Magazine article Government Finance Review

Reshaping State and Local Budgeting

Magazine article Government Finance Review

Reshaping State and Local Budgeting

Article excerpt

Budgeting is the key to just about everything that governments do, but not much is known about what makes for successful budgeting. Recent political and economic events suggest that what has proved successful in the past may no longer be effective. Against this backdrop, GFOA has formed an interorganizational task force to investigate ways to improve state and local budgeting.

It is shortsighted to think of the budget as merely a yearly decision concerning the source of funds and their allocation. The budget is, in fact, more than its sterile image -- a management tool that is legally required to be adopted by a certain date; it is the embodiment of a litany of decisions that flow to and from the budget process at the state and local levels. Government functions and programs are sustained or foiled through budget decisions:

* tax burdens, reflected in tax rates, are modified to meet budgetary needs;

* programs and services, their expansion, contraction and performance, receive their sustenance from the budget;

* management initiatives and reorganizations are hostage to budget decisions;

* employee compensation and labor contracts yield to budget limitations;

* infrastructure, its buildup and its neglect, springs from the budget;

* debt, and its refinancing, affects the budget in terms of shares devoted to debt service;

* the shifting of service burdens from federal to state governments and from state to local governments reveals itself in the budget dilemmas faced by those at the bottom of the fiscal food chain; and

* economic growth and decline show up in new demands for funding.

How budgets are developed and implemented has a substantive effect on what governments do. Although considerable evaluation has been done of budgetary reforms, such as zero-based budgeting, as they have gained in popularity, not much research has been done on what constitutes successful budgetary practices, or on what works over time and across jurisdictions. As a result, public officials and budget professionals struggle with devising budgetary solutions on their own without the benefit of knowing what has worked elsewhere under similar circumstances. Simply stated, guideposts for effective budgeting are nonexistent at the state and local levels of government.

Identifying yesterday's budget success stories will not be enough. State and local governments are facing increasing pressure to better manage the provision of public services with limited resources. These pressures are expected to continue throughout the 1990s due to projected slow economic growth, new spending requirements, increasing federal and state mandates, deteriorating capital infrastructure and demands for improved service quality. How effectively governments respond to these pressures depends to a large extent on the quality of their budgetary practices.

The economic recession of the past few years has underscored the inadequacy of current budgetary practices in addressing these challenges. The need for fundamental budgetary change at state and local levels is evident and has prompted the GFOA's standing committees on Governmental Budgeting and Management and on Debt and Fiscal Policy to initiate an associationwide effort to identify good budgetary practices and develop a debate on the value of budgetary guidelines.

The GFOA Budget Symposium

In January 1993, the GFOA hosted a national symposium to examine the budget process at the state and local levels. Approximately 40 individuals were invited to attend, representing a wide range of interests in the budget process. Among those attending were finance officers, elected officials, chief administrative officers and representatives from various interest groups, including the Governmental Accounting Standards Board, the rating agencies, bond insurers, accounting firms, the academic community and other national associations concerned about governmental budgeting. …

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