Legislative Services Office

Budget & Policy Analysis Division

Budget Process and Schedules

Introduction

The Idaho budget and appropriations process has evolved over time into one of the most streamlined and efficient state budget systems in the nation. Foremost, our system is based on an approach that shares key elements of authority and responsibility between the Legislative and Executive branches of Government:

  • The rules and guidelines that state agencies use to develop their annual budget requests are developed cooperatively between the Governor’s Division of Financial Management and the Legislature’s Budget and Policy Analysis staff.
  • Both the Executive and Legislative budget staffs are involved in providing input and assistance to state agencies over the summer months as they develop their new budget requests.
  • The agency budget requests, when completed, are required by statute to be submitted on September 1st simultaneously to the Governor’s Office and the Legislature’s Budget and Policy Analysis staff.
  • The Governor’s Budget Recommendation is featured prominently in the Legislative Budget Book, the primary source document for the Joint Finance Appropriations Committee.

67-437. DEPARTMENTS, AGENCIES AND INSTITUTIONS TO SUBMIT INFORMATION.

All departments, agencies and institutions of state government which are required by Section 67-3502, Idaho Code, to submit reports of actual and estimated receipts and expenditures to the Division of Financial Management shall submit the same information to the Legislative Services Office for the Joint Finance-Appropriations Committee, not later than the deadline prescribed in Section 67-3502, Idaho Code.

67-3502. FORMAT AND PREPARATION OF ANNUAL BUDGET REQUESTS.

In the preparation of a state budget, the administrator of the Division of Financial Management shall, not later than the fifteenth day of July have available for all departments, offices and institutions of the state government forms necessary to prepare budget requests. Such forms, whether in electronic or written format, shall be developed by the administrator of the division and the Legislatives Services Office to provide the following information:

  1. For the preceding fiscal year, each of the entities listed above shall report all funds available to them regardless of source, including legislative appropriations, and their expenditures by fund and object of all sums received from all sources, segregated as provided for on the forms.
  2. For the current fiscal year, each of the entities listed above shall report their estimates of all funds available to them regardless of source including legislative appropriations, and their estimated expenditures by fund and object of all sums received from all sources, segregated as provided for on the forms, including a statement of the purposes for which anticipated funds are expected to be expended.
  3. An estimate of appropriations needed for the succeeding fiscal year showing each primary program or major objective as a separate item of the request and itemized by object code.
  4. A report concerning the condition and management of programs, program performance and progress toward accomplishing program objectives.

The completed forms shall, not later than the first day of September except with special permission and agreement of the administrator of the Division of Financial Management and the director of Legislative Services Office, be filed in the office of the administrator of the Division of Financial Management and the Legislative Services Office. The legislative and judicial departments shall, as early as practicable and in any event no later than the first day of November, prepare and file in the office of the governor and the Legislative Services Office upon the forms described in this section a report of all of the information required in this section.

67-3505. BUDGET INFORMATION SUBMITTED TO GOVERNOR.

The administrator of the division shall, on or before the 20th day of November next succeeding prepare and submit to the governor, or to the governor-elect if there is one, information for the development of the executive budget as designated in Section 67-3502, Idaho Code, including the requests of the legislative and judicial departments as submitted by those departments.

67-3514. APPROPRIATION BILLS TO BE PREPARED BY JOINT FINANCE-APPROPRIATIONS COMMITTEE.

The joint committees of the legislature in charge of appropriation measures, after considering the budget requests required by Section 67-3502, Idaho Code, and the executive budget as required by Section 67-3506, Idaho Code, shall prepare and introduce appropriation bills covering the requirements of the various departments, offices and institutions of the state. In the case of any department, office or institution operating under a continuous appropriation, the joint committee may prepare and introduce appropriation bills covering the requirements for the administrative functions of such department, office or institution. The joint committee may, after examining the budget of any department, office or institution operating in part or in whole under a continuing appropriation or fund authorized by the legislature, prepare and introduce appropriation bills covering all the requirements of the respective department, office and institution.

