Surplus

An interesting question in chapter 10 is what do we do with the surpluses we have? In the late 90’s there were surpluses and Wildavsky suggests that politics during this time was just as partisan as it was during times of deficit spending. I am wondering what the responsible thing to do would have been. Here is a list of the things that I have come up with.

1. Ensure that we are still following the budgeting rules. We do this because it would have been nice to keep going with the surpluses we had. When we stopped following the rules and revenues slowed, as we learned in class, we had a much larger problem on our hands, as we are dealing with it today.

2. Use the money to increase monies paid to any debt that needed paid off in future budgets. This would have been a good way of continuing prosperity and would help to balance future budgets more easily.

3. Put a portion of the money into rainy day funds to help pay for emergencies, national disasters, or future debt. Deposit monies into the treasury where we can roll over a portion of the surplus into future budgets.

4. Invest into all energy sources, natural gas, oil, clean coal, and renewable energy sources such as solar, wind, tide, and geothermal, to lower the price of energy and get us off of dependence on foreign oil.

5. Use the money to get underfunded programs, to the point where they can function properly, but make sure to count this into future budgets so that we are not over spending.

6. Kick back some of the money to the tax payers to help grow the economy, decrease unemployment by helping business to grow, and in the end, hopefully help the tax base to grow some more.

Surely, some, maybe all, of this was done. It seems to me that the best thing to do in times of surplus is plan accordingly and keep the surpluses coming.

Check and Balance

After reading Rubin’s Chapter 8 Budget Implementation and Control I would like to share a work-related example of the existing federal, state and local discretion-abuse-control cycle.

The Borough of Chambersburg has received federal transportation earmark funding allocated by Congressman Bill Shuster. Leftover money that was originally allocated to other county transportation projects has been offered to the Borough for use on state and/or local street improvement projects. While this type of funding is often criticized as pork, the reality is that most federal earmarks of this nature ultimately follow some type of administrative process that is supposed to ensure the money is spent appropriately. However, as noted by Rubin the discretion-abuse-control cycle can be undermined at various levels of the administrative process beyond direct control of the elected official.

In our case, the federal transportation earmark funding is administered locally by the PA Department of Transportation (PennDot) through the Franklin County Rural Planning Organization and the Transportation Improvement Program that they control. While an earmark project is not technically approved as part of the annual federal transportation funding budget controlled by the RPO it must be reviewed and processed according to federal regulations and PennDot criteria for environmental clearance, engineering/design, permitting, etc. At a recent RPO meeting, PennDot representatives discussed federal audit results that included no findings related to management of the federal funding distribution, project planning and implementation system they administer.

Ironically, elected officials can at times become frustrated with this type of system. When well managed and operated according to the regulations the system is extremely methodical and slow. As a result, it typically takes twice as long to plan a road improvement project than it does to build it. At any rate, elected officials that are not knowledgeable of the system and skilled at facilitating an earmark through the system can find themselves in a bind when the funding that was earmarked to their constituency is jeopardized by other political and budgetary pressures. Something that is prevalent during the current federal budget struggles.

As we have learned from Rubin, and our class discussions, our government is not lacking regulations and oversight. Following the regulations or ignoring them is up to those who are elected, appointed or hired to create policy, provide funding and administer programs.

I have not been on in a week or two but it seems we are behind here. I promise to read if people will post. Do we have a critical mass for this blog??

Lonce

Save or Spend?

Save or spend
For a long time now this country has been faced with a rather large deficit. Whether you believe the deficit was caused by the Bush Administration, global problems, or even the banking issues, the point still remains that we have a serious crisis that needs to be dealt with. Obama is moving forward with his plan to instill confidence in the consumer and provide hard money to business in an attempt to help the country. There are a few different methods to help boost the economy, as we have seen with what Bush tried to do and now Obama. I come from a firm belief that the economy should, in time of need, be helped out by the government when things turn bad. This is obviously straight from Keynesian Economics, which is what is being used today, in some form. This is just my belief, as many theorists have pointed out, there is not one way to balance the budget, and the success of the theory depends on a lot of different things occurring in the country. Furthermore, I believe that the government should not just spend or cut in order to balance the budget. I believe that the budget should have both occurring simultaneously, meaning that some programs will need to be cut, while others should get more money. What do you guys think?
· Which theory do you prefer?
· Do you believe that the government has no place in the economy and that things will eventually work themselves out?
· Would you take a spending or cutting approach in order to balance the economy, or both?

