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Discussion Thread: Budget Cycle

Assessment of the Value of the Budget Cycle

In this discussion, the budget model used is that of school districts in California. In comparison with other states and the federal government, California school districts do not have the power to tax. That privilege ended in 1978 with law changes that fixed the allocation to 1% of property values within the jurisdiction. This makes budgeting somewhat difficult as the revenues are limited by the allocation, part state, and part local, as well as revenues generated by enterprise funds and grants. Fiscal control, however, remains an important focus as explained by Mikesell, “The first expectation of a budget process is that it will be a tool for fiscal discipline” (Mikesell, 2017, 158).

Revenue Estimation and Budget Formulation: To estimate revenues, fiscal officers utilize trend analysis processes that include past student enrollment for forecasting as well as prior per-student allocations plus the inflation factors normally added to the apportionment formulas. This process allows for “close to reality” assumptions that allow for a precise budget building with allocations for the various departments and schools. As Ammons explains, “Each local government department may have particularized tactics. Staffing norms, professional standards, real and imagined mandates, benchmarks, accreditation, and surveys all help agencies to justify budgets” (Rubin, 2015, 182). Local accountability laws passed in 2015 mandate stakeholder input in the budget development process, including the formation of committees that include staff, students, elected officials, and public input. The stakeholder input has been built into the local control formulas, which mandate that the revenues are directly related to the proposed and ongoing programs for the budget year. This stakeholder involvement is similar to the federal process explained by Mikesell: “Not only is the budget a financial accounting of the receipts and expenditures of the federal government; it also sets forth a plan for allocating resources—between the public and private sectors and within the public sector—to meet national objectives” (Mikesell, 2017, 155).

Budget Hearings and Budget Adoption: The state requires a budget adoption calendar that includes stakeholder involvement assurances and a public hearing at a different meeting than that for the budget adoption. The hearing meeting allows for public input and for the Board of Education to ask questions concerning the proposed budget and direct changes to be implemented by the executives. The state mandates that these meetings result in the adoption of a balanced budget by July 1. The Bible, in Corinthians, explains the fiscal cycle and budget obligations: “On the first day of every week, each one of you should set aside a sum of money in keeping with your income, saving it up, so that when I come no collections will have to be made” (ESV Bible, 2001, Corinthians 16:2).

Budget Execution: The annual budget process requires quarterly meetings, called interim reports, which require adjustments and reporting of updates to the Board of Education and the State. This process also serves to start the development of the subsequent year’s budget and mandates the implementation of multi-year projections that serve to analyze the sustainability of the proposed budgetary reports for the required three years. To complete the process, the fiscal team must make a variety of assumptions and estimations, as Ammons explains, “Each local government department may have particularized tactics. Staffing norms, professional standards, real and imagined mandates, benchmarks, accreditation, and surveys all help agencies to justify budgets” (Rubin, 2015, 182)

Assessment of the Value of Budgetary Planning Techniques

Trend Analysis-Fiscal offices are required to develop multi-year analyses to examine long-term revenues and expenditures, both for the justification of new programs and the sustainability of existing programs and mandates. The historical perspective serves to identify trends that can support or reject the fiscal plans of a particular department or school and provide the governance team with the background needed for budgetary decisions.

Driver-Based Planning-The state-mandated local control formulas require financial planning reporting based on organizational objectives, stakeholder-driven educational goals, student enrollment trends, and the actual student attendance factors, all of which serve to provide the amount of state funding received, thus incentivizing districts to increase student attendance.

Financial Modeling-In addition to basic planning models, Sexton (2010) explains that fiscal teams utilize demographic studies and legislative reviews to develop more sophisticated forecasting models that take into consideration new developments that can generate students, like housing, and plans that can decrease revenues, such as eminent domain for the development of a new rail system or commercial venture, as explained by Rubin: “budgeters tend to weigh political cues more heavily than economic cues, even though economic factors play a significant role in the analysts’ decision process” (Rubin, 2015, 194).

Forecasting – Fiscal officers develop “cohort-survival” forecasting systems to predict student populations and where in the district changes will take place to better direct resources and programs to those areas. As Korey (2011) explains, economic factors and more complex analysis involving birth records and other demographic factors can provide more precise information for budgetary and program development, allowing for better budgeting than a simple incremental approach, as explained by Rubin: “As incrementalism falls away, the books get more complex, more interesting, and less internally contradictory”  and “ Recent work has changed the view of budgeting as the allocation of dollars to the allocation of a variety of resources, including loans, subsidies, insurance, and grants” (Rubin, 2015, 187-189).

In conclusion, although California education budgeting has many similarities to state and federal budgeting, the direct involvement of the public, although sometimes underinformed (McGhee, 2010), provides a level of responsiveness and accountability that varies from the other levels of government, as well as more immediate public reaction about the results of the budget allocations.

References:

English Standard Version Bible. (2001). ESV Online. https://esv.org/

Korey. (2011). California: A Failed State or Too Big to Fail? California Journal of Politics and Policy., 3(2), 1–22. https://doi.org/10.5070/P2QC70

McGhee, E. M. (2010) “How Much Does the Public Know About the State Budget, and Does It Matter?” California journal of politics and policy. 2.3. 1–22. Web.

Mikesell, J. (2017). Fiscal Administration (10th Edition). Cengage Learning US. https://mbsdirect.vitalsource.com/books/9781337515…

Rubin, I. S. (2015). Public Budgeting. Taylor & Francis. https://mbsdirect.vitalsource.com/books/9781317461838

Sexton. (2010). A Blueprint for Rebuilding California’s Antiquated Fiscal Structure: Review of California in the Balance: Why Budgets Matter. California Journal of Politics and Policy., 2(1), 1–7. https://doi.org/10.5070/P2F604

Stone, Samuel B. “Boom & Bust: The Politics of the California Budget, by Jeff Cummins. Berkeley: Berkeley Public Policy Press.” Public budgeting & finance. 35.4 (2015): 112–115. Web.