1890-1939

Biennial line item agency budget with lines for salaries and wages, travel, printing costs and other current expense, capital outlay and other items with no program breakdown. Legislature reviewed the Governor’s Budget, haphazard hearing process.

1940-1968

Biennial line item agency budget with lines for salaries and wages, travel, printing costs and other current expense, capital outlay and other items with no program breakdown. JFAC gradually develops more formal hearing process to review Governor’s budget recommendation.

1969-1971

Biennial line-item program budget with programs, minor programs, program descriptions and workload indicators.

1971-1972

First annual line item program budget. The Idaho Legislature also establishes its own budget office, as a result of the Governor failing to present a budget to the Legislature.

1973-1975

Program budget with programs, and program descriptions, with an incremental approach that showed the cost of continuing the 1971-1972 level of services and introduced multi-year estimates for 1973-1974 and 1974-1975 fiscal years.

1976-1978

Program budget with a modified form of zero-base budgeting that used different “Levels” of funding; Level I, Level II, or Level III.

1978-1979

Program budget with a pure form of zero-based budgeting for about 25% of the state agencies. The budget contained decision units that built from a zero base, explaining the impacts of each level.

1979-1980

Program budget with a modified form of zero-based budgeting. About 25% of state agencies were required to build a budget request starting at a base of 70% of their current appropriation.

1981-1994

Program based budget; program descriptions and workload indicators.

1994-1997

Governor’s recommendation integrated into the Legislative Budget Book. Program based budget, with requirements to submit performance reports in the budget process as a result of the passage of the Strategic Planning Act in 1995.

1998-present

Program based budget, summarized at the agency level, with increased emphasis on performance indicators from agencies’ Strategic Plans, and issue analysis and supportive information in addition to budget request information.

Introduction

From “Fundamentals of Sound State Budgeting Practices” National Conference of State Legislatures

Writing a budget for a state government involves the most complicated and controversial issue in public life: how the public’s money gets spent. Given the number and variety of interests and issues that have to be reconciled for a budget to be completed, the wonder is that the process moves along as smoothly as it does year after year. But for many observers, it is the competitiveness, compromises and incomplete nature of the process that are striking, not the real accomplishment every annual and biennial budget represents. Because budgets have so many functions, the process of writing one is often conflict-ridden, unsatisfactory to observers and participants and flawed in its outcomes. Budgets seem to increase rather than resolve partisan competition; they sometimes are late; they leave problems unresolved; they spend too much or too little; they may fail to include adequate program review, planning for the future, accounting for past expenses, or controls on planned spending.
These complaints have shown up ever since formal, comprehensive budgeting became a feature of state and local government in the early years of the 20th century. The Taft Commission, which examined federal budget processes in 1912, criticized federal budgeting procedures for the same flaws observers note today. Some of the problems – partisanship, indecisiveness, lack of closure – are inherent in the democratic process. Others spring from conflicting expectations of the process. The central function of a budget – the decision of how much to spend for what – will always create disputes, and no budget will ever satisfy everyone.
“The power to tax involves the power to destroy,” said Chief Justice John Marshall, and it is equally true that the power to spend is the power to create. Budgets are documents that express state governments’ power to act. They summarize policymakers’ evaluations of past programs and public agencies and their forecasts of current and future needs and resources. Budgets set goals, decide among alternative objectives, and create means for controlling and accounting for the expenditure of public money. They can push reform or they can discourage it.
  1. Evolution of State Budget Processes

    1. Line-Item Budgeting

      Line-item budgeting represented the earliest attempts at institutionalizing a budget process and bringing some kind of order to state government expenditures. Control is expressed in written budgets through “line items”, which are simply statements or “lines” in an appropriation bill which simply define how much money can be spent for certain “items”, whether its road equipment for the Transportation Department, fish hatchery raceways for Fish and Game or Drug Enforcement Agents for the Department of Law Enforcement. State Legislators have indicated a certain comfort with this approach in the past because it is restrictive in terms of defining expenditures and setting limits, and it is also simple to explain in terms of where the taxpayer’s money is going. However, while Line-item budgeting provided the essential ingredients of order and control it does not address issues of performance, quality and accountability.

