by Colin Peddicord
No item of policymaking has more interests to satisfy that the budget. The finite amount of money must fund a myriad of services, programs and structures needed to keep a state running. Every budget has countless interest and advocacy groups, unions, companies and public desires that it must try and satisfy. These competing policy actors play a role in the shaping and creation of a state’s budget. Because there is a limited amount of money, it is not possible to satisfy all of the demands that lawmakers face when creating the state budget.
The point of this paper is to examine the process of shaping, creating and implementing the Oregon budget. First, I will explain the legislative process that goes into making the budget. Then, I will examine the different policy actors and responsible parties, and the different drivers that shape the budget. In doing so, I will show the challenges lawmakers face when drafting the budget. Through the process of this paper, I will be able to show how the budget process is the most challenging part of a lawmaker’s job.
HOW THE BUDGET IS PUT TOGETHER
The Oregon budget is set on a biennial basis. Each budget begins on July 1st of odd-numbered years and ends June 30th of the following odd-numbered year. The Department of Administrative Services’Budget and Management Division (BAM) sends out instructions, guidelines, forms and the price lists of goods and services to agencies in March of even numbered years. Agencies send back an Agency Request Budget that outlines policies, finances, performance measures and staffing. These request budgets are requesting the Governor to make certain recommendations to the legislature. Request budgets must be submitted to the Department of Administrative Services by September 1st (Rocco and Hill, 2011)1.
The Budget and Management Division (BAM) within the Department of Administrative services reviews submitted request budgets. Based on technical budget issues, availability of funds and the Governor’s policy direction, BAM then makes recommendations to the governor. The Governor’s Recommended Budget is a reflection of the governor’s current budget policy and direction. This budget includes statewide revenue and expenditure data as well as individual state agency budgets. The budget is then compiled and prepared for printing on November 10th. The Legislative Fiscal Office and the Legislative Revenue Office are supplied with a copy of this budget for analysis, although it is kept confidential until its official release on December 1st(Rocco and Hill, 2011)1.
When the regular session begins, the Governor’s Recommended Budget is presented to the Legislative Assembly. This occurs at the start of the legislative session every odd numbered year. The Joint Committee on Ways and Means reviews the proposed revenues, expenditures and performance measurements of each individual state agency through a series of subcommittees and public hearings. The Legislative Fiscal Office staff analyze budgets on the grounds of technical budget and fiscal issues and the funding priorities of the legislative leadership. Each chamber of the legislature votes on the budget bill. This determines The Legislatively Adopted Budget (LAB). This sets out General Fund appropriations, lottery fund allocations, Other Funds and Federal Funds expenditure limitations, key performance measures, and position authority for each agency.
The legislature can change the Legislatively Approved Budget through an Emergency Board, a special session, during short sessions during the even-numbered years or the next odd year session.
THE COMPOSITION OF THE 78th LEGISLATIVE ASSEMBLY
The 7th legislative assembly is controlled by the Democratic party. There are 60 seats in the house of representatives and 30 in the senate. The house is split 35-25, where the democrats hold a t10 seat advantage. The senate is split 18-12, where the democrats hold a 6 seat advantage.
The budget must pass through The Joint Committee on Ways and Means. This committee is made up of 24 members, comprised of 12 senators and 12 house representatives. Senator Richard Delvin, and Representative Peter Buckley, both democrats, co-chair this committee(Rocco, Hill and Rumbaugh, 2015)2 .
Within the government, there are several powerful players in the shaping, creating and implementing of the state budget. Some of these key players are obvious. The elected official are the most obvious players in the budget process, as they are the ones with the most direct control. The Budget and Management Division within The Department of Administrative Services sends out the initial guidelines, performance measurements and other information regarding the budget out to agencies. This division and the department it is a part of have a substantial role in the budget process, as they are the ones who collect the budget proposals from all the different agencies and make recommendations to the governor.
The governor herself also has great power over the shaping of the budget. Generally speaking, the governor has been part of the same political party that hold majority in both chambers of the legislature. Generally speaking, this means that not only is the governor the head of the state, but also the de facto head of the majority party. This has the potential to give her great power in the creation of the budget beyond the making of the Governor’s Recommended Budget.
THE LEGISLATIVE ASSEMBLY
Ultimately, the power over and control of the purse is vested in the legislative chambers. Budgetary authority is granted to the Oregon legislature under Article IX of the Oregon Constitution. While the governor can recommend budget priorities and changes, the budget that the state runs on is adopted by the legislative chambers(Brown, 2014)3. 12 members from each chamber comprise the Joint Committee on Ways and Means. Staffed by the Legislative Fiscal Office, this body determines state budgetary policy. Facilitating the adoption of the biennium budget is facilitated through six to eight subcommittees. As such, the chairs of these committees hold great power and control over what makes it into the final budget.
