The Life Cycle of a Budget

1. The Life Cycle of a Budget The Full Cycle of a State of Alaska Operating Budget Request

2. Budget Definitions and Flow of Budget Process • See handout—Glossary of Key Budget Terms, published by the Office of Management and Budget http://www.gov.state.ak.us/omb/Glossary/index.htm See handout—Flow chart of a typical operating budget flow process.

3. Operating Budget Process Alaska’s budget process is continuous and iterative, involving all levels and branches of government. Those involved in the budget process deal with different references in time—looking backward to gain from experience, implementing and monitoring the current year budget, and planning for future public needs. Preparation of the operating budget begins long before the legislature convenes.

4. Pre-Session Activity

5. In the Beginning…. The budget cycle begins in late-July, early-August of each year. This begins establishing the succeeding, or next fiscal year’s budget, e.g. in July of FY09, Management begins the development of the FY10 operating budget. Management first identifies “big picture” items—significant changes in the agency’s budget from the prior fiscal year operating budget appropriations. These items are reviewed with the Governor’s Office (OMB). Approved items are then submitted in the Governor’s Budget Request.

6. Increments and Decrements • Increment—a request for new and/or additional funding authority • Decrement—not as much is needed as last year

7. Program Narratives The narrative portion of an operating budget provides information about a budget entity (department, division, or component). Narratives describe core services, key challenges, and measures for determining the entity’s success.

8. Program Narrative The division narrative consists of: • Contribution to the Dept Mission • Core Services • Performance Measures • Activities • Key Challenges • Changes in Results • Accomplishments • Statutes/Regulations that govern division

9. Operating Budget Entered in ABS After narratives, Budget Unit begins entering operating budget information into the Alaska Budget System (ABS) There are separate modules in ABS that data is entered: • Revenue detail • Expenditure detail • Personal Service Module • Change Records

10. Revenue Detail: detail is provide for all restricted revenues. There are more than 200 various fund sources within the State of Alaska; only the DOC’s 6 restricted revenue types are shown below: • Federal Receipts • General Fund Program Receipts (GFPR) • Interagency Receipts (I/A) • Capital Improvement Project Receipts (CIP) • Receipt Supported Services (RSS) • Statutory Designated Program Receipts (SDPR)

11. Restricted Revenue What is restricted revenue? Funding is restricted for a particular purpose, e.g. federal funding can occur only for that particular purpose, as stipulated by federal grant requirements. AS 37.05.146

12. Unrestricted Revenue Unrestricted revenues do not need to be reconciled in the operating budget exercise. Unrestricted revenue is General Fund dollars that are appropriated for any purpose within the constraints of the appropriations structure and mission.

13. Expenditure Detail Expenditure detail provides descriptions of expenditures relating to the following items, and budgeted to the appropriated amount: • Travel 72000 • Services 73000 • Commodities 74000 • Capital Outlay 75000 • Grants and Benefits 77000 (DOC has no authorization within this expenditure line.)

14. Personal Services A personal services module is located in components that have positions reporting directly to that component. A personal services module contains: • Funding sources for each position that balance to funding sources specifically allocated for personal services • Benefit rates (based on bargaining unit and position status) • Vacancy Factor (based on the expectation that not all positions will be filled 100% of the time during a fiscal year)* • Organization Charts (submitted separately from ABS) *Note: The DOC received full funding for ALL Institutional positions in FY09.

15. Change Records • Types of Change Records • Atrin: agency transfer-in (between depts) • Atrout: agency transfer-out (between depts) • Dec: decrement • FndChg: fund change • Inc: increment • LIT: line item transfer • OTI: one-time item • PosAdj: position adjustment • SalAdj: Salary adjustment • TRIN (transfer-in within a dept) • TROUT (transfer-out within a dept)

16. Overview of the Pre-session Activity The division’s balanced budget has been submitted to the department level, what happens next? • Deputy Comm presents to Comm • Department submits to OMB • OMB may request changes • Governor releases budget by December 15th • Budget Unit prepares Budget Overviews for session

17. During Session

18. Activity During Session • Legislature convenes on the 3rd Tuesday in January • House and Senate Finance Committees set agency fund targets that the subcommittees are expected to meet. • Subcommittees are charged with reviewing the Governor’s Budget Request, hearing testimony from agency personnel (Budget Overview presented) and other interested parties, and developing budget recommendations to be presented to the full Finance Committee.

