Strategic Management Processes in Louisiana: Budgeting & Planning

1. MANAGEWARE OPERATIONAL PLANNING AND BUDGETING Budgeting for Results Carolyn S. Lane Office of Planning and Budget Division of Administration State of Louisiana

2. LOUISIANA’S MANAGEMENT PROCESSES STRATEGIC PLANNING State Strategic Plan – Louisiana Vision 2020 Statewide Initiatives – Children’s Cabinet & Workforce Development Agency 5-Year Strategic Plans PERFORMANCE ACCOUNTABILITY La. Performance Accountability System (LaPAS) Performance Progress Reports Program and Contract Evaluations Act 160 Management Reports Performance Audits Compliance Audits Sunset Review STATE 5-YR BASELINE BUDGET PROJECTION REVENUE ESTIMATING CONFERENCE CONSENSUS ESTIMATING CONFERENCE OPERATIONAL PLANNING OPERATING BUDGET DEVELOPMENT & APPROPRIATION CAPITAL OUTLAY PLANNING 5-Year Plan, updated annually Capital Outlay Request Tracking System (CORTS) CAPITAL OUTLAY BUDGET DEVELOPMENT & APPROPRIATION FINANCIAL ACCOUNTABILITY Comprehensive Annual Financial Report (CAFR) Financial & Compliance Audits Inspector General Audits PROGRAM MANAGEMENT BUDGET MANAGEMENT FACILITY MANAGEMENT HUMAN RESOURCE MGT. CONTRACT MANAGEMENT MONITORING IMPLEMENTATION AFS Reports Fiscal Status Reports Internal Performance Monitoring Contract Monitoring Louisiana Office of Planning and Budget

3. Operational planning and budgeting involve the task-by-task scheduling of operations and allocation of resources within a budget or management cycle to implement strategies and accomplish objectives. An operating budget is established for operation of a state agency or program and is based on legislative appropriation. An operating budget is an annual allocation of resources to carry out an operational plan. OPERATING BUDGETS Louisiana Office of Planning and Budget

4. A budget is a plan for receiving and spending funds; it is an allocation of anticipated resources. There are two parts to a budget:  Means of Financing (what comes in); and Expenditures (what goes out). Budget requests must provide detailed information on both parts. Primary source of data for OPB budget analysis and recommendations Give special care to BR-6s, BR-7s, & BR-8s The goal of budget development is to balance these two parts. The goal of budget management is to keep them in balance. MOF EXPENDS OPERATING BUDGETS Louisiana Office of Planning and Budget

5. REVENUE Where does the money come from? Louisiana Office of Planning and Budget

6. State General Fund (Direct) Interagency Transfers Fees and Self-generated Revenues Statutory Dedications Interim Emergency Board Federal Funds MEANS OF FINANCING Louisiana Office of Planning and Budget

7. Louisiana Constitution 7:9 – State revenues flow through the Bond Security and Redemption Fund All money (with a few constitution exceptions) received by the state or by any state board, agency, or commission deposited immediately upon receipt in the state treasury. All state money deposited in the state treasury (with a few constitutional exceptions) credited to the Bond Security and Redemption Fund. In each fiscal year an amount is allocated from the fund to pay debt service. Thereafter, except as otherwise provided by law, money remaining in the fund credited to the state general fund. BOND SECURITY AND REDEMPTION FUND Louisiana Office of Planning and Budget

8. OPERATING BUDGET DEVELOPMENT Contrary to popular opinion, this is nothow we build Louisiana’s annual operating budgets. 3 4 7 8 2 5 6 9 1 10 Louisiana Office of Planning and Budget

9. Louisiana uses a performance-based, programmatic budgeting approach for development of the state's annual operating budget. Program budgeting, in which funding is appropriated to budget units by program, was implemented in FY 1991-1992. Previously, Louisiana used line-item, incremental budgeting. Program budgeting was enabled by 1987 legislation. Performance-based budgeting was mandated by Act 1465 of 1997. LOUISIANA’S OPERATING BUDGET PROCESS Louisiana Office of Planning and Budget

