This article will focus on the U.S. federal and state public budgeting processes. Areas of discussion will include an overview of the elements of a federal public budget and history of public budgeting reform and budgeting formats. In addition, the public budgeting cycle and public budget revenue parameters will be described and analyzed. Issues related to the problem of competing stakeholder agendas in the public budgeting process will be addressed.
Keywords Budget; Budget Reform; Federal Public Budget; Public Budgeting; Stakeholders
Public budgeting is an integral part of the United States system of democratic government. Public budgeting refers to the political and technical process of matching and allocating monetary resources, such as taxes, fees for service, debt instruments, and funds from other levels of government, with individual and program needs. The public budgeting process serves a wide range of fiscal, administrative, financial, and governance purposes. Public budgeting may be seen as the place or process through which stakeholders debate competing agendas, perspectives, and viewpoints about the public good or the common good. Budget actors or stakeholders may play multiple roles in the public budgeting process. For example, citizens serve the roles of voters, taxpayers, and clients. Multiple role expectations are common in democratic governments and societies (Morgan, 2002).
Public budgeting is the process that produces a public budget, a consensus of the best ways to allocate tax revenues to fund public programs that benefit the common good. Public budgeting is often referred to as a scarcity allocation problem. Public budgeting is used for purposes of promoting economic growth, employment, and income distribution. Public budgeting is considered to be a part of development economics in general and, more specifically, a part of economic planning (Premchand, 2001).
Public budgeting processes, and their related public budget documents, reflect the political and social conditions of their times. During the twentieth century, public budgets were alternately characterized by focus on financial control, managerial improvements, planning, prioritization, and accountability depending on the historical context. While public budgeting is a technical process, public budgeting is also a social and historical process.
Public budgeting occurs at all levels of government including national, state, and local levels. The 1997 U.S. Census of Government reported that in June 1997, there were 87,504 governmental units in the United States. All of these governmental units undertake a public budgeting process. Some elements of public budgeting apply to the public budgeting process of all levels of government and some are level and region specific.
This article will focus primarily on the U.S. federal and state budgeting processes and will introduce issues faced by local or international public budgets when appropriate. The following sections, including elements of a federal public budget and history of public budgeting reform and budgeting formats, will serve as an introduction and foundation for later sections on the public budgeting cycle and public budget revenue parameters. Issues related to the problem of competing stakeholder agendas in the public budgeting process will be addressed.
Elements of a Federal Public Budget
Public budgets, at all levels of government, serve at least five major functions in society and government (Morgan, 2002):
- Public budgets fund programs that are responsive to public needs.
- Public budgets fund programs that are effective in accomplishing stated goals.
- Public budgets fund cost-effective programs.
- Public budgets communicate to all stakeholders.
- Public budgets use the public budget to strengthen the economy.
While size and scale of public budgets vary between levels and types of government, all public budgets involve the stages of development, adoption, implementation, and reconciliation (Morgan, 2002).
The federal budget is considered to be unique among public budgets due to its multiple stakeholders and massive scale. The federal budget presents the essential elements of the financial plan of the federal government for the coming year. The federal budget, as described in the 1967 Report of the President's Commission on Budget Concepts, is responsible for the following actions and initiatives (Curry, 1998):
- The federal budget sets forth the president's requests to Congress for new programs, appropriation of funds, and changes in revenue legislation.
- The federal budget proposes an allocation of resources to serve national objectives, between the private and the public sectors, and within the public sector.
- The federal budget embodies the fiscal policy of the government for promoting high employment, price stability, healthy growth of the national economy, and equilibrium in the nation's balance of payments.
- The federal budget provides the basis for executive and agency management of federal government programs
- The federal budget gives the Treasury needed information for its management of cash resources and the public debt.
- The federal budget provides the public with information about the national economy essential for private business, labor, agriculture, and other groups, and for an informed assessment by citizens of governmental stewardship of the public's money and resources.
The federal budget, while it maintains the principles, goals, objectives described in the 1967 Report of the President's Commission on Budget Concepts, has taken multiple different forms and formats during the twentieth century. The public budgeting process, described in the following section, is not fixed but is instead a fluid and socially and historically responsive process.
History of Public Budgeting Reform
Throughout the twentieth century, public budgeting stakeholders debated the appropriate or preferred budget formats. Twentieth century public budgeting reforms, such as program budgeting and performance budgeting, reflect the specific needs of government and society during the time they were developed. In the United States, public budgeting and budget reform have experienced at least five distinct periods during the twentieth and twenty-first centuries:
- Control characterized turn of the century public budgeting.
- Management characterized New Deal and post-World War II public budgeting.
- Planning characterized 1960s public budgeting.
- Prioritization characterized 1970s and 1980s public budgeting.
- Accountability characterizes public budgeting since the 1990s.
The idea and practice of public budgeting developed at the end of the nineteenth century. At the turn of the nineteenth century, the United States did not yet have an established budget system. Congress raised, voted on, and distributed money largely without consistency or accountability.
During the late nineteenth and early twentieth centuries, the influx of millions of immigrants in American cities created political and social turmoil and change. The professions of accounting, administration, and social work grew due to need from growing American cities and these professions promoted municipal finance reform. The professions of accounting, administration, and social work lobbied for budget or fiscal reform in the interest of producing safe, clean, and economically managed cities.
In the early 1900s, budget reform was characterized by a switch from the established budgeting practice of the Legislative Budget to the Executive Budget. In 1921, the Budget and Accounting Act, which established an executive budget at the national level in the United States and became the foundation for present day budgeting at the federal level, was passed by Congress. The new executive budget was coupled with the new idea and practice of a line-item, or object-of-expenditure, budget (Tyler & Willand, 1997). Line-item budgeting includes objects or lines of expenditure, such as personnel and supplies, which are the focus of development, analysis, authorization, and control of the budget. Governmental organizations often prefer line item budgeting as line-item budgeting allows budget officials to move money between line-item...
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