19. Subcommittee prepares report for Finance Committee(s) that include: • Agency totals: highlights big picture changes in funding, positions, and line items • Appropriation Summary of general funds only at the appropriation/allocation level • Appropriation Summary of all funds at the appropriation/allocation level • Transaction Comparisons: list of the individual transactions generating the funding/position changes from one state of the budget to the next

20. Finance Committee Closeout • Public testimony is heard and the finance committee members prepare and submit amendments to the finance committee co-chair prior to the full finance committee meeting. • Adopted amendments are incorporated into a committee substitute bill, which is then sent to the floor for additional amendments and a final vote.

21. Conference Committee Process • The House and Senate work independently, inevitably they produce different bills. A conference committee is appointed to reconcile the differences between the House and Senate versions of the operating bill. • After the conference committee has resolved the differences, the conference committee’s substitute bills are sent to both floors for a vote and then transmitted to the governor. • Conference committee bills cannot be amended on the floor.

22. Governor Signs the Operating Budget Bill If an appropriation bill is transmitted to the governor after session, the governor has 20 working days to review the bill and exercise line item veto power. The bill becomes law and is typically effective with the beginning of the fiscal year on July 1. Some sections of the appropriations bills may have other effective dates.

23. Post-Session Activity

24. And you thought we were done….. Management Plan is the final exercise to the operating budget. This typically begins in late-July to mid-August • Last chance for change records • Rebalance personal services to AKPAY, add new approved positions, etc. • Identify PCNs vacant for 12 consecutive months. (Unless approved by OMB in writing, positions vacant for more than 12 consecutive months are to be deleted) • Adjust line balances based on appropriations and allocations • Submit final management plan to OMB for approval

25. Can you change the Approved Mgmt Plan? • Once the management plan has been approved by OMB, it can be modified through the Revised Program (RP) process.

26. There are various types of Revised Programs (RPs) for various actions. The following is a listing of common RPs used within DOC. An RP requires the approval of the Administrative Service Director who is the final responsibility for departmental financial status. Internal Approved RPs do not require OMB approval. • Transfer between non-personal lines • Transfer between allocations within an appropriation or sub-appropriation. • Unbudgeted Reimbursable Services Agreement (RSA) less than $100,000 (amount is accumulative) • Restrictions (uncollectable restricted authorization or specific general fund authorizations.)

27. The common RPs used within DOC cont’d: The following is a listing of common RPs used within DOC that require additional approval by the Office of Management & Budget (OMB) within the Governor’s office. • Establish of new or reclassification of existing positions resulting in a change of more than 2 ranges • Transfer of personal services authorization • Unbudgeted RSA’s greater than $100,000 (requires OMB approval / amount is accumulative) • Increase authorization to spend unbudgeted federal or other receipts (requires approval by Legislative Budget & Audit (LB&A))

28. Three at once….Post-Session and Pre-Session Overlap • In the months of July and August, we juggle: • Prior fiscal year close-out and reappropriation; • Current fiscal year management plan • Next fiscal years Governor’s budget request….start the cycle again

29. And so goes the life of a budget…..

30. Resources • Websites • www.gov.state.ak.us/omb • http://w3.legis.state.ak.us/home.htm • http://www.legfin.state.ak.us/ • Forms & Manuals websites • http://www.gov.state.ak.us/omb/forms/forms.html • http://www.legfin.state.ak.us/Publications/publications.php