10. Budgeting for Results Performance-based budgets focus on “return on investment”—that is, what do we get for our investment of state resources? Performance-based budgeting emphasizes program effectiveness and bases decision making (whether for continuation or enhancement of a program) on outcomes rather than inputs. Appropriations are linked with expected program results specified by performance criteria (performance standards). PERFORMANCE-BASED BUDGETING Budgeting for Results Louisiana Office of Planning and Budget

11. PERFORMANCE-BASED BUDGETING Budgeting for Results— With an Eye on the Price Tag • Performance-based budgeting emphasizes program effectiveness and bases decision making (whether for continuation or enhancement of a program) on outcomes. • However, the costs of achieving those outcomes must be scrutinized to ensure efficient service delivery and maximize allocation of scarce resources. Budgeting for Results Louisiana Office of Planning and Budget

12. PERFORMANCE-BASED BUDGETING • Annual Operational Plans (part of agency budget requests) • Concise Executive Budget • Detailed Executive Budget Supporting Document • General and Ancillary Appropriation Bills Including: • Program descriptions • General performance information • Key objectives • Key performance indicators with proposed performance standards • General and Ancillary Appropriation Acts with performance standards (performance expectations) Louisiana Office of Planning and Budget

13. PROGRAM STRUCTURE • Strategic plans, operational plans, and performance-based budgets are geared to program structures. • Funds are appropriated to budget units, by program. Programs represent line items. • A program is a grouping of activities directed toward the accomplishment of a clearly defined objective or set of objectives. • Program structure is an orderly, logical array of programs and activities that indicates the relationship between each. Louisiana Office of Planning and Budget

14. PROGRAM STRUCTURE BUDGET SCHEDULE or DEPARTMENT Budget Unit or Agency Budget Unit or Agency Program Program Program Program Activity Activity Activity Activity Activity Activity Activity Activity Activity Activity Louisiana Office of Planning and Budget

15. Development, appropriation, and execution of annual operating budgets are performed under the authority of and governed by the requirements of both the state constitution and revised statutes (primarily Title 39). The major constitutional and statutory requirements and guidelines for the state's operating budget fall into six areas: Revenue estimation Need estimation Expenditure limitation Executive budget development Appropriation process Operating budget management. OPERATING BUDGET DEVELOPMENT NOTE See Title 36 for info on state government organization. Louisiana Office of Planning and Budget

16. Revenue Estimating Conference Made up of the governor, speaker of the house, president of the senate, and a faculty representative (a member of the faculty of a Louisiana college or university) who has expertise in forecasting revenues Establishes an official forecast for each fiscal year by unanimous vote Estimates must be based on laws and administrative procedures as they currently exist, so the conference cannot utilize the continuation of "temporary" revenues or proposed revenue-raising measures in the official revenue estimate. Governor's executive budget cannot exceed the official revenue estimate. Any proposals by the governor beyond the official forecast must be separate and apart from the executive budget. OPERATING BUDGET Louisiana Office of Planning and Budget

17. OPERATING BUDGET Consensus Estimating Conference • The Consensus Estimating Conference was created by Act 966 of 1990 to develop official information needed for purposes of planning and budget development. • Consensus Estimating Conference estimates needs or costs. • The statutory Consensus Estimating Conference is composed of: • Economic Estimating Conference • Demographic Estimating Conference • Education Estimating Conference • Criminal Justice Estimating Conference • Health and Social Services Estimating Conference • Transportation Estimating Conference Louisiana Office of Planning and Budget

18. Expenditure Limit Growth in state expenditures (for the state general fund and dedicated funds) is limited to the three-year average annual rate of growth in Louisiana personal income. The expenditure limit for an upcoming fiscal year must be established by the Joint Legislative Committee on the Budget (JLCB), based upon a calculation submitted by the commissioner of administration no later than 35 days prior to each regular legislation session. The expenditure limit may be changed in any fiscal year by a favorable vote of two-thirds of the elected members of each house.   Executive budget recommendations for appropriations shall not exceed the expenditure limit for the ensuing fiscal year. OPERATING BUDGET GROWTH LIMIT $ Louisiana Office of Planning and Budget

