Political Science 102

State and Local GovernmentBureaucracy and Budgeting

Public Management

Constraints: Politics, opinion

Clients: Citizens, legislatures, executives

Accountability: To elected and appointed officials

Purpose: Serve public interest, common good

Private Management

Constraints: Markets, resources

Clients: Customers

Accountability: To customers, shareholders

Purpose: Make profits, grow organization

Budgeting in State and Local Government

Budget CycleActorsPervasive IncrementalismTypes of BudgetsReform

The Budget Cycle

fiscal yearsnot calendar years

7/1 to 6/30

The Actors in Budgeting

Executive drafts the budget, legislature gets to mark it up, review process follows;

Interest groups, agencies also participateBudget is adopted

Must be approved by legislature and governorAgencies carry out their duties

Pervasive Incrementalism

one of many tactics Always ask for more Spend before end of fiscal year Creative naming

Ex. Of calling sex ed “Teaching Values of Family” Delay by studying Unneeded items to pad budgets

Types of Budgets

line-itembudget for mgmt. & planning

Not just spending what’s allocated Ensuring agencies comply with goals

performance budgeting Ensuring efficiency and cutting waste

Capital budgets Big expenditures Multi-year projects Often involves bonds

Budget Reform

balanced budgets ways to circumvent

mutli-year capital budgets, "off-budget" spending, pension borrowing, rainy day funds

Bureaucracy is a Growth Industry

10% of U.S. workers are employed by States

3 Million employees Localities

7 Million employees

10 Million out of 100 Million in the Workforce

Hiring Principles

Spoils systemMerit systemFitness system

Why Spoils?

IncentivePower to hire and fireReplacing, not removing, interest

Merit System

Created by 1883 Pendleton ActCuring the evils of party machinerySpoils/Merit controversy actually killed a

president James A. Garfield killed by a disgruntled office seeker

Components of Merit System

Neutral competency No politics becoming involved

Categorization Specialization of jobs Hierarchy of positions Helps in writing the merit tests

Merit system patronage? Governor appoints Civil Service Commission

chairCentralized control

Pay scales, raises, and duties are controlled in a single area

Representative bureaucracy

Why representative bureaucracy? Representative = responsive?

active representation and passive representation. Passive representation is simply another term for descriptive

representation, where it consists of the “degree of congruence between the composition of a public bureaucracy and the society in which it exists” (Hindera 1993).

Active representation is another term for substantive representation, referencing the agency decisions that benefit the group of interest

Where representative? Elites Street-level bureaucrats

Affirmative action Unions and collective bargaining

State bureaucracies are strongly unionized in comparison to rest of workforce

Illegal Patronage

Temporary appointments Person stays if no replacement

Specific job descriptions Tailor the description so only preferred person fits

Ignoring described duties Moving people from one duty they are qualified for

to the one you wantStacking tests

If no test exists, write it to conform to your candidate

‘Wait out the Register” Interview people higher than your preferred, then

pass them over until your person comes up

Changes in Bureaucracy

Total Quality Management TQM is a management approach for an organization,

centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society

Focuses on consistency Business abandoned this in late 1980s

Quality processes Different from TQM, current model Based more on customer feedback and efficiency

Privatization Utilities are the current controversy

Responsiveness:

1) Objective – formal, written responsibility for the bureaucrat2) Subjective – a personal moral feeling of obligation3) Professional – Dedication to personal skills and expert knowledge.

Arkansas’ Bureaucracy

State rates highly in all categories“A” Average overallHighly rated on financial and capital

managementScores lowest on human resources

9th grade civics taught us that there are three separate

branches of government:

Executive

Legislative

Judicial

Our Constitution states that one branch cannot perform the

duties of any other one. This is called the separation of powers.

Let’s first review what each of the elected offices does . . . .State

Treasurer

State Auditor

EXECUTIVE

GovernorLt.

Governor

Supreme Court

ARKANSAS VOTERS

Attorney General

JUDICIAL

Secretary of State

Court of Appeals

Arkansas House of

Represen- tatives

LEGISLATIVE

Arkansas Senate

Land Commission

er

State Organizational Model

What are Arkansas’ agencies?

