The Power of the Purse:  Legislatures That Write State Budgets Independently of the Governor

Ronald Snell
March 2008

Introduction

Control of taxation and appropriations is the foundation of legislative power. Medieval English kings called parliaments when they needed to raise money. American colonial assemblies used their control of fiscal policy to extract concessions from royal governors decades before the American Revolution. The state budget reform movement of the early 20th century somewhat reduced legislative control of state budgets in the interest of central policy direction and oversight, but the budget process remains central in all legislatures. A few state legislatures continue to hold the balance of power over the budget vis-à-vis their governors. This report focuses on five states—Arizona, Colorado, New Mexico, Oklahoma and Texas—where the legislature develops a state budget independently of the governor.  Creation of a state budget is a demanding task in terms of legislators' time and legislative resources. This report describes the principal tasks these legislatures undertake and the time, schedule and resources legislative budgets require.

A.  Which legislatures develop independent budgets?

All state constitutions require that the state legislature enact appropriations in order for money to be spent from the treasury. In that sense all legislatures control state budgets. In reality, governors' power to propose a budget sets the terms of the discussion and gives them the upper hand in many states. But there are states where the legislature dominates the process to the extent of producing a full alternative to the governor's proposed budget. 

Arizona, Colorado, New Mexico, Oklahoma and Texas all have a long tradition of independent legislative budgeting, and they are discussed in this report for the light they shed on the processes involved and the demands such legislative budgeting makes in terms of legislators' time and legislative resources.

The differences among these states make it clear that strong legislative budgeting is possible in many different environments.   Texas is the largest state with a biennial session calendar and biennial budget. Colorado, New Mexico and Oklahoma have annual sessions and annual budgets. In New Mexico, legislative sessions are relatively short: 60 days in odd-numbered years, and 30 days in even-numbered years. Arizona has annual sessions and provides agencies with annual or biennial budgets depending largely upon the size of the agency budget in question. 

In these five states, the legislative budgeting practices described in this report have existed for more than a quarter-century and have persisted despite significant changes in the partisan control of one or both houses in the legislature and of the governor's office.

B.  What is the budget committee structure?

The Arizona, Colorado, New Mexico and Texas legislatures make use of small, powerful joint budget planning bodies—the Arizona Joint Legislative Budget Committee (JLBC), the Colorado Joint Budget Committee (JBC), the New Mexico Legislative Finance Committee (LFC), and the Texas Legislative Budget Board (LBB). These legislatures can be said to have a budget process that is nearly as centralized as the executive branch process in their states. Each of these legislatures also has an appropriations committee in each chamber that must approve the budget recommended by the joint budget planning body to move it ahead. These committees review and revise or accept the recommendations that come from the joint committee. In Colorado the principal review occurs in the party caucuses in each chamber.

In each of these states, the chairs of the appropriations committee are members of the joint budgeting body, and have a vested interest in seeing that the committee endorses their previous work.   The committees receive the budget after a great deal of time and work has gone into it, and are not necessarily in a position to offer extensive alternatives. Committee and floor debate may result in numerous amendments, but not necessarily much change. In Colorado in 2007, Representatives and Senators offered more than 100 amendments to the budget recommended by the Joint Budget Committee, but relatively few were adopted. One restraint upon adopting such amendments is the Colorado House rule that amendments to increase spending must identify a funding source for the increase, in order to maintain the balance of the budget.

Oklahoma offers a completely different, highly decentralized model that brings the entire membership of the legislature into active involvement. The Oklahoma Legislature does not name a joint standing committee, and the House and Senate processes for writing a budget differ substantially.

Under the system the House of Representatives used in 2007, the House Appropriations and Budget Committee has no subcommittees (except for the Revenue and Taxation Subcommittee). Instead, the other nine House standing committees work through 25 subcommittees to make recommendations on agency budgets to the Appropriations and Budget Committee, which drafts the budget.  Almost every, if not every, House member has the opportunity to participate directly in the creation of part of the budget. 

Oklahoma Senate budget participation is also inclusive. The Senate Appropriations Committee, which includes one-third of the Senate membership, works through six subcommittees which among them include all Senators. At the end of the process, every Senator is made a member of one of the subcommittees of the  General Conference Committee on Appropriations, which resolves the final budget with the House. In effect, every Oklahoma legislator can participate directly in budget authorship.

