Effective Budget Tactics
for
Agency Budget Officials
by Arvy Smith
May 13, 2008
Table of Contents
Section Page
Introduction 2
Literature Review 3
Methods 7
Results and Discussion
Importance to Legislators 10
Rankings and Scores by Respondent Types 15
Comparison of Importance to Legislators and Agency Impact 27
Narrative Comments 31
Conclusion 32
References 35
Appendix
Cover Letter and Survey Document – Legislators 2
Cover Letter and Survey Document – Analysts 5
Cover Letter and Survey Document – Budget Officials 8
Acknowledgements
I would especially like to thank Dr. Jason Jensen, Ph.D., MPA Director, UND Department of Political Science and Public Administration who provided guidance in strategy and statistical analysis and reviewed the report. I would also like to thank Sheila Peterson, Director of Finance, North Dakota Office of Management and Budget, Allen Knudson, North Dakota Legislative Council, Representative Al Carlson, and Representative Bob Skarphol who piloted the survey tool and provided guidance to its contents.Introduction
Every two years North Dakota state agency directors, accountants and program managers shift their focus from their routine duties to the important process of budget strategy and preparation. Agency personnel, governor and legislator’s analysts and special interest groups spend many hours developing, discussing and reviewing budget requests and detailed data, supporting proposals for consideration by the state legislature. Despite their efforts, often times the legislature approves funding for programs that state agency officials never requested or even envisioned, the governor never considered or was made aware of, and powerful interest groups and lobbyists did not represent. What then impacted legislators to approve these proposals? This study seeks to identify the factors that are most important to legislators in approving budget proposals and which of these factors agency personnel can impact.
There are many important budget issues that the governor and the legislature consider and address each biennial legislative session in North Dakota. Constituents and interest groups are organizing now more than ever to get their budget issues addressed. These are often powerful actors that can be a part of agency budget success. But often, even one constituent can make a difference. For instance the 2005 Legislative Assembly passed smoke-free workplace legislation when interest groups mobilized and a 7-year old asthmatic boy testified about how unfair it is that he could not go to the bowling alley because of the effect second hand smoke has on him. An appropriation of $150,000 was passed by the 2005 Legislature because of efforts by one family impacted by a disease known as Russel Silver Syndrome. And in the 2007 session, one woman, whose child had died of a heart attack in high school, succeeded in getting funding for automated external defibrillators in schools. But should it have to take a personal crisis in someone’s life to make appropriate change? How can agency budget officials bring the most appropriate and meaningful information to legislators for consideration?
Studies note that the economy, the budget process itself, and the relationships between the governor and the legislature all have great impact on whether budget proposals are favorably considered by the legislature.[1] State agency personnel have little or no control over these factors. Identifying the factors that are most important to legislators in approving budget proposals and which of these factors agency personnel can impact most will lead to identification of effective strategies that agency budget officials can use to get favorable consideration of their budget proposals. Training of public administration students and practitioners on this topic will not only help them perform a very important part of their job, ensuring that they have adequate resources to accomplish their mission, but will result in better government as well.
Using the results of a survey of legislators, legislative fiscal analysts, Office of Management and Budget analysts and agency budget officials I conducted, I will identify those factors that are most important to legislators in approving budget proposals and those that agency personnel can impact most. I will determine the most important factors to each group of respondents, determine if there are significant differences between the groups, and analyze reasons for any differences. I will then compare the importance of factors to legislators with the amount of impact budget officials feel they can have on each factor to determine the level of agency impact on the most important factors to legislators.
Literature Review
Published literature regarding effective budget techniques is limited. In Stillman II’s “Public Administration” she indicates that budget decisions are greatly impacted by the variety of different actors (agency officials, legislative and executive analysts, interest groups, individuals and courts), as well as the budget process itself and the economic environment. The budget actors must consider the budget process and environment and their most effective strategies are to document need and the ability to save money[2]. The most pertinent work was done by Irene S. Rubin in 2006. In her book “The Politics of Public Budgeting” Rubin provides further detail on agencies’ strategies including ways to make agency requests more urgent or necessary than other requests, tactics to make requests seem cheap or cost effective, linking proposals to priorities of powerful players or legislators themselves, and finally tactics to lessen the competition for funding[3]. This work provides detailed guidance to agency budget officials to get budget proposals passed. However, I could find no evidence that she referenced any studies asking legislators what they consider as important when reviewing budget proposals.