State agencies are another group of players in the budget process. State Agencies are guaranteed to receive allocations in the budget, usually from the General Fund, which is meant for funding agencies that do not produce revenue. These agencies, while they do not produce revenue, are essential to running and maintaining the state. Other sources of funding for the budget are “dedicated”, meaning that lawmakers have a very limited level of control over them.
Despite this, agencies are keen to compete for money that lawmakers have control over. One example I saw was the Oregon State Police (OSP) making funding requests for a new database. The software used by the current system used by the Oregon State Police to keep track of records is 18 years old. The vendor that had originally designed it no longer supported it. Handling 32 million transactions a year, current systems are unable to keep up with the demand being placed on them. As a result, OSP have begun lobbying for additional funding from the next two biennium budgets to replace this system. While OSP is well funded, projects like these that all agencies must, at some point, undertake to stay efficient and able to meet future demands show the need for additional funding.
NON GOVERNMENT PLAYERS
As with any political structure, for-profit companies play a role in the budget process. Their role is usually facilitated through lobbyists when it comes to the day to day activities of the budget process. Hired lobbyists act on behalf of their employer to steer the budget process towards objectives that favor their interests. The role they play is multi-faceted. On one hand, they can be very knowledgeable on a given issue and can provide members of the legislature with information to better illustrate the topic, giving them guidance and sounds reasons to act or not act in a certain way.
Elected officials or public agencies are not the only groups with control over the budget process. Unions and other advocacy groups can also pose a threat. Even if they are not your constituents, they may decide to fund your opposition in the next election using money or grassroots tactics. Weighing the politics risks of angering or appeasing these groups determines how elected officials use their power over the budget. Elected officials are also careful to make decisions based on what groups make up their constituents and possible opposition in their district. These fact show the power that organized groups have power in shaping the state’s budget.
When discussing the budget process, often, it is the most overlooked players that end up with the most power. Public hearings play a role in the creation of the state budget. Members of the public can voice concerns, support or opposition to sections and/or details of the state budget. This allows lobbyists, unions, non-profits, advocacy groups and individual members of the general public a measure of power in the budget process. Constituents of committee members, and specifically committee chairs, can play more of a role in this process.
The relationship between lawmaker and their constituents often hinge on how they vote on budget matters. If constituents in one district, for example, one with a large university, prioritize higher education over law enforcement, it behoves the lawmaker to reflect these views in the capital and make them his/her own. The lawmaker may push for unassigned funds to be funneled to high education, funding state colleges instead of something else, such as a state agency or tax incentives. The ability for the lawmaker to make the concerns of his voters his own and make good on doing their will build and solidifies the trust voters have in that lawmaker.
However, if the elected official does not appear to be supportive and/or proves not to be, a lobbyist and withhold their skills to help them get what they want. A lobbyist could persuade other members of the legislature to vote in an unfavorable way on a bill important to a certain elected official. The companies that employ the lobbyist can also generously fund opposition to that member of the legislature, greatly endangering their chances of getting reelected.
The ultimate goal of every elected official is to get reelected. Calculated risks and balancing public opinion, constituent demands, objectives and policy of your party and what you think is right is part of the job. If large numbers of your constituents have a strong desire for something in the budget, you will use your power you have in the budget process to oblige them in order to get reelected.
WHERE FUNDING COMES FROM
The Oregon state budget consists of 4 types of funds. These funds are gathered through fees and taxes on the local and state level as well as grants from the federal government. The obvious purpose of this system is to gather money to fund the state and it’s many services and programs. It is also to ensure that the amount of money available for the state budget does not fluctuate wildly from year to year.
The first type is the General Fund. The General Fund is funded by the income taxes paid by Oregon individual taxpayers and Oregon businesses. This source of funding is “fungible”, meaning discretionary. The legislature has more freedom to use this fund as they see fit than any other source of funding.
The second type of funding is source of funding referred to as, “Other Funds”. Some of the sources for this fund comes from some taxes, mainly those related to employment, forests and use of highways. Revenues from state licensing fees, tuition fees and other service fees also provide revenue for this fund. It is important to note the property taxes do not contribute to Other Funds. The legislature does not have a lot of power over this revenue source. State laws, whether in the constitution or statutes, dictate that this source of funding be obligated to pay for certain state programs and services.
