by Maria-Veronica Gelever
“The budget is not just a collection of numbers, but an expression of our values and aspirations” -Jacob Lew1. The budget is a foundational part of any type of government system, ranging from city government agencies, state governments, to the federal government. The budget dictates the direction that the government will govern, and because of this, it plays one of the most critical roles in the government system. From the budget, stems actions, and without funds, this action cannot be taken. It also brings unlikely groups together, like interest groups and political parties. The budget is the most important piece of legislation that is passed, and dictates the rest of the bills that are passed that session.
History behind the Budget
The budget, beginning with the federal budget and then also including state and city budgets, had begun as a way to “…preserve of the legislative branch… This pattern was dominant at all levels of government in the United States.”2 There have been many reforms since the beginning of the budget, in order for the budget system to be where it is today. These reforms were set up by cities growing larger, due to immigration and growing business, and needed more money for public services.2(Taylor and Willand) Even though the budget started as part of the legislative branch, the power was shifted to the executive branch. This shift had begun with President Taft who had made a commision called “ Commission on Economy and Efficiency” and they had made a list of recommendations that “became the foundation for the Budget and Accounting Act of 1921 which established an executive budget at the national level in the United States and became the foundation for present day budgeting at the federal level. But, the national government mirrored what was already underway at the state and local level of government in many areas of the United States”2(Taylor and Willand). This was the beginning of the budget reforms.
The budget reforms had began in the 1900’s and have lasted through 1990’s. The first reform aimed for “control”, and from then: the reforms had progressed to wanting, “management and efficiency”; to “planning, prioritizing, and effectiveness”; and then to “budget reduction”, and lastly to; “accountability, efficiency, and economy.” (Taylor and Willand)2
However, budgets are always able to be reformed, and this is usually done in smaller governments first, like city and/or state governments, and then moves up to a reform on the federal level. There is room to change, as the system adapts to changes made in society.
General Budget Overview:
Being the bill that controls how the session will progress, the budget must be well thought out, carefully planned, and be very detailed. It is not a simple bill to draft up.
There are four parts to creating a budget. The first is “formulation”3, where the executive branch begins to formulate the budget. The second is “approval”3, this is where the budget (sent down from the executive), must get approval from the legislative branch. There can be debate or it could be easily passed, depending on how the legislative branch is composed and who is in the executive position (budgets from a democratic governor and a legislative branch with a democratic majority would pass easier). The third step is “execution”, where the budget is put into practice. Lastly, there is “oversight”3 where “he national audit institution and the legislature account for and assess the expenditures made under the budget”3 Although, there are many more details to the budget, those are the main four steps that summarize the budget process. Starting from “formulation” to “execution” differing groups are competing for their “slice of the pie” and this affects both the legislators and the legislation that is passed.
Oregon’s Budget System
This paper will be focused on how budget effects state governments, with Oregon being the state studied.
In Oregon, the budget system is a biennium one, which means that it lasts for two fiscal years. According to the Oregon Chief Financial Office, the budget develops in three steps. The first is: “Agency Request Budget”4 (Chief Financial Office) , which is a recommendation to the governor about “agency finances and policies for consideration” The next is the “Governor’s Recommended Budget” 4 which takes into account the agency request budget, but looks at the governor’s priorities, and it also “gives data on all the state’s revenues and expenditures. It also gives information on each agency’s budget. The Department of Revenue puts together a Tax Expenditure Report that is published at the same time.”4 Lastly, the legislature must adopt a budget. This is done by the governor giving their proposed budget. Then “Legislative committees review the proposed budget”4, the committee then produce a “Budget Report”, which summarizes what the committee recommends. Next, the Legislature must vote on every budget bill. The bills that pass through this process become the “Legislatively Adopted Budget”4. Changes can be made to the budget by the “Emergency Board” and a combination of “ The Legislatively Adopted Budget and the changes to it make up the Legislatively Approved Budget.” 4
The revenue for the Oregon Budget comes from four different sources. The first part is the “general fund” which “is largely made up of personal and corporate income taxes collected by the Oregon Department of Revenue. The personal income tax makes up the largest share of General Fund revenue” (Oregon Blue Book)5. This general fund “provide funding to agencies that do not generate revenues, receive federal funds or generate sufficient other funds to support their approved programs”5 Because of what the general funds supports, the competition for this money is great.
The next source of revenue for Oregon is the Lottery Fund. This fund is composed of money from the lottery and video poker. The lottery fund “is constitutionally dedicated to be spent in specific ways. The remainder is distributed at the discretion of the Legislature for economic development”5.
