The Governor’s 2011-13 Recommended Budget (GRB) was released February 1st and it is worthy of careful legislative consideration. Unlike the 2009-11 GRB, Governor Kitzhaber’s budget was actually based on current spending levels and expected revenues. This GRB does not include multiple, large tax increases. Although the 2011-13 GRB has its share of controversial features, it contains the preliminary steps toward providing budgets based on a strategy for Oregon’s future, and not merely increased funding for programs and agencies.
Since the previous Governor’s Updated Reset Cabinet Report confirmed Oregon’s economy faces “a decade of [billion dollar] deficits,” the GRB proposes a change in budgeting assumptions.
In the past, Oregon has used an assumption that the starting point for state budget discussions should be theCurrent Service Level (CSL). CSL budgeting is a process of “expenditure-based budgeting,” where the budgeting process is focused on funding programs with exponentially rising costs, instead of creating a budget to accomplish the organization’s strategy. With CSL budgeting, state agencies submit proposed budgets for the following biennium (two-year budget period) that includes increases above current budget levels. The budget is the means to maintain the current level of services provided, and there is little thought given to whether those services are effective or necessary.
CSL budgeting is like the lady who went shopping at the grocery store. She cruised the aisles selecting various boxes, cans and jars, then pushed her over-loaded cart to the check–out stand. When the cashier completed the tally, the shopper gasped at the higher-than-expected total, and rummaged through her purse gathering coins, cash and credit cards in order to pay the bill.
To put into perspective how confusing the process can become when an organization like the State of Oregon begins with what it wants to spend, instead of first determining what the organization’s goals and financial resources are, consider the 2011-13 Budget.
If we were to continue to use Current Service Level budgeting for 2011-13, the CSL Budget would be $18.1 Billion. After ten consecutive decreases in Oregon’s quarterly revenue forecasts, the “legislatively approved” spending level for the current 2009-11 budget is down to $12.4 Billion, and the latest revenue forecast for 2011-13 expects an increase of $1.5 Billion.
Thus, when discussing the same 2011-13 budget, one person could say the Governor’s GRB proposes a “$3.5 Billion Cut” from the CSL budget of $18.1 Billion, and another could argue that the 2011-13 GRB increases spending by $1.5 Billion above the 2009-11 spending levels.
What is needed is a rational procedure for the State to use each and every time it begins its budget preparation cycle. Such a process would apply to more organizations and certainly would apply to the creation of the Governor’s GRB. It could include the following:
1. Strategic Planning that methodically determines the vision and goals for the organization, prepared over time by the executive with input from members of the legislature;
2. A plan devised to accomplish the executive’s strategy;
3. Programs designed, organized and administered to implement the plan;
4. Budgets limited by realistic revenue expectations to fund the administration of the programs;
5. Key Performance Measures (KPM’s) that provide information on each program’s outcomes for use by the executive’s strategic planners to evaluate the program’s effectiveness in achieving the organization’s strategies.
In less than three months, the Governor, with his 2011-13 GRB, appears to have made an honest attempt to craft a budget based on goals and current revenues rather than inflated CSL estimates having little to do with either goals, available revenue, or reality.
It will take time to digest the consequences included in the multiple layers of the GRB, and there will be many conflicts between the GRB and the final budget passed by the Legislature. Nevertheless, the 2011-13 GRB at least gives the Legislature a rational starting point for crafting a balanced budget in this time of economic crisis and revenue shortfall. For that, we should give credit when credit is due.