19. OPERATING BUDGET TIMELINE November 8 December/January First Quarter Performance Revenue Forecast Progress Report December/January November 1 Preliminary Budget Recommendation Operational Plan, Budget Request and Capital Outlay Requests February/March Executive Budget, Supporting Document, and Appropriation Bills February 8 September-November Midyear Performance Agency Budget Preparation Progress Report September 20 March/April- June DOA/OPB Guidelines for Legislative Appropriation Budget Preparation Process September 8 Yearend Performance May 8 Progress Report Third Quarter Performance August 15 Progress Report Performance Adjustment Requests Fiscal Yearend Closeout June 30 Prior Fiscal Year Current Fiscal Year Ensuing Fiscal Year Fiscal Year Ends July 1 Early July Fiscal Year Begins Appropriation Letters Budgets Spread Louisiana Office of Planning and Budget

20. BUDGET DEVELOPMENT TIMELINE September 20th – Budget Forms, Instructions, and Guidelines for ensuing fiscal year distributed by OPB November 1st – Budget requests due to OPB from agencies January 1st – Continuation Budget due to JLCB February/March – Executive Budget presented to JLCB (45 days before legislative session begins) March/April through June – Legislative appropriation process Mid-July – Appropriation letter packages for newly enacted budget distributed to agencies October 1– State Budget published Louisiana Office of Planning and Budget

21. $ OPERATING BUDGET DEVELOPMENT Operating Budget Forms, Instructions and Guidelines • Title 39 stipulates the information that must be included in agency budget requests • OPB prescribes the budget request forms to be used by each budget unit. However the OPB must consult with legislative staff regarding the format and content of the forms. • OPB must transmit forms and instructions to agencies no later than September 20th. • Budgets are submitted by agencies on November 1st • OPB • Legislature (LFO, HFD, SFS) • Legislative Auditor Louisiana Office of Planning and Budget

22. TOTAL BUDGET REQUEST PACKAGE • Total Budget Request Package consists of 6 components • Operational Plan (OP Form) • Existing Operating Budget (BR Forms) • Continuation Budget (CB Forms) • Technical/Other Adjustment Package (T/OAP Forms) • New or Expanded Services Package (NE Forms) • Total Request Summary (T-SUMM Form) • Forms, Guidelines, and Instructions posted on OPB website. Louisiana Office of Planning and Budget

23. TOTAL BUDGET REQUEST PACKAGE • Total Budget Request Package is accompanied by 5 addenda: • Activities • Sunset Review • Information Technology • Children’s Budget • LA Workforce Commission • Forms, Guidelines, and Instructions posted on OPB website Louisiana Office of Planning and Budget

24. TOTAL BUDGET REQUEST PACKAGE • Title 39 mandates that budget development be on the basis of appropriation levels rather than continuation levels (as required in previous years). • Budget units should prepare their budget requests with the current year's operating budget (existing operating budget) as the budget request base to which adjustments are made to arrive at the total budget request. • Continuation level is an important interim step in the budget development process. Louisiana Office of Planning and Budget

25. The governor submits to the legislature a budget estimate for the next fiscal year setting forth all proposed state expenditures. This budget estimate—the governor's executive budget—must include a recommendation for appropriations from the state general fund, dedicated funds, and self-generated funds that cannot exceed the official forecast of the Revenue Estimating Conference and the expenditure limit for the ensuing fiscal year. The governor may submit supplementary recommendations that are balanced with additional revenue measures. This explains why some executive budget publications have a "supplementary recommendations“ section. EXECUTIVE BUDGET DEVELOPMENT Louisiana Office of Planning and Budget

26. EXECUTIVE BUDGET DEVELOPMENT • Continuation budget must be prepared and presented to legislature. • Continuation budget represents the cost of conducting today’s operations and delivering today’s services in tomorrow’s marketplace. • Continuation Budget guidelines available for OPB analysts • Five-year plan at continuation budget developed • Draft usually completed in late November or early December • Continuation budget presented to JLCB in January Louisiana Office of Planning and Budget

27. EXECUTIVE BUDGET DEVELOPMENT • Executive budget development is a 4-stage process: • Internal OPB Stage – SIFO 1 or “Bare Bones” • Commissioner’s Stage – SIFO 2 • Governor’s Stage – SIFO 3 • Final Budget – SIFO 4 Louisiana Office of Planning and Budget