A third source is from “Other Fund”. This is a fund that is composed of “ money collected by agencies in return for services. Legislative actions may allow an agency to levy taxes, provide services for a fee, license individuals or otherwise earn revenues to pay for programs.”5 This fund differs from the general fund, and the money is harder to get ahold of, (compared to the general fund) due to “they may be based on statutory language, federal mandate and legal requirements or for specific business reasons”5, which results in less competition for these funds.
The last source of revenue is derived from federal funds. These are funds that come from the federal government, and in the 2013-2015 budget they composed “a 29.3 percent share of the total budget”5.
Oregon has a unique system, that affects legislation through the budget, and this is “the kicker”. This is a provision that says that “ if actual revenues exceeded estimated revenues by 2 percent or more…[the ]excess funds to be “kicked back” to taxpayers”5. In November of 2012, there was an amendment to “the kicker” that “required that this [ corporate income and excise tax payers] excess be retained in the General Fund to provide additional funding for public education of kindergarten through twelfth grade”5.
A last part of Oregon’s Budget System is the “Rainy Day Fund and Education Stability Fund”. These funds function as a “backup” for when there are economic troubles in the state. Funds can be taken out of these funds, under precautions and when necessary, like during an economic recession.
There are four key players that work together and influence the budget. The first, and most important, is the executive (the governor in this context of state politics). The second and third, are the legislative branch and the Co-Chairs of the Joint Ways and Means committee. Lastly, interest groups play a role in the budget process as well. Together these four groups work together to establish harmony and compromises that attempt to satisfy all parties.
The governor, being the executive, is a major key player in the budget process. Their agenda is set through this process, and they contribute to the layout and where funds should go.
The Co-Chairs of the Joint Ways and Means Committee must make their own versions of the budget and it must be passed through the Legislature.
The legislature is also a key player, especially in Oregon because they must approve the governor’s budget, and can apply changes, through committee recommendations.
Interest groups have a stake in the budget as well. There are many issues, that require money to be successful, and since resources are limited, the competition for these funds is highly competitive.
Tom Loftus said, “The governor’s power to propose budgets is what really gives the governor the tiller when it comes to setting the course of policy” (Rosenthal, 267)6 Although the governor shares his or her power with the legislature, in Oregon, they are still a major key to the budget, and they get a lot of power from the budget.
Agenda setting is the biggest power that the governor can derive from formulating the budget. Although there are compromises made from all parties, “the governors have a great advantage of being able to focus- to pick and choose what they will or will not put on their agenda… If governors concentrate on limited number of initiatives, chances are that these items will be given top billing by the legislature” (Rosenthal, 266)6. The ability to set an agenda, and to get bills passed along that agenda, provides credibility and establishes legitimacy for the executive. Legitimacy is needed for several reasons. First, if an executive would like to be reelected, it is important for voters to view them as having legitimacy, and being able to carry on with their promises. By being able to set an agenda (during campaigning) and carrying out said agenda, this will help with future campaigns and can lead up to reelection. Second, legitimacy keeps a government body working smoothly. If the Governor is viewed as legitimate, then he or she is respected and it is a smoother processes in the Legislature. When there is a lack of legitimacy, a distrust develops, not only among the citizens of the state but also with the other members of the House and Senate, and all through the Legislature. When a government does not function, the chances of reelection decrease, and it has negative impacts on all the players. Richard Clucas writes, about how in Oregon there are powers “that can either strengthen or weaken a governor’s ability to obtain his or her goals”8 . These powers include “the potential for a governor to be reelected, and the amount of control the the governor has over the budget”8 . It is clear why the governor has a clear interest in the budget, but there are other key players as well.
The Co-Chairs of Ways and Means
The Co-Chairs of the Ways and Means Committee play a large role in the budget process. Madeline Dardeau, the Chief of Staff for Representative Jennifer Williamson, says that the Co-Chairs “hold the purse strings” because, “the governor might propose 53 million for a project but the Co-Chairs may propose 20 million, and at the end the legislature passes the budget”. While the governor may set the agenda, the Co-Chairs hold the purse. This is a powerful position. Clucas writes, “ The chairs of the Ways and Means Committee are particularly important, however, because this committee puts together the budget for the state legislature.”8 They reign in the governor’s budget at times, and this is a check on the governor’s power. However, these Co-Chairs are nominated by their party, so they often make adjustments according to what the party wants or needs. Because they are placed by the party, the power of the budget, via the Co-Chairs, is also a power of the party.
The legislature and the Co-Chairs, go hand in hand. The Co-Chairs can make recommendations to change the budget, but in the end it must be passed by the legislature. The budget dominates many debates and conversations. When a bill is being debated, a question that is often asked is, “where will that money come from?” There is only so much money to be split, and this “splitting of the pie”, as discussed later, because a highly debated topic through the legislature, by both sides of the aisle. For example, during a five hour debate on SB 941, in the 2015 session, there were alternative bills proposed, to replace the private background checks. One of these alternatives, was to employ more officers to stop illegal gun sales. While some legislatures might have thought this was a good idea, it was asked time and time again, “where would the money come from?”
