Well, readers, the election is over and I'm no longer in the state legislature. However, one of the things that I enjoyed doing the most at the Capitol was "de-mystifying" the legislative process, and I'd like to post some things regularly about how things get done (or don't get done) at the State Capitol. There are a lot of news sources out there, but they give very little insight into the nuts and bolts.
I thought I would start with the budget process, since Gov. Dayton and the legislature will be tackling a $6.2 billion deficit over the next few months. I must confess, there was no document like this available when I was in the legislature, at least not in one place! You just had to figure it out.
What's the timeline for approving a state budget?
Here are a set of deadlines by which certain budget tasks have to get done. (These dates are for the FY2012-2013 budget only.) There is more detail on these steps later in the post.
- First week of December 2010: Minnesota Management & Budget (MMB) Commissioner presents forecast of revenues and expenditures and projects a surplus or deficit
- February 15, 2011: Governor must send budget proposal to legislature
- Last week of February 2011: MMB Commissioner presents revised forecast of revenues and expenditures; and Governor may issue a revised budget proposal in response
- March through early April 2011: State agencies present detail of Governor's budget to the legislature
- Date TBD by legislature 2011: Budget targets are set by Ways & Means Committee that define how much funding will be in each finance committee's budget
- Mid-April 2011: Finance bills must be reported out of their respective finance committees
- May 23, 2011: Constitutionally mandated adjournment for regular legislative session
- July 1 2011: Fiscal year 2012 begins
- December 2011, February 2012, December 2012 & February 2013: MMB gives additional forecasts that show if revenues and expenditures are in line with the approved budget
- 2012 legislative session & 2013 legislative session: Legislature approves supplemental budget(s) that keeps the budget biennium ending on 6/30/13 in balance based on forecasts
The state budget we are talking about is for a two-year period--or biennium--starting July 1, 2011 and ending June 30, 2013. (Hereinafter Fiscal Year or FY2012-2013.) The state constitution, Article IV, Section 12, requires that the legislature complete its work by the "first Monday following the third Saturday in May" (this year that would be May 23rd). So the legislature needs to submit a budget that can be signed by the Governor by May 23rd, unless the Governor calls a special session after that time. If a budget is not signed by June 30th, 2011, then the state government would shut down. This happened in 2005 and it was not pretty.
How does the process get started?The executive branch starts the process, which starts usually in the late fall and early winter, when state agencies begin to prepare estimates of their budget needs to fulfill program obligations set by previous legislatures. Everyone knows that cuts are going to happen this year, so agencies are likely preparing smaller budgets that take cuts into account. Governor Dayton's staff will review these draft agency budgets to see if they fit with his vision for the state. His staff will likely ask agencies to re-submit budget proposals based on the direction that the Governor wants to go, e.g., put more money in program A but reduce the amount in program B, cut program C and add a new program D, etc.
Minnesota Management and Budget (MMB, or the old Department of Finance) compiles all the budget proposals into one document and is responsible for making sure that everything adds up. In addition, Governor Dayton is likely to propose additional revenue and so his Department of Revenue will produce revenue estimates for how much new funding would be available for the budget under certain scenarios (e.g., increasing the income tax rates on the highest earners, as the Governor has proposed).
The Governor will submit a final budget proposal to the legislature by the third Tuesday in February (February 15th for 2011) as required by
Minnesota Statute (M.S.) 16A.11. (If the Governor was not new, the deadline would be the fourth Tuesday in January.) The Governor and his MMB Director will likely make a public statement about the budget and how big it would be, where the cuts will be, how much revenue might be raised in taxes, and how the numbers add up. A flurry of press conferences and press releases by legislative leaders will ensue.
The State of Minnesota requires a balanced budget, but that requirement is not in the state constitution. It is in law in Minnesota Statutes (M.S.) 16A.11 subdivision 2; 16A.15 subdivision 1.
