Public Policy and Administration 230 Public Budgeting and Finance Professor Nancy Shulock Executive Director Institute for Higher Education Leadership and Policy Course web site:

Week 1: Introduction and Course Objectives Introductions and information ( addresses) Review syllabus What is public budgeting? –Budget formats –Federal/state/local budgeting –History of budgeting –Budget theory Contemporary context of public budgeting Ethical issues in public budgeting Sample budgets Preview week 2

Public Budgeting: Definition Donald Kettl: Decision about how much of society’s resources we want to take from the private sector to use for problems of broader public interest

Functions/Disciplines of Public Budgeting political (political science) economic (economics) accountability/control (business) managerial/administrative (public administration) organizational (organization theory)

Budget Formats line item -- emphasize control –pushes policy into background –minimizes conflict program budget -- emphasize policy –what should government do –requires more analysis performance budget -- emphasize management –productivity of specific tasks, not overall goals –administrative outcomes

Federal v State/Local Budgeting Federal: –economic and political perspectives –expenditure driven –entitlements –defense State/Local: –organizational and administrative perspectives –revenue driven –more unified executive control

History of Budgeting Congressional dominance –no executive leadership –no “budgets” as we now know them Presidential dominance –Executive Budget Movement –Budget and Accounting Act of 1921 President’s budget OMB Present -- Stalemate –Congressional Budget Act of 1974 Budget committees CBO

Congressional Dominance Period: Small scope of government, compared to Europe Temporary increase in executive power in Civil War Problems: –“bureaucratic feudalism” –no executive leadership –no accountability –inability to respond to growing needs from industrialization, immigration, population growth

Seeds of Change Taft Commission 1912 –US budget and policy are controlled by Congress –Executive branch is instrument of Congress “The result is that while in most other countries the budget is in the nature of a proposal or program submitted on its responsibility by the executive to the legislature, in the US the Book of Estimates, our nearest approach to a budget, is rather a more or less well-digested mass of information submitted by agents of the Legislature to the Legislature for the consideration of legislative committees to enable the Legislature both to originate and to determine the policy which is to carried out by the Executive during the coming budgetary period.”

Seeds of Change, cont. President’s Message: “Notwithstanding the magnitude and complexity of the business which is each year conducted by the executive branch and financed by the Congress, and the vital relation which each governmental activity bears to the welfare of the people, there is at present no provision for reporting revenues, expenditures, and estimates for appropriations in such manner that the Executive, before submitting estimates, and each Member of Congress, and the people, after estimates have been submitted, may know what has been done by the Government or what the Government proposes to do.”

Seeds of Change, cont. Taft Commission recommendations –President submit annual budget message on priorities summaries of expenditures and revenues needed law changes –Department heads submit annual budgets Congress rejected recommendations –common theme: power struggle between executive and legislative branches

Presidential Dominance Period: Executive Budget Movement –borrowed from business and Europe –comprehensive –defined period of time for a budget –standard expenditure categories –developed by executive; staffed by experts –agency heads must support executive budget Budget and Accounting Act of 1921 (Pres Wilson) –Bureau of Budget in Treasury  OMB –Formal budgeting mechanisms –GAO accountable to Congress

California’s Executive Movement Preceded federal reform Some reforms under Governor Hiram Johnson in 1911 Prior to 1911, no schedule for budget preparation –department heads attended all four months of session Board of Control established to advise Governor More reforms in 1922 after federal reform –Amended state constitution – section 12 – a consolidated administration proposal –1927 Legislature created Department of Finance

Era of Stalemate: Congressional Budget Act of 1974 Congress can put forth own budget to challenge the President’s budget more detail in Schick and Kettl readings Shutdowns, late budgets huge staff increases as both sides equalize constant search for reforms (week 5)

Budget Theory Theory: a framework for accumulating knowledge Normative, descriptive, positive –normative -- what should be –descriptive -- what is –positive -- what will be (predictions) V. O. Key 1940 question in search of normative theory: “On what basis should it be decided to allocate X dollars to activity A instead of B”

Budget Theory -- continued Wildavsky –normative theory impossible -- utopian –descriptive theory: incrementalism how decisions are made (process or outcome?) how strategies selected main theory today but partially discredited Rubin: field lacks good theory –need to merge political and technical –recognize importance of process –complexity of disciplines

Examples of Budget Theory Questions how much can revenue estimates be politicized before other means are found? how much of the political can be treated technically without loss of political accountability? how does the political or technical become more dominant at one stage or another or in various circumstances? when does executive v legislative have upper hand? does citizen participation in resource allocation increase support for government? adaptation of Kingdon – microbudgeting theory (week 4)

Contemporary Context of Public Budgeting The New Public Management: Accountability for outcomes Flexibility Decentralization Deregulation Performance Measurement

Ethical Issues in Public Budgeting Technical aspects of budgeting –withhold or distort information Political aspects of budgeting –political ethics issues—who benefits? who pays? Traditional budgetary ethics –appropriate use of funds Contemporary budgetary ethics –appropriate use of discretion –ethical use of information for accountability

Sample Budgets Form –tables –graphs –text: budget message; priorities Level of detail –summary –line items –schedules Context –prior year comparisons –budgeted v expended

Preview of Week 2 Begin Rubin Chapters 1,3, 4 Memo assignment (refer to course website for samples of memo-writing style) –Organization –Clarity –2 pages maximum! Class notes each week posted Monday night before class Listserv will be set up