However, once a budget is agreed upon, it must pass through the legislature, and this is where their power of the budget comes from. It is not common for the Democratic party, to have the executive office and have the Senate and the House of Representatives, but when it does happen, like in the 2015 session, this power goes all to the majority party, and it is great power.
It is not only the democratic party or the republican party that have an interest in how the budget is set, but also interest groups play a role. Interest groups play a role for an obvious reason, they want their interests to be part of the budget. This will be discussed in more details later on, but interest groups use their lobby efforts to acquire as much of the budget as possible. There are many competing interest groups who need money, and some examples of these are different education groups, environmental groups, city lobbyists, justice and corrections departments, and many more. These interest groups often have lobby days at the capital and they speak with the legislators offices, and advocate why they need money and what they are going to do with it.
Budgets effect on Legislation
The budget has a massive effect on all of the legislation that is passed in that session. The agenda is set, and funds are established. If a bill has support but there is no revenue to support it, the bill carries no weight. It is a good idea, with no actions to follow. “Some of the most significant disagreements between the executive and legislative branches are over the budget. The governor and legislature provided different amounts for school aid, higher education, and many other items” (Rosenthal, 358)6. Legislators try to avoid this, and it takes negotiating and competition, from both the legislative branch and interest groups, for their agendas to be carried out, through the bills. There are only a limited amount of resources and many ways that these resources can be spent.
The budget affects each office, and each legislator differently because there are different needs throughout the state. One office may be located downtown, with a jail, and so they will do more advocating for the Department of Corrections and Department of Justice, and one office may be in rural oregon and they will advocate for their constituents needs, such as environmental laws.
When asked about the role the budget has in Representative Williamson’s office, and on her priority legislation, Madeline Dardeau responded, “With Rep. Williamson as the Co-Chair of the Joint Ways and Means committee on Public Safety, there are just certain things that must be funded. For example, the Department of Corrections must be funded. If you have a priority, you have to make sure that you can get it funded. You can pass great bills in policy committee and have them die in Ways and Means.”
The budget affects how each office tries to pass their priority bills, because there must be a way to get the bills funded or else they are just great policy and have no bite to them.
The budget not only affects how each legislature, and their office do work, but it plays a role in other offices around the capital. Linda Gilbert the Principal Legislative Analyst, in the Legislative Fiscal Office, and also the Administrator of the Joint Ways & Means Subcommittee on Public Safety, says that “All our work is budget-related. We analyze budget requests and make recommendations to elected members on full funding, partial funding, or no funding. In very rare cases, we might recommend more funding than was requested, if we have new and compelling information. Recommendations are based on cost-benefit analysis, statutory and constitutional mandates, and known member preferences.”
There are many aspects that go into the budget process, and part of that is the recommendations that come to the elected members on the bills that are being heard in the Ways and Means Committee.
Ways and Means Committee
Once a bill is passed out of its relevant committee, if it has a monetary aspect (either spending or taxing), it moves to the Ways and Means committee. This is where it has been said that bills “go to die”. “Good” bills can pass out of committee, with a recommendation, and make it to Ways and Means, and then that bill could get denied revenue (not in the budget) and the bill (if it cannot raise money on its own, which is usually the case), will no longer have power. Bills like this are essentially “empty”, they are ideologies that people agree with, but will not fund, leading them to essentially be ineffective.
The budget affects legislation in this sense, because a bill can pass out of its committees and legislators, and interest groups, may think that it is a wonderful idea, but unless it is funded, it will stay that way; an idea.
The Ways and Means committee, although it tries, cannot avoid policy. Madeline Dardeau says that “where you put your money represents policy. Resources are scarce and how they are allocated has to do with policy. In Ways and Means, policy is talked about, it’s hard to separate the two (policy and fiscal implications).”
Policy cannot be avoided in Ways and Means discussions because, while it is about how much resources can be allocated and where they should be placed, there is only so much money to be distributed and where this money is eventually placed, is a reflection on policy priorities, and of agendas.