Thanks for this article Phil. Very nice example. One thing to point out here is the use of taxes to reach a policy goal. That is, we often think of taxes as dealing strickly with revenue (or lack of) but many times taxes can be used to limit activity (in this case, possibly drilling).

Natural gas fuels hot debate in Pa.

Many of the terms and concepts discussed by Rubin in Chapter 2 are referenced in the 1/18/10 Public Opinion article “Natural gas fuels hot debate in Pa.”

http://www.publicopiniononline.com/ci_14213840

The state is trying to decide whether to tax the companies that extract Marcellus Shale gas even though they already secure revenue from lease fees and future royalties. It’s interesting to read about the Democrat and Republican policy and revenue positions related to a state natural resource and the companies that will benefit from the gas extraction. I find it especially interesting that Governor Rendell wants to help the industry become an economic engine for the state but also share the tax burden beyond lease fees and royalties. While the newspaper article does note that most of the lease revenue goes to the general fund, I wonder whether the governor would consider earmarking tax revenue from Marcellus Shale gas extraction to help protect the environment where the drilling takes place?

Transparency....

Throughout the first half this weeks assigned reading in the Rubin text I could not help but focus on the issue of accountability and transparency of records. Legislation like Gramm-Rudman-Hollings unintentionally encouraged creative bookkeeping and after the 2002 expiration of the Budget Enforcement Act practices became less open yet again. With the utilization of Ad Hoc committee and creative scoring and rule changes that made deficits look smaller to justify policies and tax cuts. I think I am really just hung up about how publicly traded companies are now “held to higher standards of record keeping” than the government enforcing them. Through the Sarbanes Oxley Act that was passed in 2002 and signed by President G. W. Bush companies were held accountable for the accuracy and completeness of corporate financial reports. I see the exclusion of Defense Department from the budget although it received approximately 75 billion dollars in funding in 2005, which occurred under the same Bush Administration (Rubin, 119) that felt the need for people to trust financial records. Public budgets are public record of government finances but how much of the general public would be able to make sense of anything through thousands of pages of legislation and gimmicky accounting practices let alone trust it. Does this seem like a double standard to anyone else? States and local governments have moved more towards line item vetoes to truly invoke accountability as well encourage transparency. I guess that would make the national budget seem more trustworthy and less like things are being pushed under the rug. At the same time I understand that that’s a lot of Presidential power, and well we all read about how wonderfully Nixon used his power with the impounding. I may be comparing apples and oranges but it just seemed a little sketchy.

OMB

I incorrectly posted this as a comment to the Welcome post last weekend. Thought I would post it again after Lonce discussed the OMB last night. While reading the Wildavsky and Rubin assignments, I have taken some time to review the OMB website. http://www.whitehouse.gov/omb/ In light of the text discussions regarding executive and legislative budgeting perspectives, I found it interesting to review the President’s FY 2010 transmittal letter and Terminations, Reductions and Savings plan. Rubin’s discussion about the “variety of actors” involved in budgeting makes you realize how monumental, and potentially unrealistic, this plan is.

Types of Budgets

The four types of budgets line-item budget, performance budget, program budget, and zero based budget, found in Rubin Chapter 3 page 82 are all distinct and serve different purposes. I think that many people like the idea of a line item budget because it is easy to discern what money is being spend on, there is no guessing. It makes accountability easy because an individual can point to specific expenditures. I have always thought of it as a way gain control when expenditures are seemingly out of control. However, the obvious negative aspect to this is that the top administrator has no say or leeway when it comes to making expenditures as Rubin points out. My view on this is that it inhibits the essential functions of that administrator because they cannot maximize potential of their assignment. I would think that this is a top role for that administrator.
The performance budget focuses on how well the money that was allocated last year was spent. This seems like a good idea but I have some reservations which I am not sure about. For instance, do they take into account the changes in economy, staffing, costs of goods, etc. from one year to the next. I think that if the budget is approached with those kinds of questions in mind, it could be a useful tool.
Lastly, Zero-based budgeting rates programs or services by their importance and funds those deemed to be the most important. I think that the positive aspect to this is that you can take care of most of the people's concerns with this because those most important programs are being taken care of. This is the best for the majority but someone is going to be left out or a program or service used by a few a minority of people is going to be dropped. However, I think that this program is where the cost cutting is at.

Welcome

Hello everyone. This is the place to discuss our weekly readings for the SU Foundations of Public Budgeting course.