The Budget Process: A Quick Primer

South Carolina budget legislation

The budget process spelled out in state law is a thorough, deliberate process, designed to inform citizens at every stage and to maximize their input into the spending of taxpayer dollars. Unfortunately, lawmakers consistently flout this law in favor of a process that centers key decision-making in the hands of a few powerful lawmakers.

Here’s a timeline of the legal budget process, and who you can hold accountable at every stage.

 

November 1: Agency budget requests, and last year’s spending details

By the beginning of November, all state agencies should have submitted their budget reports to the Governor. These reports must include a) every dollar – new and recurring – they want to spend next year, b) where they are getting the money, and c) what they want to spend it on.

What you should know:

  1. How much each agency is asking for, in itemized form
  2. The agency’s reasoning for why it should receive the requested funding – both recurring and new expenses
  3. How much federal funding the agency is getting and what strings are attached
  4. Where the agency’s Other Funds (fines, fees, etc.) are coming from
  5. The purpose, goals, and quantitative measurements for every program the agency provides

Who is responsible for this, and who can you hold accountable?

State law is clear: it’s the Governor’s job to collect this information. His office is required to design and supply the agencies with itemized estimate blanks which clearly designate the information required to be submitted, and the completed reports are submitted to him.

To date, however, the information posted online is very incomplete.

While agency budget requests are typically posted online every year, they reflect only requested budget changes from the previous year and are not the comprehensive, “zero-based” (listing each item on the basis of cost and need, without regard to previous budgets) agency budget required by state law. There is no information posted online regarding the federal dollars requested and spent by each agency, and what strings are attached to those dollars.

State agencies do report their Other Funds sources and projected amounts for the upcoming year, and these reports can be viewed online.

Also by November 1, the Comptroller General is required by law to report to the Governor an overview of state finances and spending. This includes the following.

What you should know:

  1. How much each agency had on hand at the end of the previous fiscal year
  2. Statements of monthly income/expenditure for each state account for the previous year
  3. Statements of annual state income and expenditures from each appropriations account for the two previous years, and the increase/decrease for each item
  4. Itemized balance sheet for the entire state
  5. Any other financial information the Governor may request

Who is responsible for this, and who can you hold accountable?

The Comptroller General is responsible for submitting this objective, comprehensive report of state income and spending to the Governor by November 1. The Comptroller General is a statewide official and is accountable to the entire state for the timely supply of this information. However, no such report is typically published for public perusal by either the Comptroller General or the Governor.

 

November 10: Projected revenue for upcoming year

Ten days after the agency budget requests are submitted, the Board of Economic Advisors (BEA) is required to submit to the Governor and to lawmakers their initial forecast of economic conditions and how much revenue will be available to lawmakers to spend in the upcoming year. This forecast will be adjusted periodically throughout the year, but for budget development purposes, the first forecast is due by November 10 and should include the following.

What you should know:

  • An explanation of the economic model and all the assumptions and basic decisions underlying the forecast – in other words, the BEA’s thought process and research
  • Projected state income on a quarterly basis for the upcoming fiscal year
  • Separate discussions of and revenue projects for every industry in which over 20% of the state is employed (not including agriculture)
  • The flow of revenue for the current fiscal year compared to how much was predicted, and details for any current shortfall

Who is responsible for this, and who can you hold accountable?

This law places the responsibility for this revenue estimate on the Finance Committee Chairman, the House Ways and Means Committee Chairman, and the Governor, respectively. The law also requires the BEA to submit the revenue forecast and each adjustment made throughout the year to the Governor and the General Assembly, and to make it available to the media (published BEA reports are available here).

Only one member of the BEA is directly accountable to the entire state through the Governor. The other two members are only accountable to the chairmen of the appropriations committees in the House and Senate. The House Ways and Means Committee Chairman is elected by the members of his committee, which are selected by the House speaker. The House speaker is elected by the entire body, which means the only way to hold any committee chairman appointees accountable is through each citizen’s House member.

The Senate Finance Committee chairman is determined by seniority, not legislative appointment or election. Again, the only way to hold his appointees accountable is through the individual lawmakers who are responsible for the entire system.