    2. Incremental Budgeting

      Incremental budgeting focuses attention on additions or deletions to the existing structure of state government. This budget approach usually takes for granted previous appropriations and structure, focusing on year to year inflationary changes, and building by small increments on past budget decisions. The incremental approach guides the discussion of budget decisions toward what money can buy, called an “input”, versus the quality of the service that is provided, an “outcome”. While it is certainly true that the quality of services in state government can be questioned in an incremental budget, it remains a fact of life in any budget process decision making that the format will have large and direct impact on policy discussions. “These practices are under attack because they are said to foster a business-as-usual approach to government at a time when the public is challenging how state governments operate, questioning their efficiency and effectiveness, and expressing distrust of representative government itself. With growing concern about how well government functions, many people contend that the traditional focus on line-item budgeting and incremental change neglects outcomes so much that the budgeting process itself is an impediment to effectively delivering programs.”

    3. Program Budgeting

      Program budgeting places considerable emphasis on designing a budget architecture that groups expenditures and sources of funds into functional activity categories. In program budgeting terminology, a function is simply a group of related activities for which a governmental unit is responsible. The classification structure used in each government unit is a product of fiscal, organizational, and political considerations. The second Hoover Commission recommended that agencies should “synchronize their organization structures, budget classifications, and accounting systems.” If this were accomplished, both organizations and budgets would be structured functionally and tied together. This is a key aspect of program budgeting. For instance, the Idaho Department of Fish and Game is divided into eight major programs along functional lines. One of those programs, the Fisheries program, is then broken down into smaller units, such as Resident Fisheries and Anadromous Fisheries, then each of those functions in turn is broken down into smaller units; etc.; etc. Program-based budgeting allocates resources by function, which in turn are divisible into activities. The evolution and development of program budgets was a vast improvement to the state budget process, because it provided some functional perspective for decision makers. By organizing budgets into functional units the focus quite logically turned to the function itself and the delivery of services. The framework in this decision-making process begs the question, “what do you do and why do you need this money to do it?”. The program budget formats in many states then began displaying goals and activities of a program to answer those questions, which then evolved into an examination of “workload measures” and the beginning of a serious evaluation of “performance measures”.

    4. Performance Budgeting

      Performance Budgeting developed as a natural progression from Program Budgeting as Governors and Legislatures began looking at state government functionally. Performance Budgeting emphasizes the outcome of state programs, and attempts to measure the performance of state government, reward programs that work well, and redesign programs that do not work well.

      “Performance-based budgeting calls for a revolution in how states are governed. It focuses on setting goals, designing the strategies needed to meet the goals, and measuring how well they are met. Future funding decisions should focus on program effectiveness, not on the preservation of existing programs and levels of spending. This approach requires that budgeting be directed at programs rather than at specific line items, that the goals of those programs be laid out in measurable terms, and that performance review becomes central to budget decisions.”

      Performance Budgeting is currently the hot topic in state budget development. It is beginning to turn up in various forms in several states, particularly the strategic planning aspect of this process; setting goals and objectives. The most difficult part of Performance Budgeting up to this point has been in identifying meaningful measurements of performance. It is easy to quantify workload; but much more difficult to measure quality which requires a context of public satisfaction, productivity, cost benefit, and fairness. The other two difficulties, once you have meaningful measurements in place are; how do you reward performance in the budget process and how do you sanction poor performance. Are State Legislatures expected to “hard code” budget decisions into a performance budget process on automatic pilot and thus surrender oversight.

