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Week 5: Deficits, Budget Balancing, Reforms (cont.)

Week 5: Deficits, Budget Balancing, Reforms (cont.). Review Leg. Analyst’s Recommendation on school reform Summarize Kettl Balancing budgets--state and local government Budget balancing strategies Budget reallocation Budget processes characteristics and goals

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Week 5: Deficits, Budget Balancing, Reforms (cont.)

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  1. Week 5: Deficits, Budget Balancing, Reforms (cont.) • Review Leg. Analyst’s Recommendation on school reform • Summarize Kettl • Balancing budgets--state and local government • Budget balancing strategies • Budget reallocation • Budget processes • characteristics and goals • examples from students’ assignments • class exercise on school district budget process • Preview of week 6

  2. Legislative Analyst’s Analytical Approach • Cite research (relationship between time and achievement) • Accuracy and appropriateness of comparisons • instructional time v total time • core academic subjects v total time • other things not equal (quality of instruction) • More efficient means to same ends (better use of time) • More effective means to same ends (look at alternatives) • Equity (not all schools have same opportunity to participate) • Implementation (would not work as proposed) • Lacking detail

  3. Governor/Dept. of Finance Vision/policy/leadership Budget balance Reserve/flexibility Retain agency support Maintain agenda control Public support Successfully defend Governor’s Budget Legislative Analyst’s Office Frame budget discussions Recommend budget reductions Preserve non-partisan reputation Accurate analysis Gain Legislative approval for recommendations (secondary) Different Roles in Budget Process

  4. Summarizing Kettl • rationality fixes have failed to account for politics • process fixes are foiled by circumvention strategies: • snapshot projections and other game playing • with 70% exempt, huge incentives to avoid the axe • and by competition between branches and centralization of power within each branch • leads to personal (ad hoc) budgetary politics • Other foils: • costs of entitlements (interest group politics) • anti-tax sentiment-- hard to raise $$ for entitlements • divided party government

  5. Summarizing Kettl -- continued • Solution: political leadership • confront controversy • promote vision and values • promote citizenship and sense of fairness • define the public interest • other characteristics of effective political leadership? • Would a greater sense of fairness of tax and spending policies help? • disconnection between who pays and who benefits • should there be a closer connection?

  6. Balancing Budgets -- State and Local • Budget balancing requirement • More intense efforts to hide deficits • Fewer macroeconomic issues to consider • Greater influence of environment on balance/deficit • Deficits don’t accumulate--problems more tractable • Temporary, not structural deficits -- more fixes available

  7. Budget Balancing Strategies--State and Local • Year-end balances • How much is politically acceptable? • Authorization to re-appropriate or carry over • “Pre-buy” from “budget year” • Spend budget year funds this year • Projected year-end deficits • Hiring and expenditure freeze • Across the board unallocated cuts • Budget year shortfalls • Across the board • Priority-based cuts (reallocation)

  8. Budget Reallocation • The value of reallocating resources • meeting changing priorities • differential growth rates among units • static budgets • Challenge of reallocation • political -- sense of fairness • requires analysis • Built-in constraints • entitlements • spending floors (Prop 98) • permanent positions and labor intensive organizations

  9. Budget Process • Designed to meet organizational goals • Reflects organizational culture • Variables • players • rules/procedures/documents/timelines • balance of executive/legislative power • degree of centralization/coordination • top-down/bottom-up • openness to internal members • openness to external community • Examples from students’ memos on budget process

  10. Units: 4 elementary schools 2 middle schools 1 high school Players: elected school board superintendent/staff 7 principals 7 PTAs parents and community Process Variables: roles of various players authority/balance of power rules/procedure documents/timelines executive v legis power degree of centralization top down/bottom up openness to internal openness to external Design a Budget Process for a School District

  11. Preview of Week 6 Begin Part II: Context of Public Finance • New Book: Brunori, on sales, income, property tax issues in state government • Rubin Chapter 2 on revenue politics • Guest speaker, Brad Williams, from LAO • state revenues and process for projecting • politics (and games) of revenue estimation • tax expenditures • current issues in state finance

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