1. Correction 2. Economic Development 3. Education 4. Environmental Quality 5. Finance and Administration 6. Health 7. Highway and Transportation 8. Human Services 9. Labor

Organization of Arkansas Bureaucracy

Nine departmentsSome areas are funded mostly from federal

government Transportation Health Social Services Economic Development Labor and Industrial relations

Administrative Strategy

Administrators must maintain good relations With governors And with legislators

But must isolate themselves So they don’t get political flak

Administrative Power

Information Legislators rely on bureaucracy for information Selective or strategic distribution of info is wise

for a bureaucratFiscal Notes

Bureaucrats must write up analysis of a proposed law’s costs

Legal vagueness Legislature lacks specific knowledge, must defer

to bureaucracy in implementation.

Arkansas Budget and Appropriation Process

Excerpted from Bureau of Legislative Research, 2006

Arkansas Budget Process

The State Fiscal Year Begins on July 1 and Ends on June 30.

A Biennial Period or Biennium is a two year period that usually begins July 1 of the odd-numbered year and ends June 30 of the next odd- numbered year.

Jun Jul Sep Oct Nov Dec Jan Mar Apr May Jun Aug Feb Budget Requests Prepared

Executive Review

ALC/JBC Hearings

Session Convenes

Joint Budget Meetings

Legislature Adjourns

Operating Budgets

Prepared

Official Revenue Forecast

Budget Calendar

The Preparation PhaseA Budget Request - Line Item Format

Title Actual Budgeted Base TotalRegular Salaries $200,000 $352,000 $361,856 $486,856 No. Positions 12 16 16 22 Personal Svs Match 42,000 73,920 75,990 102,240 Operating Expenses 665,000 541,530 529,604 728,354 Conf Fee & Travel 58,776 60,000 60,000 78,000 Capital Outlay 123,241 101,000 - 300,000

Prof. Fees & Services 82,150 71,550 71,550 171,550 Advertising - - - 300,000

Total $1,171,167 $1,200,000 $1,099,000 $2,167,000

FUNDINGFund Balances $2,100,000 $1,365,833 $689,833 $689,833General Revenue 400,000 474,000 474,000 474,000 Special Revenue 37,000 50,000 61,000 61,000 Federal Funds - Total Funding $2,537,000 $1,889,833 $1,224,833 $1,224,833

Base Level- 16 Positions & $1,200,000

Change Level 1 $300,000

Change Level 2 2 Positions & $450,000

Change Level 3 $18,000

Change Level 4 4 Positions & $300,000

A Budget Request – Change Level Format

Replace Old Computers

New Inspectors

Training Seminars

Overseas Advertising

Current Year Budget Plus

PayPlan Less

One Time Costs

Arkansas Budget Process

Yearlong processAgencies prepare their own proposed

budgets Submits them to Governor’s Office Governor Reviews and makes recommendations

Set Policy for Agency Requests Forecast State Revenue Recommend Budget For Next Biennium to ALC/JBC Recommend Added Revenues as Needed

Governor makes decisions Issues budget message to Assembly

Legislative Council / Joint Budget

84 membersConsider Agency Requests & Governor’s

Recommendation Recommend Budgets to General Assembly Recommend State Employee Salary Levels Have Bills Prepared for Introduction

Joint Budget Committee

Legislature holds hearings Committees and subcommittees allowed to mark

up Conference to resolve interchamber differences

JBC: Consider ALC/JBC Recommendations Consider Governor’s Revisions and New Programs Consider Member-Sponsored Bills Recommend Fiscal Bills and Pay Levels to General

Assembly Prepare Revenue Stabilization Amendment

Budget in the Ledge

“Legislators get caught spending inordinate amounts of time trying to save relatively trifling sums.” Changing State Budgeting: S. Kenneth Howard, 1973

Preparation

Authorization

Budget Process

Appropriations

An appropriation gives the agency the authority to spend money if and when it becomes available.

