Ken Hare In Depth: State budget process can be mind-numbing - WAFB 9 News Baton Rouge, Louisiana News, Weather, Sports

Ken Hare In Depth: State budget process can be mind-numbing

Posted: Updated: Feb 8, 2013 01:55 PM CST
MONTGOMERY, AL (WSFA) -

The adage that there are two things that it's better not to see being made -- sausages and laws -- could easily be expanded to include the Alabama state government budgeting process.

Even if the average taxpayer tries to follow the process, there's a good chance that he or she will become frustrated not just by the complexity of the endless numbers, but how the budgeting and legislative appropriation process works.

In following the budget debates, the first thing that the public should keep in mind  is that Alabama essentially has two distinct and independent budgets -- the Education Trust Fund and the General Fund. The ETF covers the state's share of the cost of public schools and public colleges. The General Fund covers most of the non-education functions of state government -- prisons, courts, Medicaid, etc.

The budgets are much in the news this week. First, Gov. Robert Bentley presented his budget proposal to the Legislature for fiscal year 2014, which begins Oct. 1, 2013. And the Legislature began its budget hearings that will eventually lead to appropriation bills for public education and for the General Fund.

[EXTRA: Governor Bentley's State of the State Address]

But the actual work of preparing budgets for the fiscal year starting Oct. 1 began months ago, when state colleges and government agencies started to compile their budget requests based on needs and expected revenues.

Meanwhile, two different groups -- the Legislative Fiscal Office and the governor's Executive Budget Office -- have been working to estimate what revenues will be available during fiscal 2014 for the Legislature to appropriate. These revenue estimates are crucial to the budgeting process. Unlike the federal government, state governments cannot have spending deficits. Any shortfall in revenues must result in reductions in spending, called "proration" in Alabama.

It is all too common for the governor to have to declare proration and chop budgets during the budget year. These cuts are almost always disruptive and often painful, with Alabamians seeing important services reduced and state and education employees sometimes even facing layoffs.

Not surprisingly, the legislative and the executive revenue estimates are often different. That's the case this year as well.

Asked to describe the differences between the executive and legislative revenue estimates, state Finance Director Marquita Davis said: "The fact is, some of your estimates are conservative, and some of them aren't. You're not going to make the same estimates.

[EXTRA: Finance Director's presentation to the Legislature]

[EXTRA: LFO Director's presentation to the Legislature]

"I know this sounds crazy to you, but a $30 million difference isn't a big deal in a $5.8 billion budget (for the ETF)," she said.           

Another point that taxpayers struggling to understand the appropriations process should keep in mind: The governor's budget proposals are just that -- proposals. The Legislature can give them as much or as little weight as they desire in preparing their appropriation bills.

However, if legislators get too far afield from a governor's proposal, he has the power to veto all or part of an appropriation bill. (In Alabama, a governor has the power to accept or reject any particular item of an appropriation bill without vetoing the entire bill. If he rejects a portion of an appropriation bill, only the vetoed section is returned to the house of origin for reconsideration by the Legislature. The remainder of the bill would become law.)  A veto by the governor can be overridden by a majority of the membership of each chamber of the Legislature.

Because Alabama has two distinct budgets, each chamber of the Legislature has two budget committees. The House has the Ways and Means Education Committee and the Ways and Means General Fund Committee; the Senate has the Finance and Taxation Education Committee and the Finance and Taxation General Fund Committee.

Starting this week and continuing over the next few weeks, the Legislature will hold hearings at which state agency directors and college presidents will plead their case for funding. 

The public should note that the budget requests by many of these agency directors often have little direct relationship to the money that will be available to fund them. They sometimes seem more like a "wish list" letter to Santa than a realistic budget request.

However, the hearings do give the agency directors an opportunity to make a case for what their respective agencies could do with full funding, even though they know they don't have a prayer of getting their full request in the coming fiscal year.

An example came on Wednesday, when the State Department of Education was the first agency up to bat in this year's round of legislative budget hearings.

State Superintendent of Education Tommy Bice asked the Legislature for $4.1 billion for his agency and public schools for fiscal 2014. That would be a $405 million increase from this year's appropriation. And that doesn't even include money for a pay raise for teachers, which the State Board of Education supports.

Bice knows he won't get that much.

"We did a budget based on need. We didn't do a budget on what we totally thought would be available, because if we did that, we'd never get ahead," Bice told al.com. "So we knew when we planned this in November, we'd have to go back and readjust it once we figured out what the actual figures are."

The public can expect other budget requests seemingly disconnected with fiscal reality as budget hearings continue over the new few weeks.

Because Alabama, unlike most states, has two budgets, and because different revenue streams flow into each budget, the state can find itself in the position of having one budget in relatively good financial shape and the other struggling to grow enough to keep up with the demand for services. And in Alabama, the General Fund budget is the one that is most likely to be struggling.

So this year, the governor is able to recommend a modest salary increase for teachers and education support staff members, but not for state employees who are funded out of the General Fund.

Pointing out that budget cuts have forced the state to raise the cost of retirement on both state employees and teachers, Finance Director Davis said: "The irony is that in one budget we're able to provide a 2.5 percent increase that offsets what we've taken away and begin to have a conversation about how to increase their (teachers) pay, while in the other side (state employees) we don't have a mechanism or a way to even begin that conversation."

This disparity in the fiscal health of the two budgets is compounded by the fact that Alabama earmarks a greater portion of its state revenues for specific purposes or agencies than any other state.

Alabama currently earmarks about 83 percent of its tax revenue, far more than the state ranked second, Michigan, with about 63 percent of its revenues earmarked. Forty-one states earmark 30 percent or less of their revenues.

That amount of earmarking further complicates the budgeting process for Alabama governors and legislators.

Another point for members of the public to consider as the legislative appropriations process goes forward: Sometimes moving slowly in passing the appropriations bills is not a bad thing -- as long as it is not too slowly.

If the Legislature waits until later in the session to pass the bills, it allows time to revise and refine revenue estimates, making it less likely that proration will have to be declared in the coming fiscal year.

So, in summary, Alabama taxpayers who are trying to follow the legislative budgeting process need to understand that it will never be perfect. The governor and the Legislature have to build budgets based on estimates made today on how the state's economy will be doing in a fiscal year that doesn't end until 18 months from now. They usually don't have enough money to come close to meeting all the needs for state services. And because of earmarking, they often do not have the flexibility to move revenue where it is most needed.

State government budgeting is difficult, and especially difficult in Alabama. But it is easily the most important task the Legislature faces, and one of the most important tasks for governors. So Alabama taxpayers need to hold them accountable for how well they budget.

Like making sausages, it may not be a very appetizing process for the taxpaying public to watch closely. But it is important that Alabama taxpayers do so nonetheless.

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Ken Hare was a longtime Alabama newspaper editorial writer and editorial page editor who now writes a regular column for WSFA's web site. Email him at khare@wsfa.com.

Copyright 2013 WSFA 12 News.  All rights reserved.

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