Budgeting for the Millennium

Article excerpt

The year 2000 is almost upon us. Figuring out the implications of the millennium for budgeters is an urgent task: This editorial lays out some likely scenarios.

To budgeters used to thinking in terms of annual and biennial budgets, a millennial budget is a new concept. Millennial budgeting for some budgeters, especially in CBO, OMB, and GAO, means budgeting for the next 1000 years. They are already projecting thirty years out. What is another 970 years? After fixing social security and health care spending, these budgeters have a relatively easy ride for the next 900 years. Agreement on assumptions for the outyears may prove difficult, however, and the projections of the three agencies differ by about 17 googleplexes.

The difference in projections is not problematic, because Congress has agreed to pick whichever projection favors the currently preferred policy. They call this practice "directed projections."

However, Congress did pressure CBO to increase the estimate of surpluses in year 3002 so that they could reduce taxes in year 2002, 2003, 2004, 2005, 2006, 2007, and on to 3001. Members of Congress argued that this improved projection was justified by the fiscal dividend resulting from the budget surplus in 1998. This surplus would have a chance to improve the economy each year between 2000 and 3001 and hence would produce a surplus in that year of any desired size.

Other budgeters have argued that the millennium means that Armageddon will finally arrive in a blast of heat. They have been waiting for it and announcing budget meltdown each year for the last millennium (and you thought economics was the dismal science), and now they have a chance to be right. These budgeters refuse to spend the money for the Y2K solutions, firmly believing that the year 2001 will never occur. Budgeting with the idea that the world will end in two years changes things, besides the number of outyears in the budget.

Groups of Believers in different budgeting approaches have divided over how to budget for the final year. Incrementalists argue for keeping the budget distribution just as it is now, but would like everyone to go out happy, so they budget for a 100 percent increment. The department heads are ecstatic, until they realize they won't get a chance to spend it, unless they move very very quickly. Everything at city hall speeds up: The fire trucks go faster, the police arrest people faster, the finance office pays bills faster, and overall productivity improves, like the Fourth of July fireworks just before the end of the show. To get the extra money, the incrementalists push off expenditures into next year, and push up revenues into this year.

Performance budgeters are initially ecstatic about the improved productivity. But then they think about what it means if the programs they are monitoring actually come to an end. And they also worry about who will be around to do the final evaluation, and if evaluation of programs will be on His or Her mind. In light of disagreement on these crucial issues, they decide to push the idea of self-evaluating organizations.

Zero-based budgeters are least able to deal with the millennium, until they remember that from the department's point of view, zero base is the end of the world. …