28. EXECUTIVE BUDGET DEVELOPMENT • SIFO 1 or “Bare Bones” – Internal OPB Stage • As tight as possible; strict guidelines on what can be included • Usually completed in mid-December • Analysts work with supervisor on recommendation (what is included and why; how calculations were made; and what requests were not funded and why) • Each supervisor, with group, meets with OPB management to present and defend recommendations • Changes incorporated and recommendations go to commissioner Louisiana Office of Planning and Budget

29. EXECUTIVE BUDGET DEVELOPMENT • SIFO 2 – Commissioner’s Stage • OPB meetings with commissioner, deputy commissioner, and policy analysts to discuss current funding issues and agency needs (usually in mid-to-late December) • Initial administration decisions incorporated into preliminary budget recommendations for agencies • Preliminary budget recommendations distributed to agencies (usually late December or early January) • Agencies may appeal preliminary budget recommendations to commissioner using BAD Packages (usually mid-January) • Changes approved by commissioner incorporated Louisiana Office of Planning and Budget

30. EXECUTIVE BUDGET DEVELOPMENT • SIFO 3 – Governor’s Stage • Final targeted investments and administration priorities are incorporated • Revenues maximized • Usually complete by late January or early-to-mid February (depending upon type of legislative session) Louisiana Office of Planning and Budget

31. BUDGET DECISION-MAKING FACTORS • Available Revenues • Means of Financing • Discretionary vs. nondiscretionary status • Gubernatorial agenda and initiatives • Statewide and agency strategic plans or initiatives • Return on Investment • Program performance • Demonstrated need • Other guidelines • Other input Louisiana Office of Planning and Budget

32. INTEGRATING PERFORMANCE INTO BUDGET DECISION MAKING Louisiana: Vision 2020 AGENCY STRATEGIC PLAN CAPITAL OUTLAY REQUEST TRACKING SYSTEM PERFORMANCE ACCOUNTABILITY CAPITAL OUTLAY BUDGET DECISIONS OPERATIONAL PLAN OTHER BUDGET REQUEST FORMS & ADDENDA PERFORMANCE PROGRESS REPORTS OPERATING BUDGET DECISIONS AUDITS Louisiana Office of Planning and Budget

33. Budget EXECUTIVE BUDGET DEVELOPMENT • SIFO 4 – Final Budget Stage • Executive Budget and Supporting Document completed by early February or early March (depending upon type of legislative session) • Preparation of commissioner’s presentation to JLCB • Presented to JLCB and posted on OPB website 45 days before beginning of legislative session (except for first year of gubernatorial administration, when presented 30 days prior to session) • Hard copies for all legislators at opening of session Louisiana Office of Planning and Budget

34. NOTE Same process for ancillary appropriation bill. OPERATING BUDGET APPROPRIATION PROCESS • House Bill 1 – General Appropriation Bill • Governor submits a general appropriation bill for proposed ordinary operating expenditures in conformity with the recommended appropriations contained in the executive budget. Bill is sent to legislature when executive budget is presented to JLCB. • Governor may submit a bill or bills to raise additional revenues, along with proposals for the use of those revenues. • Governor may also submit supplemental appropriation bill for current fiscal year. Louisiana Office of Planning and Budget

35. HB 1 APPROPRIATION TIMELINE Mid-February or Mid-March–Executive Budget presented toJoint Legislative Committee on the Budget Last Monday in March or April– Legislative Session begins (start date depends on type of session) March through May- House Appropriations Committeehears and amends HB 1 Mid-May– HB 1 on House Floor Memorial Day to Mid-June- Senate Finance Committeehears and amends HB 1 Mid-June– HB 1 on Senate Floor Just Before Session End– Conference Committee gets HB 1 Down to the Wire– HB 1 enrolled and sent to the governor Louisiana Office of Planning and Budget

36. OPERATING BUDGET APPROPRIATION PROCESS • During the legislative appropriation process: • OPB presents and defends executive budget recommendations. • OPB prepares and submits administration amendments. • OPB tracks bills for fiscal and policy impact. • OPB queries state agencies on impact of non-administration amendments. Louisiana Office of Planning and Budget