Additional work was done by Sydney Duncombe and Richard Kinney in 1987 when they interviewed 100 officials from five western states[4]. The study used both qualitative and quantitative techniques to determine how agency officials, executive budget analysts and legislative analysts define agency budget success. Findings indicated that respondents thought that obtaining sufficient funds to meet agency needs and maintain agency programs, maintaining good relationships with legislative and executive budget staff, gaining flexibility in using funds, and good budget implementation were the most important indicators of success. The appropriation amount compared to the previous budget or the budget request were not the most important indicators as suggested in earlier studies. Economic and fiscal conditions have a great impact on how agencies approach the budget process and define success.
Based on my background as an executive budget analyst for 12 years and an agency budget official for six years, Duncombe and Kinney’s findings are consistent with what I’ve experienced over the past 18 years. This research does not, however, address successful techniques agency officials can use to achieve budget success; it focuses on how budget success is defined. It was also admittedly conducted during tougher state economic conditions which are speculated to have an impact on how successful agencies can be.
Although there are limits in agency officials’ ability to lobby, I find many of the suggestions in Wolpe and Levine’s “Lobbying Congress” relevant to state agency budget success. Their five commandments for lobbyists – tell the truth, never promise more than you can deliver, know how to listen, work with staff, and don’t spring any surprises – can certainly apply to bureaucrats’ work with the executive office and legislators in getting their budget proposals approved[5]. Most of the fundamentals of lobbying presented can also be applied to state agency strategies for budget success. But again it does not ask the individuals that make the final decisions – the legislators themselves – regarding which factors are most important to get a proposal passed in the legislature
In “Memos to the Governor”, Second Edition (2004), Dall W. Forsythe advises governors that there are four things that consistently affect budget dynamics – the economy, the extent of changes proposed, incentives for cooperation or competition among leaders, and the political calendar or timing of elections of the involved players. Forsythe’s advice to governors is that there are no “iron laws” but only rules of thumb when it comes to state budgeting[6]. His perspectives are general and do not relate to effective methods agencies can use to get budget proposals passed.
In 1968 Ira Sharkansky looked at 592 major agency budgets for one budget period in 19 different states between 1963 and 1969. He used the percentage of the agency’s request for the upcoming budget period appropriated by the legislature and the percentage of current expenditures appropriated by the legislature for the upcoming period as measures of budget success. Sharkansky concluded that the Governor was more powerful than the legislature on budget matters and considered the Governor’s potential tenure in office, Governor’s veto powers, party competition, the number of elected state executive officials, and several other factors to contribute to gubernatorial power. Sharkansky also finds that the Governor’s support appears to be a critical ingredient in budget success of individual agencies and that the more agencies request the more they receive. Finally he notes that various economic factors also affect the Governor’s recommendations and legislative action on budgets[7]. This study looked at only one period for each state and did not consider the respective parties of the Governor and each house in the Legislature. In addition although it looked at several agencies in each state, the study was conducted at a total state budget level in which case one agency’s large increase could be offset by several medium sized agency decreases. It also did not look at funding sources, the availability of those resources, changes in the budget process and state requirements for a balanced budget.
In 1987 Joel A. Thompson replicated Sharkansky’s work and assessed the impact of recent executive and legislative reform efforts, the changing intergovernmental environment, and the impact of various funding sources. Thompson specifically noted that state governments’ professionalism has increased. Thompson also noted that his period of study was a period of higher inflation than Sharkansky’s. With greater revenues available and greater inflation, agencies are likely to be more acquisitive (ask for more) and were also more likely to receive more. He indicated that increments from the base, not the size of the base are more important for decision-makers and that there was a significant decline in gubernatorial influence in budget proposals[8]. Factors included in my survey include agency professionalism and gubernatorial influence. My survey was conducted during a period of state revenue surpluses, similar to the period of Sharkansky’s study. This factor must be considered in determining generalizability of study findings.
