Commentary: Is the Public Economics Toolbox Applicable to Budget Analysis?

• DOI: http://doi.org/10.1111/puar.12242
• Published date: 01 July 2014
• Author: Abraham Lackman
• Date: 01 July 2014

Commentary

Abraham Lackman is senior off‌i cer

for civic affairs at the Simon Foundation

and scholar in residence in the Graduate

School of Education at Fordham University.

Previously, he was secretary of the New

York State Senate Finance Committee for

nearly a decade and budget director for the

City of New York for two years.

E-mail: alackman@fordham.edu

Is the Public Economics Toolbox Applicable to Budget Analysis? 527

Public Administration Review,

Vol. 74, Iss. 4, pp. 527–528. © 2014 by

The American Society for Public Administration.

DOI: 10.1111/puar.12242.

Abraham Lackman

Fordham University

“Creating Public Value with Tax and Spending

Policies:  e View from Public Economics” by Laura

Kalambokidis provides an excellent summary and

analysis of modern developments in public econom-

ics. While many of the proposed public f‌i nance tools

should be useful in evaluating discrete and digestible

pieces of proposed legislation, I remain skeptical of

the applicability of these tools in evaluating proposed

budgets either at the federal or state level.

 e heart of Kalambokidis’s article is a series of ana-

lytical tools (from the public economics toolbox) that

“can help governments make tax and spending choices

that will maximize public value.” Many of the tools

revolve around “a cost–benef‌i t framework to identify

policies that can deliver the greatest return to the

state’s investment.”

While I am sympathetic to the rigorous toolbox

described so well by the author, it is important to

recognize where the systematic application of these

public f‌i nance tools is feasible and where it is not. In

the f‌i rst instance, the proposed tools are appropriate

and helpful in evaluating new and discrete legisla-

tion involving tax and spending policies outside the

normal budget process.

 e obvious question is, why exclude the budget

documents that are generally the major pieces of legis-

lation adopted by either the Congress or the respective

states in a given year? As one who has developed and

negotiated budgets for both New York City and New

York State for more than a decade, I question whether

the rigorous cost–benef‌i t framework espoused by the

author may be practical.

In the case of New York State, current budget docu-

ments total nearly 3,000 pages, include more than

20,000 discrete appropriations, and are currently

$138 billion in size.  e budget itself (actually a series

of budget bills) is required under the state constitu-

tion to be released by the executive during the third

week of each January.

 e governor then has 30 days to of‌f er amendments

to the original budget. In some years, these amend-

ments are voluminous. By the middle of February, the

New York State Legislature has a complete proposed

budget to evaluate. Unfortunately, the state legislators

and their f‌i scal staf‌f have only six weeks to evaluate the

proposed budget and of‌f er amendments before a f‌i nal

vote is taken on March 31, the day before the start of

the new f‌i scal year.

Having supervised the budget process and analysis for

more than a dozen budgets at the state and city levels,

I believe that it is not realistic, let alone practical, to

expect a rigorous cost–benef‌i t analysis of each discrete

appropriation (a variant of zero-based budgeting)

given the limited timetable imposed by the state

constitution.

At the very best, the current budget process in most

states allows “a rough justice,” as described by Joseph

Stiglitz. You try to evaluate the overall winners and

losers and hope to estimate their relative gains and

losses. In my view, this is a best-case scenario for most

large states, where the budget time frame is severely

compressed.

Clearly, this is not the standard espoused by

Kalambokidis. In her view, “To benef‌i t from an eco-

nomics-based view of public value, government deci-

sion makers need help to identify market failures and

the range of options available to address those failures.

 ey also need policy analysis that can forecast the

expected outcome from adopting a proposed policy.”

While I think her standard is high, it can be achieved

for discrete and digestible legislation outside the “hot-

house” environment of budget making. In particular,

rigorous policy analysis should be applied to new and

discrete legislation in multiple areas ranging from

criminal justice to the environment to the evaluation

of individual tax expenditures. Kalambokidis of‌f ers

numerous instances in which such analysis is currently

being undertaken.

Is the Public Economics Toolbox Applicable to Budget

Analysis?