How do they figure out how big the budget and the deficit will be?The state relies on accurate budget forecasts. In Minnesota, the state contracts with an economic forecasting firm called
Global Insight to figure out how much tax revenue will come in and how great the state's spending obligations will be. These forecasts factor in all sorts of variables like the price of oil, home ownership trends, consumer data, and so on. By calculating what the state's economy will be like, the forecast tells you how much the state will receive in business, sales, and income taxes. This information will help with spending estimates too, since a lot of state spending relies on how many people are in need of services, like unemployment insurance, health care coverage, transportation, etc. when people are out of the workforce.
M.S. 16A.103 requires two forecasts each year. One is presented by the end of the first week of December and the other is presented by the end of February. The state's MMB commissioner, usually with the state's economist, presents the findings. The forecast must be presented to both the Governor's office and the legislature in the same day, presumably to keep anyone from altering it for political gain.
Eventually, each house of the legislature sets "targets." This is where House and Senate leadership determines how big the budget will be. For example, leaders might say that the budget will be $33 billion for FY2012-2013. Then they indicate how large the budget for each finance committee will be, e.g., K-12 education gets $11 billion, health and human services gets $9 billion, and so on. Then each finance committee drafts a budget in the process outlined below that meets that target. If leadership wants there to be an increase in revenue beyond what is forecast, then the tax committee in each house has to figure out how to raise that new revenue with its own target. The entire set of targets must be in balance, so proposed revenue and expenses need to be equal.
During committee and floor debate on budget bills, you may often hear the phrase, "Your proposal is going to 'blow' the targets." That just means that a proposed amendment or change to the finance or tax bills will put the budget out of balance. The House and Senate may set their own targets and they may differ from the Governor's proposal. Eventually all three entities need to agree on the same targets. Sometimes they work together ahead of time to do this (usually when they are all in the same party, which is rare), but usually they don't do this until the end. (More detail on why each entity might do this, see a fuller description below.)
One valid complaint about the budget target setting process is that it makes it harder for the legislature to set priorities
across different parts of state government. Finance committees can set priorities
within their budget target but if you look at the whole budget one could say that most programs in committee A's budget are a lot more important than programs in committee B's budget. Eventually you see some fur fly on the House and Senate floor when the minority says, "Why are we funding this less important program (arts and anything appearing to be "touchy-feely" are always a target) when nursing homes, veterans, and education are struggling?"
In recent years (at least in the House) the Ways & Means Committee approved the budget targets but there have been attempts to require the entire body to vote on them.
Where is the budget?The Governor's office produces both paper and electronic copies of the budget. By February 15th of this year, legislators will get several three-ring binders of the budget, and the sections are divided by agency. MMB will make it available
on its web site as well for the public.
As the legislature reviews the budget through committee hearings and input from state agencies and the public, the budget gets put in a different form. By late April or early May, each finance committee in the House (there are 11, I think) and Senate (roughly the same) will put the budget in a bill format. Usually a committee takes a bill that is "dead" in committee and amends it to replace the contents with the committee's budget so that a new bill does not have to be introduced. This is called a "vehicle" bill so you don't have to re-introduce a whole new bill. This leads to a lot of confusion for members of the public who are trying to track the budget. The committee's finance bill obviously has to be within its budget target.
The full House and Senate usually pass each committee finance budget separately on the floor, then it usually goes to a conference committee to work out differences, then each house votes on the conference committee report, and then the final bill goes to the governor. Then the bills become "
session law" and go into effect. If the Governor vetoes the whole bill, the process has to start over back in committee, where another vehicle bill is created. At this point, the Governor and the legislature start negotiating the final details of the budget. The Governor can also sign a finance bill and make line-item vetoes of specific expenditure items. An official veto message comes back to the legislature in either case explaining the vetoes.
Any tax bill has to originate in the House, but there are ways to get the Senate to act first. For example, the House might pass a simple bill that might raise a small fee and send it to the Senate as a vehicle for a much bigger tax bill. The Senate votes on it and sends it back to the House.