37. OPERATING BUDGET APPROPRIATION PROCESS • State Budget Enacted • Once the legislature passes the appropriations bill, it is sent to the governor for signature. • By statute (R.S. 24:10), bill becomes law if if governor signs it or fails to sign or veto it within 10 days after delivery if the legislature is in session, or within 20 days if the legislature is adjourned. • Governor cannot sign an unbalanced bill. • Governor has line item veto authority. • HB 1 is signed (with any vetoes) and becomes general appropriation act. • Appropriation letter packages distributed by OPB to agencies (usually mid-July). • OPB publishes State Budget (by October 1). Louisiana Office of Planning and Budget

38. $ OPERATING BUDGET IMPLEMENTATION • Appropriation Letter Packages • Commissioner of administration must notify each budget unit as to the nature and amount of appropriations contained in the general appropriation act or other acts for such unit, including the sources of funding supporting such appropriations. • This notification must occur no later than two weeks after the effective date of such act. • OPB e-mails appropriation letter packages and posts materials on OPB website. • OPB provides Office of Statewide Reporting and Accounting Policy (OSRAP) an upload of appropriated budget to accounting system. • Agenciesspread their budgets. OPB must approve spread. Louisiana Office of Planning and Budget

39. OPERATING BUDGET MONITORING, MAINTENANCE, AND CONTROL • Guided by: • Title 39 • Preamble of the appropriation act(s) • Accomplished by: • OPB approves APs, EBs, RBs in AFS • OPB monitors revenue collections, expenditures, positions, and performance • BA-7 process • OSRAP and Treasury • Contract review • OPB presents monthly Fiscal Status Statement to JLCB Louisiana Office of Planning and Budget

40. OPERATING BUDGET MONITORING, MAINTENANCE, AND CONTROL • Monitoring • OPB analysts reconcile agency budgets between the OPB Budgo system and AFS (per instructions provided). • OPB analysts also monitor collections by the agencies. • OPB analysts run monthly position reports. • OPB analysts monitor agency quarterly performance progress reports in LaPAS. • OPB analysts monitor reports by legislative auditor and inspector general. Louisiana Office of Planning and Budget

41. OPERATING BUDGET MONITORING, MAINTENANCE, AND CONTROL • Mid-Year Adjustments - BA-7 Process • BA-7s are used by agencies to request mid-year budget adjustments • Request must conform with Title 39, preamble of the appropriation act (general or ancillary), and PPM 52 • Both financial and performance data are required • Form and questionnaire must be complete • Incomplete BA-7 requests may be returned without action. • Approval may be made in-house by commissioner’s approval or may require JLCB approval. • BA-7 form and questionnaire available on OPB website. • Guidelines provided to OPB analysts. Louisiana Office of Planning and Budget

42. OPERATING BUDGET MONITORING, MAINTENANCE, AND CONTROL • Monthly Fiscal Status Statement • DOA must submit a budget status report monthly to the JLCB. This report must indicate the balance of the budget for the state general fund and dedicated funds by comparing the official forecast for these funds to the total authorized appropriations from each fund • State economist in the OPB prepares the monthly Fiscal Status Statement for presentation to the JLCB. • JLCB reviews the report and makes any changes it deems appropriate to ensure that the report reflects the status of the budget for each fund as of the date on the report. • The most recently approved fiscal status report is the official budget status of the state. • If necessary, action may have to be taken to prevent the occurrence of a deficit. Louisiana Office of Planning and Budget

43. OPERATING BUDGET MONITORING, MAINTENANCE, AND CONTROL • Other Issues • Executive Orders • Act 194 Retirements • Interim Emergency Board Requests • Supplemental Appropriation Bill Louisiana Office of Planning and Budget

44. For more information, please visit the Office of Planning and Budget website at: http://www.doa.louisiana.gov/opb/index.htm • Look for: • Executive Budget Documents • LaPAS • Performance-based Budgeting Forms and Guidelines • MANAGEWARE: A Practical Guide to Managing for Results • Links to performance-based enabling legislation and appropriation acts Louisiana Office of Planning and Budget