DAY 2

State budget process leaves many in limbo

With so much uncertainty, recipients would like more stability; but how?


Patriot Ledger State House Bureau

Every year, Norman Smith wonders whether the prolonged budget debates on Beacon Hill will force him to cut back on staff and hours at the Blue Hills Trailside Museum, or even close the place entirely.

Smith, the director of the popular class-trip destination on the Milton-Canton
border, has survived recommended budget cuts each of the past two years,
but now he’s worried about a third attempt by the governor’s office.

In the last two years, lawmakers eventually overrode the
governor’s proposals and agreed to send money to the museum,
which relies on the state for about half of its $500,000
annual budget.

But Smith is still waiting to find out whether the museum’s
funds will survive this time around. “It makes for a very
uncertain situation, all the time,” Smith said. “ In January,
the governor’s budget comes out (but) we never
know until July what we might get.”

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That’s just one line item in a budget that can be as thick as a phone book when printed, with a $23.5 billion bottom line. State aid to cities and towns, money for preschool programs and higher education, and hundreds of other line items all get caught up in a power struggle between the Republican administration of Gov. Mitt Romney and the Democrats who control the Legislature.

The result is far from the orderly budget planning that takes place in the corporate world. Instead, the tug of war on Beacon Hill leaves many beneficiaries of state aid unsure just how much money they’ll receive for much of the year – making it tough for them to plan their own budgets.

Each January, the governor submits a spending plan for the state fiscal year that begins in July. But within a few months, much of that plan won’t even matter.

By April, the House of Representatives comes up with its own plan, with Democratic legislators largely discarding the Republican governor’s spending proposal.

Later each spring, the Senate writes its own version of a state budget. The House and the Senate then thrash out their differences before sending it back to the governor – who can use his veto pen to zero out any spending he disagrees with but can’t add anything to the budget at that point.

All the while lobbyists and special interest groups fill the corridors of the State House, chatting up lawmakers in the hopes of influencing the budget-writing process.

Budget experts say it’s difficult for states to adopt the more orderly budget process used by financial executives in the private sector.

“The budget process here is highly inefficient, but because it is a policy process, not just a fiscal process, that’s why it is so complicated,” said Linda Bilmes, a public policy lecturer at Harvard University’s John F. Kennedy School of Government. “In business, the budgeting process is more of an internal thing. In government, the budget is where competing interests are reconciled.”

The state uses a “maintenance” budgeting approach, which means state budget analysts begin the process by figuring out what it would cost to provide the same services as the previous year. As a result, most line items from the previous year make it into the budget untouched.

For better or worse, that’s proven the best way. Previous attempts to apply private-sector budgeting techniques to public-sector spending plans have produced mixed results.

Former President Jimmy Carter was famous for his use of “zero-based” budgeting, through which budget-makers start with the assumption they will spend nothing and build up.

The process has proven unworkable for government, experts say, because it means budget analysts every year would have to go into every single agency and every single line item, and start the budgeting process from square one.

State Treasurer Timothy Cahill recalls Quincy Mayor William Phelan using zero-based budgeting when Cahill was a Quincy city councilor.

“I think it’s a gimmick,” Cahill said. “My last year in the city council, the mayor came up with this big zero-based budget, but it was really a sham. It wasn’t a real change. You still base your budgets on what you spend the year before.”

In 1992, then-Gov. William Weld employed a “performance-based” budgeting approach, which allocates money to broad areas such as “highway construction” and “homelessness services,” and sets performance goals for each.

That approach failed, too. While the performance of private businesses can be measured through quarterly earnings or long-term dividends, in the public sector, many programs don’t generate revenue and their bottom lines don’t necessarily show how well a road was fixed or what type of assistance a homeless family received.

House Speaker Thomas Finneran has another idea: a two-year budget. Passing a budget every second year would allow the governor and legislators to use the off-year to concentrate on policy. And Finneran would give incentives to encourage department heads to create efficiencies.

“I think a two-year budget would give a sense of stability and predictably to those department heads and agency heads, and we could align it with incentives,” said Finneran, a Mattapan Democrat. “If they perform their functions in accordance with expectations and do that for less than the appropriation they’ve been given, I think they should be allowed to keep some or all of the savings and apply it as they see fit.”

But budget experts say states that have switched to two-year cycles spend a lot of time making changes and adjustments to their spending.

“The story from states that do two-year budgeting is... that it really isn’t better, because what they do is pass a series of supplemental budgets,” said Bilmes of the John F. Kennedy School at Harvard.

Yet another approach – “activity” budgeting – can be used on a limited basis to help the state understand what it’s getting for its money, Bilmes said.

Activity budgeting tracks what it costs to do things – for example, what it costs to bake a loaf of bread, as opposed to what it costs to run a bakery.

“The best way to get a grip on costs is not to see the public works budget, but to say per pothole, what does it really cost to fill them in?” Bilmes said. “Then you can see where you have a lot of excess costs. That is the frontier where budgeting need to go – getting away from the line-item budgets to what it costs to do things.”

Tom Benner may be reached via email by clicking here.

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Budget timeline

How the state budget for fiscal 2005 came together

2003

  • August: Romney administration develops spending plans for fiscal 2005
  • November: Budget analysts begin their review

    2004

  • Jan. 5: Administration hails surprise boost in tax collections for December, up 4.3 percent
  • Jan. 13: House Ways and Means Chairman John Rogers says budget deficit will be $1.75 billion deficit, twice the amount projected by the governor
  • Romney vows to balance budget without raising taxes, revives proposal to fold Turnpike Authority into highway department.
  • Jan. 21: House Post Audit and Oversight Committee says taking on the turnpike would cost state $500 million
  • Jan. 28: Romney budget would increase spending by $1.1 billion, up 5 percent over fiscal 2004
  • Jan. 29: Budget and Policy Center says Romney relies on “hundreds of millions of dollars” from sources that will disappear after 2005
  • Feb. 5: House Speaker Thomas Finneran says state is “in the midst of its worst financial situation in 50 years”
  • March 3: Rogers cautions that state’s economy is “not stable” enough to warrant optimism over increased tax collections
  • March 31: Senate Post Audit and Oversight Committee calls for greater use of bulk purchase discounts
  • April 14: House Ways and Means Committee endorses $22.5 billion budget that cuts hundreds of jobs
  • April 20: House members file 1,220 proposed amendments to the budget
  • May 3: Citing economic recovery, Romney calls for reducing income tax rate to 5 percent
  • May 4: Senate budget chief Sen. Therese Murray of Plymouth says tax collections on track to trigger automatic tax cut by increasing personal exemptions
  • May 12: Senate releases $22.5 billion budget
  • May 20: Senate passes budget
  • June 1: Finneran calls talk of tax cuts “premature”
  • June 12: Target date for Senate, House conference committee to send compromise budget to Romney
  • June Governor has 10 days to review budget.
  • July 1: Start of fiscal 2005
  • July 31: Legislature must act on vetoes by end of formal session

    Source: www.02133.org



  • A special report
    Published June 12-17, 2004