How hard is it to track some of these budget bills? When I watch budget bill hearings, it all looks like stuff has been worked out behind the scenes.The public will usually get frustrated by this process because when deadlines approach you can't figure out which finance bill moving through the committee process is the current draft of the budget. Usually the lobbyists and other interest groups who camp out at the Capitol are the only ones who can keep track of it in time.
For example, the House Environmental Finance Committee might take a dead or small finance bill sitting in committee (say, a hypothetical House file 1234 on fishing license fees) and create a vehicle bill that includes the committee's budget. Now HF1234 is the environmental finance bill. This is after the committee chair works with members of his/her own party in private meetings to figure out what programs will get funding and at what level. (Sometimes a chair will just have the finance bill drafted and just tell everyone else what is in it and not ask for input!) The minority party members on the committee usually get notification of the bill's contents a few hours or a day in advance should those members want to propose amendments in committee. Some committees have a "24-hour rule" so any bills or amendments to be considered have to be available a day ahead of time so members can review them. The committee chair works closely with a non-partisan fiscal analyst to make sure all the numbers add up.
The committee might take testimony over the course of a few meetings and then vote on the bill once members introduce and perhaps pass various amendments. This often happens late at night. Within a few days, the finance bill moves through other finance committees that might have to look at a specific section of the bill, and eventually it goes to the full Finance Committee and Ways & Means Committee. At each stop the bill has become a new draft (or "engrossment") because it has usually been amended in each committee. The legislative web site may not have the most up to date version available for the public until the next committee meeting, such as "HF1234, 4th engrossment." You really have to stay on top of it by talking to committee administrators to get the latest draft, as well as proposed amendments. Vehicle bills passed near the end of session from the floor are very hard to track as well.
Then the bill hits the House floor, where there is no opportunity for public comment or testimony. The people who usually testify in committee on finance bills are organizations who have a major stake in the outcome, such as state agencies, business organizations, and nonprofit advocacy groups. It is pretty rare to have testimony from the general public just because it is so hard to track the bills and interpret all the detail. Legislators do hear from constituents
a lot when advocacy groups notify their members of pending votes, as in "Tell your legislator to vote YES on the Gardner amendment to the Environmental Finance bill!" Those phone calls, e-mails, letters, and visits make a difference, and the more personalized those communications are the better.
Once the budget passes, it is still in about a dozen pieces in many different finance bills. The explanatory information about each government program that you find in the agency budgets back in February does not show up in the law. There is no central and/or user-friendly place to find the approved budget along with an explanation of what each program does. I introduced legislation during my tenure that would require state government to use an
Application Program Interface (API) so that the public could access budget data more easily and "mash up" the information for innovative analysis. Alas, the computer guys at the state said it couldn't be done in a timely way and it would cost too much. The federal government has accomplished this at the
USASpending.gov web site.
There are some time rules for how soon a bill can move through committee or be voted on on the floor. For example, a conference committee report usually has to be on members' desks or on the internet for a 12 hour period. Some legislators have tried to change the internal rules so that it takes longer to get bills through committee so people have a chance to give more input.
There are efforts to show what the impact of budget proposals will be. The
Minnesota Budget Project is one of the better conduits of information. In many cases, the bill summaries they put together on finance bills, especially for health care and human services, are better than what legislative staff put together. In particular, the MBP gives some plain-English description of what each affected program does and what changes to their budget will mean in real terms.
How do legislators know how much an idea will cost?Legislators introduce bills that can save or cost money, or raise or cut revenue. State agencies have staff who review these bills and create a "fiscal note" to determine the cost of the idea. Legislators with an ambitious idea often become downcast when a fiscal note appears on their desk that shows their idea would cost more than they thought, or that it wouldn't save as much as they thought. If your idea involves revenue, the Department of Revenue produces a "revenue estimate" instead of a fiscal note. The agencies show their math and assumptions in the note or estimate. Occasionally politics filters its way into fiscal notes. Democrats in the House often complained that the Republican administration was trying to kill an idea by overestimating the costs of a Democratic idea or by taking a long time to produce the fiscal note. Sometimes agencies will just simply not like a legislator's idea and do the same thing, which often has nothing to do with politics. My observation was that if an agency didn't want to do what the legislator was suggesting, the agency will say, "Oh, Representative Gardner, that will cost a lot" and produce a hefty fiscal note. If they really
want to carry out the idea, they will say, "Rep. Gardner, we will absorb the cost of the program."