Early literature focused on the competing powers of the governor and the legislature, measured budget success by comparing the appropriation to the previous period’s budget and the requested budget, and suggested that the more an agency asks for, the more they will get. More recent literature considers other measures of agency budget success and factors that impact legislative and gubernatorial budget decisions by surveying legislative and executive fiscal analysts. Additional literature provides fundamentals for lobbying Congress, some of which may apply to state agency budget efforts. But nowhere in the published literature were legislators themselves asked about the factors that affect their decisions to approve budget proposals. This study uses the information from this literature review, as well as my own experience, to develop a survey of legislators, fiscal analysts and agency budget officials and determine the most important factors to legislators in approving budget proposals.
Methods
In order to understand this study, it is important for the reader to understand the budget process in North Dakota. The executive branch, through the governor and the Office of Management and Budget (OMB), is responsible for developing the budget process and submitting the governor’s budget plan to the North Dakota legislature. Legislators, by law, spend up to 80 days reviewing the governor’s proposal, as well as many other budget proposals included in bills submitted to the legislative assembly. Approval of final budget appropriations for state agencies often occurs in the final hours of the last legislative day. In North Dakota, the budget must be balanced, meaning that although they are able to incur debt for long term assets, they cannot approve a budget that ends with a negative general fund balance.
Budget guidelines are provided to state agency budget officials in April of each even numbered year and, unless an extension is approved, budgets are to be submitted to the Office of Management and Budget by July 15 of that year. After nine months of budget preparation and OMB fiscal analyst review and analysis for inclusion in the governor’s budget plan, agency budget officials present their budget proposals to the North Dakota Legislative Assembly.
I approached the research question by developing and administering a survey to a sample of North Dakota legislators, analysts and agency budget officials. Based on my review of available literature, my discussions with key budget players, and my own twelve years of experience as an executive budget analyst with the Office of Management and Budget and six years as an agency budget official, I identified 27 factors potentially influencing legislative budget decisions. Survey participants were asked to rate the importance of each factor to legislators in approving budget proposals, on a Likert scale from 1 to 6, based on the respondents’ own observations and experiences. In addition, agency budget officials were asked to rate each of these 27 factors as to agency budget officials’ ability to impact or control these factors. These 27 factors are the variables used for this study. Refer to the Appendix for copies of the survey containing the 27 factors or variables and cover letters sent to each of the three types of respondents – legislators, analysts, and agency budget officials.
In completing the survey, respondents were to assume that North Dakota was not experiencing a budget shortfall and that the overall state budget would tolerate a moderate (5% per year) general fund increase in expenditures. The survey was conducted in March and April of 2008. My intent was to include a full population of factors in the survey, including those that I thought were more important and less important to legislators, and those that agency budget officials have both more control over and less control over. This allowed me to compare responses and gauge the reliability of the information I received from the survey.
The survey was sent to all North Dakota legislators that have served on appropriations committees during the last three legislative sessions. In addition it was sent to legislative fiscal and executive budget analysts, and to agency budget officials that have served in their position within the last three legislative sessions. Legislators were limited to those serving on appropriations committees because these committees make recommendations to the full legislative body regarding passage of appropriations bills and, for the most part, their recommendations are generally accepted by their respective chamber. The Legislative Council employs around five full time legislative fiscal analysts who provide information to legislators regarding agency budgets and all appropriations bills. The Office of Management and Budget employs around five full time executive budget analysts to analyze agency budget proposals and appropriations bills and make recommendations to the governor. Agency budget officials are defined as the person in the state agency who is most responsible for the budget strategy for the agency. In smaller agencies this may be the agency director; in others it could be the deputy or assistant director, the chief financial officer or a separate legislative liaison that approves all budget testimony of the agency.
