Almost everything you always wanted to know about budgets, but were afraid to ask

1. Almost everything you always wanted to know about budgets, but were afraid to ask Presented by: Lori Albin, Director Fiscal Policy Center National Juvenile Justice Network

2. The Fiscal Policy Center is supported by generous grants from the Public Welfare Foundation, Tow Foundation and John D. and Catherine T. MacArthur Foundation. Leads and supports a movement of state and local juvenile justice coalitions and organizations to secure state and federal laws, policies and practices that are fair, equitable and developmentally appropriate for all children, youth and families involved in, or at risk of becoming involved in, the justice system.

3. The Budget • Why do we care? • The Budget is about making choices

4. What goes into a budget • Projections • Revenue projections • Expenditure projections • Five parts: • Operating budget • Capital budget • Tax expenditure budgets • Forecasting • Adjustments

5. Budgeting in Times of Fiscal Strain • Projections problematic • Shortfall in revenues • Increase in demand for some services • Government must make adjustments • Increased revenues (i.e., taxes) and • Cut spending • Budget debate moves from marginal changes vis a vis prior budget to in-depth examination of whether programs (spending) should be continued

6. The Players • The Chief Executive • The Executive Budget Office • Develops and defines the budget process • Presents a plan that considers program priorities • The Legislature • Budget Committees • Leadership • Executive and Legislative Budget Staffs • Provide Technical Assistance during process • Often draft fiscal notes

7. Funding State Services

8. Funding State Services • Generally, numerous sources • Federal Funding • Debt Financing • Lotteries/Gaming • Fees/Licensing • Income Taxes • Ad Valorum Taxes

13. OPERATING BUDGETS

14. OPERATING BUDGETS • The portion of the budget that addresses program activities and services authorized by the state’s legislature and governor. • The construction and renovation of buildings and the purchase of major equipment is not included in the operating budget, but is instead addressed in the capital budget.

15. Overall Process

16. Planning Process

17. Legislative process

18. Finding the Numbers(More to come in future trainings) • Budget Bill is Published (enrolled) • Reconciliation Bill is Published (enrolled) • Budget by agency is published (Budget Books) • Agency Publications • Grant proposals • C/B studies • Look at related issues – drug courts • Public Information Act requests

19. Fundamentals of budgeting

20. The work of government • The work of government can be depicted as a system of: • (1) obtaining resources (or inputs); • (2) putting those resources to work (or processing them) so that; • (3) a service (or output) is provided, and, as a consequence; • (4) a desired result (or impact) is produced for the people of the jurisdiction.

21. Budget formats • Different methods of looking at the work of government • Line-item budget • Performance budget • Program budget • Most states use a mixture of the above

22. input Line-Item Budgeting • input • process • output I want to hire more probation officers. Why? Because we need to lower caseloads. Why?” • So that we can increase public safety.

24. program budgeting • Looks at spending proposals in terms of services the programs are intended to provide • Program (and sub-program) refer to • Provides information on what is produced • Budget is focused on: • What does government want accomplished – • Lower recidivism rate impact output

25. How do we reduce recidivism by 10%? impact • By implementing realignment. output What is involved in realignment? process What is the monetary effect of realignment? input

29. Performance Budgeting • Allocates money to various activities or programs • Describes the work output that the organization will produce with this money • Advantage: • Shows activities of government and • Service levels of the activities

30. Performance based budget examples

34. Performance/Program Budgets(and a Little Line-Item Thrown in) • Most states use a combination of the presented formats • Here are some examples: • Oregon • Texas • Check: • Uncodified language • Riders • Reconciliation Bill (BRFA) • Conference Committee Report

42. Program portion PERFORMANCE PORTION RIDER

43. Zero-Based Budgeting • Process (or tool for creating budgets) • The key characteristics of zero-based budgeting process are: • It begins at zero resources. • It forces the ranking of organizational purposes and programs. • It requires a clear focus on the priorities of and alternatives to the entity’s operations. • Analyzes the essence of a program, agency, department to determine its value and worth to residents. • Limited use

44. Capital Budgets

45. Definitions • By statute • For state governments, the span of capital projects typically includes: state buildings, special use state facilities such a prisons and mental hospitals, life safety, modifications to conform with the Americans with Disabilities Act (ADA), public infrastructure such as water systems and wastewater treatment, and other basic requirements. • In some jurisdictions, capital items also include major items of equipment, technology systems, and special use items such as aircraft.

46. Performing Financial Analysis of Capital Projects • Needs analysis is often/sometimes required for certain capital projects. • In some jurisdictions, there is a regular or prescribed cost benefit analysis model that is followed in evaluating capital projects. • When the final recommendations are made, the strength of the needs analysis, the financial analysis, and the ability to document that analysis will allow it to stand up to scrutiny from policy makers and staff in both the executive and legislative branches.

47. Capital Budget Excerpt

48. Post Budget Process

49. Financing Options • Gift or Grant • Pay cash or borrow • Privatize Project (followed by lease/purchase) • Still uses RFP/IFB system

50. Additional Resources • www.njjn.org • http://www.vera.org • http://www.nasbo.org • http://www.pewcenteronthestates.org • http://www.naco.org • http://www.ncsl.org • http://www.gfoa.org • http://www.cbpp.org • http://www.wsipp.wa.gov/rptfiles/costbenefit.pdf • http://www.usgovernmentspending.com • http://www.census.gov/govs/estimate/