A blueprint for state and local government budgeting.

• Author: Strachota, Dennis
• Position: State of the Art

In January 1993, the Government Finance Officers Association (GFOA) sponsored a symposium on problems besetting state and local budgeting. Encouraged by interest generated from the symposium, the GFOA Executive Board created an interorganizational task force to examine ways to improve state and local budgeting practices.

Nine state and local government groups joined forces with GFOA to create a task force comprised of elected and appointed officials, academicians, researchers and public finance industry representatives. Nominated by their respective firms and organizations, 27 individuals were appointed to the National Task Force on State and Local Budgeting, chaired by Mayor Paul R. Soglin, City of Madison, Wisconsin.

The following article was excerpted from a draft of the task force's final report. At the time of the report's release, members of the task force were seeking the endorsement of its recommendations from participating state and local government organizations. The GFOA Executive Board endorsed the recommendations at its February 1994 meeting.

Budgeting: Key to Decision Making

In its most basic form, budgeting is the legal authorization for a government to raise and spend financial resources. Without it, states and localities could not function.

For most states and localities, however, budgeting is more than a device to authorize and control revenue raising and spending. It is the primary vehicle for setting fiscal and program policy. In a growing number of jurisdictions, it also has become the principal means for establishing objectives and evaluating the performance of departments and programs.

Although budgeting involves political choices, it is governed by a set of budget policies and procedures. These policies and procedures deal with matters as diverse as budget formats and tax policies. The budgetary environment, which is influenced by such factors as laws, custom and management capacity, will largely dictate the makeup of a government's budgetary practices. As the budgetary environment changes, generally so do budgetary practices.

Forces that Strain Budgeting

Budgeting is not done in isolation. It is affected by a number of internal and external factors, such as economic and fiscal health, management style of executives and administrators, and taxpayers' attitudes toward government. Budget policies and procedures often undergo change when the influence of one or more of these factors is pronounced. In recent years, several factors have coalesced to put added stress on budget systems across the nation.

Economic Slowdown. Two recessions in the 1980s and one earlier this decade, combined with a slow economic recovery, contributed to operating deficits and a reduced capacity to maintain existing service levels. An October 1993 U.S. General Accounting Office study found that state and local government budget reserves have generally declined since the mid-1980s. This weakening of fiscal health can be attributed, in part, to slower economic growth during and following recent recessions. This slower growth has reduced revenue levels and increased spending for social welfare programs. Jurisdictions have responded to these...