“Splitting the Pie”
A common term, when discussing how the funds from the budget will be spent, is “splitting the pie”. There is a limited amount of resources, and states must often “live within their means”. Because of this, there is competition for what the state spends a majority of its budget on. Squire and Moncreif summarize the thought process behind “splitting the pie”:
“In years of economic downturn, it can be a painful process for legislators. States are responsible, in a whole part or whole, for public education, higher education, health care, roads and highways, prisons, and a host of other public services and regulations. What do we cut? Do we raise taxes? Do we do both?…they [the legislators] can be assured that some segment of the population will be unhappy with whatever decision they make” (Squire and Moncreif, 227).7
In Oregon, the top three programs that dominate the budget are: Education, Human Services, and Public Safety.5
This pie chart (taken from Oregon Blue Book’s, Government Finance page) shows the “2013–15 General Fund and Lottery Funds Budgeted Expenditures”.
In this budget session, education was the highest portion of the pie, with human services second, and public safety as third. Although all of these services are very important, the money only stretches so far. A difference of ideology is merely rearranging how the pie is split up. Legislators must work amongst themselves and the executives, to try to compromise and divide the budget in a way that can be passed, and that benefits the citizens of the state, in the best way.
Interest groups are also involved in this process, as they are also advocating for their ideologies and preferences for how the budget should be allocated. “If an interest group’s legislative objectives require an appropriation of state funds, the dynamic changes. Different groups and different causes compete for limited resources. Much lobbying occurs over budgets and taxes, normally resulting in incremental changes, rarely in big winnings or big losses for any group” (Rosenthal, 177)6.
An interest group that has an interest in the budget each session, is higher education. The cost of higher education in Oregon is increasing at large rates, while the budget for higher education decreases. In the 2007 session, despite lobby efforts, “The governor’s proposed budget for the Oregon University System (OUS) was cut by $33 million, from $827 to $794.”9 This budget cut has affected the price of tuition and has made lobby efforts increase for higher education, to this day.
Higher Education is just one example of the differing lobby groups, who try to reduce the budget cuts on their programs.
The budget affects every aspect of the legislative process. It gives power and legitimacy to the executive, it provides direction to the legislative branch and involves interest groups in the competition for revenue. The bill process is affected by the budget through the ways and means committee. This single bill, sets the stage for the entire legislative session.
Not only does the budget affect every aspect of the legislative process, but it also gives power to some key players in the process. This power is shared between the Governor (to set agenda and release the initial budget), to the Co-Chairs of the Ways and Means Committee (who make changes to the budget, and may cut the governor’s spending), to the Legislatures themselves ( who must pass the final budget), and of course, to the majority party and leadership within the party, who appoint the Co-Chairs.
All bills that have a fiscal impact are impacted by the budget as well. They must go through Ways and Means, where they can not get approved for the requested budget and the bill will just remain a good policy idea.
There is only so many resources to be spread, and there are priority issues that must get funding. These are usually education, public safety (such as corrections), and human services. Where the money is, is where the priorities are. There are many bills that would benefit Oregon, that there is not enough funding for, and this poses a problem, either cut the programs or raise taxes. More often than not, the solution is to cut programs.
The passing of the budget is the most important piece of legislation within the session. It sets the boundaries for all other bills that are passed that session, and it is the topic of conversation when discussing new bills and ideas. It is highly debated, and gives power to certain leaders. The budget, is what causes actions behind the ideas, and without it, policies would not be effective resulting with the government not being effective.
- “Jacob Lew Quote.” BrainyQuote. Accessed March 16, 2015. http://www.brainyquote.com/quotes/quotes/j/jacoblew442942.html?src=t_budget.
- Tyer, Charlie, and Jennifer Willand. “Public Budgeting in America.” Public Budgeting in America. January 1, 1997. Accessed March 16, 2015. http://www.ipspr.sc.edu/publication/budgeting_in_america.htm.
- “Why Are Budgets Important? | International Budget Partnership.” International Budget Partnership. Accessed March 11, 2015. http://internationalbudget.org/getting-started/why-are-budgets-important/.
- “Chief Financial Office Budget Process Overview.” Chief Financial Office Budget Process Overview. Accessed March 9, 2015. http://www.oregon.gov/DAS/CFO/pages/budgetprocessoverview.aspx.
- “Oregon Blue Book: Government Finance: State Government.” Oregon Blue Book: Government Finance: State Government. Accessed March 10, 2015. http://bluebook.state.or.us/state/govtfinance/govtfinance01.htm.
- Rosenthal, Alan. Engines of Democracy: Politics and Policymaking in State Legislatures. Washington, DC: CQ Press, 2009.(177,266-267, 358,
- Squire, Peverill, and Gary F. Moncrief. State Legislatures Today: Politics under the Domes. Boston: Longman, 2010. (227,
- Clucas, Richard A. Oregon Politics and Government Progressives versus Conservative Populists. Lincoln: U of Nebraska, 2005. Etext ((Location 1759-1760)
- “Students Lobby at Capitol for More Funding.” Portland State Vanguard. 27 Apr. 2007. Web. 22 May 2015.