Federal Funds are a source of income for the state from the federal government. These funds are usually legally obligated to be used for specific programs and/or services. The federal government places specific limits on where this money goes and how it is spent. Some of these funds come from the state matching what the federal government for state expenditures. These funds are granted only if the state runs the program or funds a project with the federal government’s approval.
Finally, Lottery Funds are a large source of money that the state can use for specific purposes. A general trend has been to spend this money on dedicated purposes like education sports programs, economic development, the state’s Education Stability Fund, the Parks and Natural Resources Fund and debt services.
The budget itself is the product of the process through which it is created. While there are many players that influence the shaping, creation and implementation of the budget and the changes to it, there are several key drivers. Drivers are patterns and/or events that impact the budget process.
PATTERNS THAT DRIVE THE BUDGET PROCESS
Population growth and changes in demographics are two of the biggest. As populations grow, state programs and services have to grow and adjust to accommodate these changes. If population growth is driven by an increase in children, K-12 education will need an increase in funding. If there is a spike in the senior citizen population, the state programs, such as healthcare-based services, that focus on those populations may have to receive additional funding.
Health care costs and constitute a large portion of the funding. High numbers of people without insurance can have a major impact on the operating costs of hospitals and state programs that give assistance to those at the bottom of the socio-economic ladder. If someone makes an emergency room visit and does not have insurance or any feasible means to pay the bill, the state usually has a role to play, stepping in and paying the hospital for treatment rendered.
EVENTS THAT DRIVE THE BUDGET PROCESS
One-time expenditures can have noticeable impact on the state budget. Large construction projects, such as building a new bridge and large highway repair projects can cost tens of millions of dollars or more. These projects usually require funding from the state over a period of several years. As such, the legislature must be able to find money from the appropriate source of funds to pay for these projects.
One example of multiple drivers coming together in a single event to influence budget change would be the expansion of Medicaid under the Affordable Care Act and the subsequent implementation of the Cover Oregon policy.
The passage of the Affordable Care Act caused changes in federal policy relating to health care laws and regulations to not only make buying health care through a private insurance company more affordable but also making sure the rights of the consumer was protected. It also expanded Medicaid to include more people, thereby decreasing the number of uninsured in the state. These policy changes, in turn, will decrease state spending on the uninsured while increasing tax revenue from increased economic activity.
Another driving event that will impact future budgets, both in the amount of money available and who receives future money has been the legalization of marijuana in the state. Decriminalizing marijuana will not only generate millions in new revenue, but will also have law enforcement agencies millions. One study indicated that legalizing marijuana could save law enforcement nearly 30 million dollars(Miron, 2008)4
WHAT’S IN THE BUDGET?
By studying key drivers and understanding how they play a role in the budget process, and studying current economic, demographic, cultural and legislative changes in Oregon, we can better understand and see how the Oregon Budget was shaped. In addition, by studying these trends, in is possible to see how future budgets will be shaped, what key drivers will play a role and to what extent.
The general make up of Oregon’s state budget has stayed relatively the same for the last few bienniums. K-12 education has been the largest single expenditure of the state. Between 2009 and 2013, Oregon spent 11 percent in 2011 to 15.7 percent of the budget on K-12 education. During the same time, funding for higher education dropped from 9.5 percent in 2009 to 1.1 percent in 2013(NASBO, 2014)5 .
Currently, the state is running on the 2013-2015 Legislatively adopted budget. The total state budget for the 2013-2015 Legislatively Adopted Budget is 59.8 billion dollars. This amount represents a growth in the state’s budget of 4.6 percent over the 2011-2013 Legislatively Approved Budget (Legislative Fiscal Office, 2013)6 . This figure excludes Oregon University System Other Funds, as it is no longer part of the state budget.
Examining the two funding sources that the legislature has the greatest discretionary control over, the General Fund and the Lottery Fund, which constitute 16.4 percent of the state budget when combined, we can see how these funds are spent and what programs and services are dependent on them.
As seen on the graph below, education, which receives 8.6 billion dollars for the 2013-2015 biennium, accounts for 51.6 percent of General and Lottery Fund expenditures. Human Services, at 3.2 billion dollars, makes up 25.7 percent. Public Safety and all other programs make up 12.6 and 10.1 percent, respectively (Department of Administrative Services, Chief Financial Office, 2013)7.