 

December 1: Statewide cost estimate

By the beginning of December, the Comptroller General is required to submit an official estimate of the state’s financial needs to the Governor. The Governor must include this estimate verbatim in his executive budget, along with his own recommendations. This estimate must:

  • Be itemized
  • Be certified and approved by the House speaker and Senate president pro tem
  • Fully explain any increases/decreases from last year’s budget

Who is responsible for this, and who can you hold accountable?

As a statewide-elected officer, the Comptroller General is accountable to every citizen and has a statewide perspective on spending.

 

Mid-January (15th-19th): Governor’s executive budget

Five days after the legislative session begins (the deadline varies from year to year, as session always starts the second Tuesday of January), the Governor is required to submit his executive budget to the House speaker and Senate president pro tem. This budget must include the following.

What you should know:

  • An itemized, complete plan of all proposed expenditures for each state agency, classified by functions, character, and object
  • Estimated revenues and debt for each year, starting with the next fiscal year
  • The increase/decrease from last year for each item
  • The Comptroller General’s cost estimate and explanations

The Governor must include, along with the budget:

  • A statement of the income and expenditures for the two previous years
  • A statement of the current assets, liabilities, revenues and surplus/debt of the state
  • A statement of the state’s debts and funds
  • A statement showing the Governor’s itemized estimates of the condition of the State Treasury as of the beginning and end of each year
  • An itemized and complete financial balance sheet for the state
  • A general survey of South Carolina’s financial and natural resources, with a review of the economic, industrial and commercial condition of the state

Who is responsible for this, and who can you hold accountable?

While approval for all state spending is the role of the legislature, the Governor – as a statewide official – is required to draft the initial budget. The final executive budget is the cumulative result of all the financial information collected in all the previous steps, which is why following the legal timeline and disclosing the information to the public at every stage is so important. This process would give citizens the opportunity to study, digest, and comment on the state’s appropriations while the budget is being developed by an officer accountable to every single citizen.

 

January 23 (approximately): Joint budget hearings begin

Within five days of receiving the Governor’s budget, the House Ways and Means Committee and the Senate Finance Committee are required by law to hold joint, open hearings on the Governor’s budget. The law does not authorize lawmakers to develop their own draft; they are required to start with the Governor’s budget as the working appropriations document, although state law allows them to increase or decrease the various items in the budget as they consider appropriate.

To date, however, there is no record of these joint, open budget hearings ever being held.

Who is responsible for this, and who can you hold accountable?

The chairmen of the two appropriations committees are responsible to hold the joint, open hearings, but they are only directly accountable to their own legislative districts. Citizens cannot exercise any real, direct accountability unless their representative or senator happens to have a seat on the committee. The only option, therefore, is for constituents to force each lawmaker to answer for this entire system.

 

How the budget process actually works

Of course, very little of the legal process is actually followed. If the Governor and Comptroller General collect all the required information prior to submitting the executive budget, they do not publish it to the general public. The Governor’s budgets have varied in the amount of detail and information included over the years, but as a rule, do not include everything required by state law.

The primary culpability, however, lies with lawmakers. Instead of holding joint, open hearings on the Governor’s budget, they draft their own in a plethora of House subcommittees which are neither streamed nor recorded, and which are often held simultaneously. This forces both citizens and most lawmakers to rely for spending decision explanations on the handful of legislators who were privy to those decisions.

Once the budget hits the House floor, lawmakers only discuss one third of the budget – the General Fund (tax revenue)– completely ignoring Federal Funds and Other Funds (fines & fees), despite the fact that the budget authorizes all three pots of spending. Once the budget finally passes the House, the entire process is repeated in the Senate.

As a result, the budget is stuffed every year with excessive spending, pork projects, bills which failed as stand-alone legislation, and shady revenue reporting practices.

 

What can you do about it?

While state spending is the primary duty of the legislative branch, the process laid out in state law is designed to provide a check to excessive legislative spending. If followed, the public would be able to review the budget information at every stage of its development and provide input throughout the appropriations process into the spending of their tax dollars.

This process, of course, would not prevent questionable provisos from being added to the budget. Sometimes these are added at the committee level as well as during the floor debate. It would, however, make it more difficult to keep these provisos hidden.

The only way for citizens to regain control of the budget process is to demand that their representatives and senators insist that the law be followed – which will expose the entire budget to the scrutiny of the state and force every spending decision to be debated and voted on openly.

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