From Housing Need to Housing Markets: Changing Institutions and Structures of Governance
Budget Structures & Institutions: Federal and State-Local
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Transcript of Budget Structures & Institutions: Federal and State-Local
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Budget Structures & Institutions: Federal and State-Local
Troy UniversityPA6650- Governmental Budgeting
Chapter 3
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The Federal Budget
• Spending by the Federal GovernmentPage 81- Federal Outlays by Function
• 20% for national defense• 64% for human resources• 5% for physical resources• 8% interest payments• 3% other
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The Federal Budget Process
• Process dictated by constitution, statute, tradition, politics
• Important historical events– Budget & Accounting Act of 1921– Budget & Impoundment Control Act of 1974– Balanced Budget & Emergency Control Act of
1985– Budget Enforcement Act of 1990
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Federal Budget Organizations• OFFICE OF MANAGEMENT AND BUDGET (OMB)
– Created as the Bureau of the Budget in 1921– Executive Branch Ownership– Develops and controls the budget– The “M” is no longer silent
• GOVERNMENT ACCOUNTABILITY OFFICE (GAO)– Congressional agency established in 1921– Primary “watchdog” agency for Congress & American people– External audit agency for the federal government– Headed by Comptroller General (15 year term)
• CONGRESSIONAL BUDGET OFFICE (CBO)– Permanent, nonpartisan professional staff– Forecasts, analysis, scorekeeping, policy research
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Phases in the Federal Budget Cycle
– Executive Preparation and Submission phase
– Legislative Review and Appropriation phase
– Execution phase
– Audit and Evaluation phase
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Executive Preparation and Submission Phase
• OMB orchestrates and collects requests• OMB ensures requests aligned with president• CEA and Federal Reserve provide forecasts
– INFLATION RATE– INTEREST RATE– UNEMPLOYMENT RATE– GDP GROWTH RATE
• Final review and submission• PRESIDENT’S BUDGET submitted first Monday
in February
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Legislative Review &Appropriation Phase
• Committee pathways
• Each house has an authorization committee, an appropriations committee, a budget committee, and a finance committee
• 12 appropriations committees in Senate, 10 in the House
• Authorization committees set policy, create programs, & set ceilings
• Appropriations committees provide the funds
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Legislative Review &Appropriation Phase
• Budget committees develop the congressional budget
• Finance committees (Senate Finance Committee and House Ways and Means Committee) deal with tax/revenue, SSI, Medicare, Medicaid, unemployment, and debt
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Legislative Review &Appropriation Phase
• Annual Concurrent Budget Resolution looks at the macro-level budget as a whole in the spring
• Annual reconcilliation bill– Matches spending to revenue– Important as a deficit-reduction tool– Prohibits filibusters– Requires amendments to be germane– Requires House & Senate agreement
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Legislative Review &Appropriation Phase
• Appropriations Bills signed by the president
• Veto is available. Line item veto is not. (Line Item Veto Act of 1996). Why not?
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Execution Phase• Money spent, services provided
• Apportionment applies a schedule to spending
• President can IMPOUND funds (not spend the money)– RECISSION (permanent cancellation)– DEFERRAL (temporary delay)– Recissions must be approved by Congress, deferrals
must be executed within the fiscal year
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Audit Phase
• GAO looks at both financial execution and performance
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Budget Authority• A budget is a commitment
• Types of authority include:– Appropriations authority (permits obligations and
payment by the Treasury)– Contract authority (agencies may enter into binding
contracts prior to the appropriation)– Borrowing authority (agency may incur debt)– Loan & loan-guarantee authority (permission to
loan money and guarantee loans)– Entitlement authority (allowed to pay entitlements)
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Appropriations
• 3 types of appropriations measures– Regular appropriations bills
– Annual (one year only, no carry-over)– No-year (no restriction on year used)– Multiple-year (runs over several years)– Advance (funding for future years)– Permanent (no repeated action
– Continuing resolutions – continue operating at the beginning of a new fiscal year when a
budget has not yet been passed
– Supplemental appropriations– New programs, bad forecasts, surprise events in execution year
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Mandatory v Discretionary Spending
• Discretionary – 40% of budget• Mandatory – 60% of budget
• WHY?– Interest on the national debt– Social Security– Medicare/Medicaid– Food & Nutrition
• Entitlements– Means-tested (determined by the economic status of the recipient)– Non-means-tested (transfer based on other characteristics)
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Federal Deficits• Found on page 110/111
• Surplus in 2000!
• To close the deficit, you need either more revenue or less spending
• We sometimes borrow from off-budget funds
• Pros and cons to deficit argument
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Federal Deficits• Attempts to control
– DEBT LIMITS (currently 9 trillion)
– AGGREGATE BUDGETING (Congress “approves” a deficit amount)
– TARGETS & ENFORCEMENT (sequestration)
– SPENDING CONTROLS (caps on discretionary spending), PAYGO (must offset an increase in spending from another program), and ADJUSTABLE DEFICIT TARGETS (due to economic and technical conditions)
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Federal Fiscal Policy• ECONOMIC STABILIZATION
– Promoting maximum employment, production, purchasing power
– National policy of full employment, increased real income, balanced growth, balanced budget, productivity growth, price stability
• FISCAL POLICY– The use of government decisions on spending and taxing to
influence the overall economy. Does it work?
• MONETARY POLICY– The use of the money supply to regulate the economy. Does it
work?
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State and Local Budgets
• Local government dominated by elementary and secondary education
• State government spends on public welfare, higher education, highways, medicine, corrections
• Lots of diversity nationwide in structure/process
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State-Local Compared to Federal• Christmas-list budgeting at local level
• Some chief executives elected, some not
• Varying budget cycles (biennial/triennial) and fiscal years
• Less formality than federal procedures
• All states have line-item veto
• Public vote may be necessary to increase spending
• Usually require balanced budgets
• Limit on the ability to produce revenue / carry debt
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Conclusion
• Federal budget cycle and process clearly defined
• Process is in disarray, outcome is awful
• All levels are fiscally constrained, some worse than others