement in State Budgeting: Advancement and Backsliding from 1990 to 1995

Performance measurement has been one of the dominant themes of budget reform in the 1990s and has been prevalent in the mainstream of budgeting since the 1950s. Given the attention that performance measurement has had nationally, states might be expected to have made major strides in this arena in recent years. The article considers the current status of performance measurement practices, and identifies both advancement and backsliding made by states between 1990 and 1995. The discussion is based on data obtained from surveys of state budget offices in those two years. Indexes of performance measurement were constructed, and these became the bases of regression analyses using independent variables pertaining to state characteristics. Generally, these analyses were unsuccessful in explaining the variations among the states. The findings underscore the diversity among the states in their budgetary practices and the fact that budget reform, in the sense of increased use of performance measurement, is not necessarily achieved in a straight line of progression. The article considers possible explanations for the changes.