=

THE CONSTITUTIONAL REQUIREMENTS

The Authorization Phase

Constitutional Restrictions

2 Year Limit on Appropriations

Single Subject

General Appropriation Bill must "embrace nothing but appropriations for the ordinary expenses of the executive, legislative and judicial departments of the state” & be passed first

Appropriations must be in dollars and cents

Appropriations (except for education, highways, and debt of the state) must be approved by 3/4 affirmative vote

Appropriations

Our State Constitution puts some very strict requirements on enacting the budget.•There is a two year limit on appropriations. One legislature can't bind another. Every session makes its own budget.

•The appropriation bill must have only one subject. The courts have ruled that the word "subject" is very narrow. Therefore, we have an appropriation bill for every agency. This results in Arkansas leading the nation in the number of appropriation bills. Last session we had 1,496 bills appropriating money compared to 1-5 for most states.

•We must pass the bill for the expenses of the elected constitutional officers before any other appropriation bill is passed for the next biennium. We failed to do that in 1989 and had to have a special session to reenact every appropriation measure passed during the regular session.

•Appropriations must state a maximum amount and can't be open ended.•Most appropriations require 3/4ths of the vote to pass.

528691

922

1163

309 348 370 429 475

1496

0

200

400

600

800

1000

1200

1400

1600

Introduced Appropriation Bills

Types of Appropriation Bills

Regular Biennial Appropriation –2-year period –Effective July 1

Supplemental Appropriation –Effective before July 1 & usually immediately –Usually adds to an existing authority –State Funds usually come from an Accumulated Surplus or

recovered Fund Balances Construction

–State Funds usually from General Improvement Fund (Surplus & Interest Earnings)

Reappropriations –Allows the Agency to spend the balance of an appropriation

provided by another General Assembly. –Not new authority to spend : usually for old construction

projects

Funding

Preparation

Authorization

The Budget Process

TOTAL STATE REVENUE 2006 FY

General Revenue $ 5,180,059,838

Special Revenue 1,656,660,858

Cash Funds 3,489,121,218

Federal Funds 3,952,819,022

Trust and other Non Revenue 2,540,912,688

TOTAL STATE REVENUE $16,819,573,624

TOTAL STATE REVENUE – 2006 $16.8 Billion

General Revenue

31%

Trust & Other

Non Revenue

15%

Federal

24% Cash

21%

Special

10%

GENERAL REVENUE - 2006$5.2 Billion

Insurance2%

Income Taxes53%

Sales/ Use41%

Other>1%

Luxury4%

Property Tax Relief14%

Finance5%

Natural Resources

2%

Highway Users38%

Game & Fish5%

Other36%

SPECIAL REVENUES - 2006$ 1,656.7 Million

Preparation

Authorization

Funding

Review /

Revise

The Budget Process

“...since the practice of review and advice violates the separation of powers doctrine, [it] is unconstitutional.”

CHAFFIN v. ARK. GAME & FISH COMM'N, 296 Ark. 431 (1988)

CAUTION!!!

Review / Advice

CHAFFIN v. ARK. GAME & FISH COMM'N, 296 Ark. 431 (1988)757 S.W.2d 950

“The legislative practice of reserving the power of review and advice in an appropriated bill is the equivalent of approval or consent and the "advice" is tantamount to a legislative order on how to execute a contract; since the practice of review and advice violates the separation of powers doctrine, section 17 of Act 939 is unconstitutional.”

Some appropriation bills contain language which require approval of the Legislative Council or Joint Budget Committee for various types of appropriation and fund transfers. The language further states that if the requirement of approval is ruled unconstitutional by a court jurisdiction, then the section containing the language is void.

Review / Peer Subcommittees

The Review Subcommittee looks at an average of 900 contracts per year.

PEER (Performance Evaluation and Expenditure Review) reviews about 120 Misc Federal Grant Requests and 100 Interagency Contracts per year.

•Contracts

•Methods of Finance

•Leases REVIEW

•Budget Adjustments

•Misc. Federal Grants

•Interagency Contracts

Legislative Council SubCommittees

PEER

Budget Focus

Under this system the agencies, the Governor and the Legislature spend most of their energy in justifying increases in the purchase of commodities, services or in payroll.

The legislature and the DFA monitor the agencies, almost exclusively, on the basis of the money spent for those items compared to the amount that the Legislature appropriated.

Governor

Final Bill Submitted to Governor Sign Veto