What about zero based budgeting?Zero based budgeting is the concept that we shouldn't just look at what agencies received last year and then just add or cut some money from year to year. ZBB would require starting from scratch and have state agencies, the Governor's office, and the legislature justify each program again. This can sound pretty appealing to a legislator who doesn't like the idea of just "tweaking" the budget when it's not clear which programs are more effective than others. However, it would be a daunting project. The legislature has about five months to pass a budget, and as you can see from the timeline, the work does not get started in earnest until March. This kind of effort would have to be a multi-year effort. The House Public Information Office did a
very good article on the opportunities and pitfalls of ZBB in 2009.
During hearings you will hear people talk about the "base budget." Most items in the state budget, unless there is specific language that something "is a one-time appropriation," are part of the "base budget." That means that agencies expect that the base budget level of funding will be the same in the future. When cuts are made they can be identified as one-time cuts or cuts to the base budget. This is often done to help agencies with planning and expectations, but the process pretty much conflicts with zero-based budgeting efforts!
How does politics get integrated into the budget process? Many voters wonder why the legislature only solves a short term budget problem. The requirement is for a balanced two-year budget, and after going through the process above, you can see why that is all you can get sometimes! Legislators fight tooth-and-nail for their priorities. Republicans beat up Democrats for raising taxes and Democrats beat up Republicans for cutting spending. Sometimes it seems miraculous that a budget gets passed at all just for
two years! The MMB does give information on revenues and expenditures for the next four years, but it isn't as accurate as the two-year forecast because economic conditions can change rapidly. So it's hard to nail down a budget for longer than that.
Of course, legislators always look toward the next election. Everyone is always envisioning what the attack postcards in your mailbox are going to look like ("John Doe wants to kick grandma out of the nursing home!" "Richard Roe wants to kill jobs with more taxes!") and that can affect how legislators behave. Do you want to take a principled stand, lose the next election, and let someone with the opposite viewpoint take the seat and swing the majority? Should you accept the risks of the job and do what needs to be done? It makes for short tempers and a lot of stress in April and May.
The amendment process says a lot about politics in the budget. The majority party has to assemble a budget and get it passed. The minority party will try to change the bills by introducing amendments that support its priorities. If you can get enough majority votes on your amendment to pass it, you can have an impact. The minority party is also trying to get their colleagues on record supporting a view that can be used in the next election. Committee mark-up sessions and floor sessions on finance bills end up taking a while for these two reasons. This year will be interesting because the DFL and GOP are only a few seats apart and the DFL could get some GOP members to join them on some selected amendments. During the last four years, the DFL had sizable majorities so the GOP introduced amendments mostly to make political hay.
Why do Governors and/or the Legislatures propose budget bills that they know won't pass or get signed into law? It seems like a waste of time.There are a few reasons. First, one party will want to show public support for their idea even if they think it will not succeed. This is where the Governor and the legislature are appealing to their political bases. You can say that you tried and so the vote is "symbolic." Legislators in competitive districts hate symbolic votes! That's because you take the risk of an unpopular (if preferred) vote and get little benefit out of it. Second, you might present your proposal because it is based on your principles and you think it is the best idea. Third, since you might be negotiating later for something less, you should aim high and then negotiate downwards so you can get the best deal. Finally (and this was the case with Gov. Pawlenty during my tenure), you might not actually know what the other side will do until you put the proposal on their desk, which will get the other side to fish or cut bait!
Well, that's it from my perspective. If you are interested in other topics, let me know! Thanks to Alissa Harrington for helpful input.
Copyright 2011 Paul D. Gardner