      “Advocates contend that the difficulty of implementing a performance-based budget is evidence of how thoroughly state government needs to be reformed. They say that the difficulty of agreeing on goals for programs is evidence that the evidence that the issue has been neglected, and the process of trying to reach agreement will produce valuable analysis and debate. The difficulty of measuring performance has to be faced squarely. How else can anyone know whether government is providing needed services? How else can public confidence in government be rebuilt?”
    5. Zero-Based Budgeting

      Zero-Based Budgeting (ZBB) began in the private sector in a formal sense with Texas Instruments in the late sixties. The popularity of zero-base budgeting (ZBB) spread to state government in Georgia in the early seventies under then-Governor Jimmy Carter who then introduced it at the federal level with his election in 1976. The appeal of Zero-Based budgeting lies in its name mostly, and the expectations it creates. In its pure form the process actually does not work very well in the state budget process. Basically, ZBB starts at point zero every year for all funding decisions. The budget, for all intents and purposes starts from scratch every year for both existing and proposed new programs. Individual programs and activities in a state agency are then prioritized in their importance, and from the ground up all of these units are considered as building blocks in the budget. The intent of ZBB is to take no previously funded programs for granted, requiring that every program emerge through a competitive looking glass which asks the question, what are the consequences of not funding this program?

      “State programs are not, in practice, amenable to such radical annual re-examination. Statutes, obligations to local governments, requirements of the federal government, and other past decisions have many times created state funding commitments that are almost impossible to change very much in the short run. Education funding levels are determined in many states partly by state and federal judicial decisions and state constitutional provisions, as well as by statutes. Federal mandates require that state Medicaid funding meet a specific minimum level if Medicaid is to exist at all in a state. Federal law affects environmental program spending, and both state and federal courts help determine state spending on prisons. Much state spending, therefore, cannot usefully be subjected to the kind of fundamental re-examination that ZBB in its original form envisions. No state government has ever found this feasible. Even Georgia, where Governor Jimmy Carter introduced ZBB to state budgeting in 1971, employed a much modified form.”

      The positive aspects of ZBB for states that experimented with this very tough-minded process were that many programs for the first time received some close scrutiny. Secondly, the intent of this budget process survived in varying forms as many states adopted certain aspects of Zero Based Budgeting that worked within that particular state’s existing process. Examples of this include prioritizing new budget requests across programs within an agency; developing one-time expenditure policies or the “sun-setting” of certain programs, and developing alternative options or levels of funding for accomplishing a goal.

    6. Idaho’s Line-item, Incremental, Program Based, Modified Zero-Based Performance Budget

      As the section title implies, somewhat tongue in cheek, Idaho like many states has developed a budget process over the years that borrows aspects of several approaches in governmental budgeting.

      1. Our process is line-item to the extent that expenditure categories are defined in the approrpriation bill; Personnel Costs, Operating Expenditures, Capital Outlay, and Trustee/Benefit Payments.
      2. Our process is incremental in that it accepts previous funding decisions in establishing a “base budget” on which to build for the coming year; and provides mechanisms to allow inflationary increases and program enhancements to existing programs.
      3. Our process is Program-based in that all budget information is structured by program with emphasis on goals and objectives by function.
      4. Our process is Performance-based in that performance measures are listed in the Legislative Budget Book and the state agency Strategic Plans are submitted with the Budget request documents.
      5. Our process has elements of a Zero-based approach through encouraging one-time expenditures and sunsetting of programs, zeroing those expenditures out of the budget base each year.
  2. Annual versus Biennial Budgeting

    States are split about evenly on whether they conduct their budget process every year, or whether they set a two-year budget cycle. In the past fifty years, as State Legislatures around the country wanted more input and control in the budget process, many states opted to change from a biennial cycle to an annual cycle. The issue was oversight and control. In a biennial cycle the Legislature was out of the loop after setting a two-year budget, surrendering a great deal of management and control to the executive branch. Idaho went from biennial system to an annual system in 1971, and created its own budget office to elevate its professional capabilities in the budget process. The current reform thinking around the country is to take a second look at biennial budgeting. Two states returned to biennial budgeting recently, ostensibly as a means to allow more time for planning, review and evaluation. No one has been able to clearly make their case that one system offers more positives than the other.

    “In reality, a state can develop a good system of executive and legislative fiscal and program planning and controls under either an annual or biennial budget. The success of a budget cycle seems to depend on the commitment of state officials to good implementation rather than on the method itself.”

Legislative Services Office Budget and Policy Analysis 700 W. Jefferson St.  •  P.O. Box 83720 Boise, ID 83720-0054 P: 208-334-3531 | F: 208-334-2668