What this implies is that, when it comes to the part of the budget most influenced by public opinion, demand for a well-funded education system out-prioritizes other concerns by far. However, given that it is already over half of the discretionary spending budget, it is hard to see how education funding could increase or where that money would come from.
HOW THE BUDGET PROCESS IMPACTS ELECTED OFFICIALS
Part of the budget process is not simply funding something but reforming the policies around a particular area of spending to ensure that the funds are being spent on a well-run, efficient program to make sure that money is not being wasted. Part of keeping your job as an elected official, especially one with power in the budget process, is making sure that the programs and services you are funding give a good return, whether that return be monetary or otherwise. Constituents don’t like expensive programs that aren’t efficient and tend to view them as a waste of money, thus, hurting your chances at reelection and keeping your job.
A state cannot exist without a budget. The state’s budget and the processes, actors and policies that factor into its shaping, creation and implementation can be a political and policy minefield. Political and legislative structure, such as the role the governor, joint and subcommittees and the two legislative chambers play in the budget process don’t change. Certain key drivers like population growth and demographic are permanent yet changing forces. Public opinion is the most malleable and constantly shifting force within the budget process.
The public desire for well-funded programs coupled with a reluctance to pay higher taxes to finance these things combines with other influences jockeying for a piece of the ultimate finite budget resource: money. Lobbyists, companies and corporations and issue-based advocacy groups vie for the favor of elected officials and the process’ power players to enact or prevent change as they see fit.
No item of policymaking has more interests to satisfy than the budget. Through the funding and maintaining of the state, lawmakers, who have the direct control of creating the budget, must satisfy the many individuals and groups that are also players in the process. The legislative process that creates the budget is stringent. The drivers are numerous and the players and interest to please are endless.
The members of the legislature have a difficult job to allocate money they have control over. As discussed earlier, some government agencies that are already funded through dedicated funds, yet require additional money for special projects. K-12 education is the single largest expenditure, yet funding for higher education has been slashed. Lawmakers must do what is right for the state, the public at large while also appeasing their constituents and securing their reelection.
Ultimately, the members of the legislature must weigh all these forces and the pros and cons of all possible actions while trying to do right by their constituents. This makes budget process presents the greatest opportunity and challenges to these elected official. The power they have in its process provides them the greatest opportunity to solidify the support of their constituents. But the endless pitfalls can incite disapproval to be exploited by other groups or individuals and trigger defeat in their reelection, costing them their job.
- Rocco, Ken, and Daron Hill. “Overview of Oregon’s Budget Process.” http:// http://www.orgeonlegislature.gov. Legislative Fiscal Office of Oregon, 1 Sept. 2011. Web. 2 Mar. 2015. <https://www.oregonlegislature.gov/lfo/Documents/2011-4 Oregon’s Budget Process.pdf>.
- Rocco, Ken, Daron Hill, and Gina Rumbaugh. “2015 Joint Committee on Ways and Means.” http://www.orgeonlegislature.gov. Legislative Fiscal Office of Oregon. Web. 23 Feb. 2015.
- Brown, Kate. “Oregon Blue Book: Constitution of Oregon: 2014 Version – Article IX Finance.” Oregon Blue Book: Constitution of Oregon: 2014 Version – Article IX Finance. Oregon Secretary of State’s Office, 2014. Web. 26 Feb. 2015. <http:// bluebook.state.or.us/state/constitution/constitution09.htm>.
- Miron, Jeffrey. “The Effect of Marijuana Decriminalization on the Budgets of Massachusetts Governments, With a Discussion of Decriminalization’s Effect on Marijuana Use.” http://www.scholar.harvard.edu. Harvard School of Economics, 1 Oct. 2008. Web. 11 May 2015. <http://scholar.harvard.edu/files/miron/files/ decrim_update_2007.pdf>.
- Brown, Kate. “State’s Proposed & Enacted Budgets | NASBO.” State’s Proposed & Enacted Budgets | NASBO. National Association of State Budget Offices, 2014. Web. 14 May 2015. <http://www.nasbo.org/resources/states-proposed-enacted-budgets#OR>
- Rocco, K. (2013, July 1). Legislative Fiscal Office 1 July 2013 2013 – 15 Legislatively Adopted Budget General Fund/Lottery Funds – Summary. Retrieved March 6, 2015, from https://www.oregonlegislature.gov/lfo/Documents/2013-3 LAB Summary 13-15.pdf
- Naughton, G. (2013, January 1). Oregon Blue Book: Government Finance: State Government. Retrieved March 1, 2015, from http://bluebook.state.or.us/state/govtfinance/ govtfinance01.htm