Benefits and Problems Associated with Changing Budget Cycles

Benefits and Problems Associated with Changing Budget Cycles
Response to GAO Survey by Fifteen States

Benefits of Changing to Annual Budgeting

Allows development of shorter-range revenue estimates and a revenue/spending plan that more accurately reflects the needs of the state;

Provides an opportunity to adjust and make changes to expenditures and revenues more frequently as economic and other factors change;

Allows more opportunity for involvement of individual legislators as well as elimination of a 20-month period of relative inactivity on appropriations;

Requires fewer adjustments or supplementals in order to balance and/or meet state obligations; and

Avoids the legislature's having to delegate authority to the governor to make changes in the off-year of the bienniumB

Benefits of Changing to Biennial Budgeting

More time is available in the off-year for review of program issues; and

Biennial budgeting requires departments and programs to consider the long-range implications of their budget requests and their program operations.

Problems of Changing to Annual Budgeting

Requires the almost continual involvement of agency and budget division staff in budget formulation to the detriment of effective budget execution and program analysis;

Encourages short-term fiscal decisions that hinder the development of a long-range fiscal plan;

Extends the length of legislative sessions; and

Requires the executive and legislative branches to use extensive resources to prepare and approve budgets.

Problems with changing to Biennial Budget

Spending and revenue forecasts are less reliable because they cover a longer period.

Source: United States General Accounting Office, Budget Issue; Current Status and Recent Trends of State Biennial and Annual Budgets, July 1987.