I had anticipated that survey response rates could be an issue, particularly for legislators, for a variety of reasons, including politics. This is why I developed the survey process in a way that it provided total anonymity to respondents. I also piloted the survey with two legislators, a legislative fiscal analyst, and a budget analyst, which addressed any concerns they had. Finally, I obtained support for the survey from the chair of the Legislative Council interim committee and was able to indicate that support in the cover letter for the survey of legislators. As a result I obtained a good overall response rate of 64% (77 of 121 surveyed). I received a good response rate of 59% (29 out of 49 surveyed) from legislators and in fact, received positive feedback from a number of legislators who responded to the survey. In only two cases did a legislator fail to indicate political party affiliation. My response rate for other respondents was good as well, with 67% of analysts responding (8 out of 12 surveyed) and 67% of agency budget officials (40 of 60 surveyed) responding.
The purpose of this study was to identify 1) the factors that are most important to legislators in approving budget proposals and 2) which of these factors agency personnel can impact the most. In the survey, legislators were asked to identify how important each of the 27 factors is to them in approving budget proposals. In addition, analysts and state agency budget officials were asked to identify how important they think each of the 27 factors are to legislators in approving budget proposals. Finally state agency budget officials were asked to indicate how much impact they feel they can have on the 27 factors. The budget officials were also asked to provide any additional comments regarding effective budget tactics.
This study used descriptive statistics to analyze and rank the mean and standard deviation of each of the 27 factors both as to legislative importance and agency impact. ANOVA or Analysis of Variance was used to evaluate whether there were differences in how important subsets of the respondents think each factor is to legislators. Subsets of respondents included legislators, analysts, and budget officials. Legislators were further stratified to House legislators, Senate legislators, Republican legislators and Democratic legislators. In addition I presented descriptive statistics comparing the mean of these 27 factors of legislative importance by respondent type to the mean of agency impact on these 27 factors to determine if there was consistency between legislative importance and the ability of an agency to have an impact.
Results and Discussion
Importance to Legislators
The mean and standard deviation of the 27 factors of importance to legislators are presented in Table 1. Each respondent type is presented – legislators, analysts, and agency budget officials. They are presented in order of rank by total respondents with the rank number for each respondent type also presented.
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Notes: The Total column contains the mean for the aggregate ranking of the three respondent types based on a Likert scale from 1 to 6. The value of n varied for each factor and respondent type as “Don’t Know” was allowed as a response and was eliminated from the sample. For Total n varied from 62 to 77; for Legislators n was 28 to 29; for Analysts n was from 6 to 8 with only one factor rated < n =" 29;" n =" 9;" n =" 18;" n =" 18;" n =" 9." n =" 29;" n =" 9;" n =" 18;" n =" 18;" n =" 9." title="" style="mso-endnote-id: edn1" href="http://www.blogger.com/post-create.g?blogID=5860132984087433256#_ednref1" name="_edn1">[1] Rubin Irene S., 2006. The Politics of Public Budgeting. Fifth Edition. CQ Press.
[2] Stillman II, Richard J., 2005. Public Administration Concepts and Cases, Eighth Edition, Houghton Mifflin Company.
[3] Rubin, Irene S., 2006. The Politics of Public Budgeting. Fifth Edition. CQ Press.
[4] Duncombe, Sydney and Kinney, Richard. Spring 1987. Agency Budget Success: How it is Defined by Budget Officials in Five Western States. Public Budgeting & Finance.
[5] Wolpe, Bruce C. and Levine, Bertram J. 1996. Lobbying Congress. Second Edition. Congressional Quarterly, Inc.
[6] Forsythe, Dall W., 2004. Memos to the Governor. Second Edition. Georgetown University Press.
[7] Sharkansky, Ira. 1968. Agency Requests, Gubernatorial Support and Budget Success in State Legislatures. The American Political Science Review, Vol. 62, No. 4, Dec 1968.
[8] Thompson, Joel A.1987. Agency Requests, Gubernatorial Support, and Budget Success in State Legislatures Revisited.
The Journal of Politics, Vol. 49, No. 3 Aug 1987.