The number of legislators in these states is shown in figure 1, and the size of the membership of the joint budget groups and the budget and appropriations committees appears in figure 2. Oklahoma's subcommittee membership is not listed.

Figure 1. Number of State Legislators, 2007


State


House of Representatives


Senate


Total Membership

Arizona

60

30

90

Colorado

65

35

100

New Mexico

70

42

112

Oklahoma

101

48

149

Texas

150

31

181

 

Figure 2. Membership of Joint and Chamber Appropriations Committees, 2007


State


Committee


House of Representatives


Senate

Arizona

Joint Legislative Budget Committee

8

8

 

Appropriations Committees

17

11

Colorado

Joint Budget Committee

3

3

 

Appropriations Committees

13

10

New Mexico

Legislative Finance Committee

8

8

 

Appropriations Committees

18

10

Oklahoma*

Appropriations Committees

9

16

Texas

Legislative Budget Board

5

5

 

Appropriations Committees

29

15

*In the Oklahoma House of Representatives, the nine other standing committees make budget recommendations to the House Appropriations and Budget Committee.

 

The Arizona JLBC, Colorado JBC, New Mexico LFC and Texas LBB have similar responsibilities with regard to the state budget: each prepares a proposed state budget for legislative consideration. In each of those four states, the membership of the joint body overlaps with that of the separate committees in the two chambers.

  • The JLBC in Arizona consists of the chairs of the House and Senate appropriations committees, who chair JLBC in rotation, the finance (tax) committee chairs from each house, the majority leaders from each house, and five other members of the appropriations committee of each house (16 members in all).

  • The Colorado JBC consists of the chairs of the House and Senate appropriations committees, who chair the joint committee in rotation, one additional majority member and one minority member from each of the two appropriations committees (six members in all).

  • The New Mexico LFC includes the chairs of the House  Appropriations and Finance Committee, the House Taxation and Revenue Committee and the Senate Finance Committee, six other house members, and seven other senators. Membership is proportional to partisan membership of the chambers (16 members in all). 

  • The Texas LBB includes the lieutenant governor and the speaker of the House as joint chairs, the chairs of the House Appropriations and Ways and Means committees, the chair of the Senate Finance Committee, two additional members from the House, and three additional members from the Senate (10 members in all).

The overlapping chairmanships and the use of the same staff provides ties between the joint committees that draft the budget and the appropriations or ways and means committees in the two chambers. 

C.      What is the role of pre-session budget hearings?

  • Arizona legislators do not hold pre-session budget hearings. With direction from the Joint Legislative Budget Committee chairs, staff draft a budget on the basis of agency documents before the legislative session begins in January.

  • The Colorado Joint Budget Committee meets four days a week in November and December for staff briefings and formal agency budget hearings.  

  • The New Mexico Legislative Finance Committee begins its work in August for the fiscal year that will begin the following July 1. In August, it issues guidelines to state agencies and the committee staff for budget requests, based on preliminary revenue estimates and committee priorities. Agencies submit budget requests September 1, on which the committee holds hearings and receives staff recommendations through the end of December. The committee meets monthly for several days each time. At the end of December, the committee makes decisions on its budget recommendations and staff compile them for introduction. The staff provides the appropriations committees with statements of the differences between the recommendations of the Legislative Finance Committee and the governor.

  • Oklahoma House standing committees and subcommittees begin hearings in October, first focusing on agency performance reports and moving on to budget requests when those are provided to the Legislature in October. Senate appropriations subcommittees hold hearings throughout November and December on agency performance reports and budget requests.  

  • The Texas Legislative Budget Board staff hold interim hearings with agencies in accord with legislators' directions, traditionally without legislators' direct involvement. Legislators have been more involved in pre-session hearings in the last two rounds (2004 and 2006).

 

D.      When is the budget actually drafted?

  • In Arizona, the staff prepare a detailed budget in the late fall under the direction of the co-chairs of the Joint Legislative Budget Committee and the chamber leadership. The governor's budget is released within five days of the beginning of the legislative session, and JLBC staff then prepare a line-by-line comparison of the JLBC budget and the governor's budget for appropriations committee hearings in January. The JLBC staff prepare a budget book similar to a governor's budget book.

  • The Colorado Joint Budget Committee focuses on supplemental appropriations for the current fiscal year in January, and the staff produce supplemental appropriations bills that the committee reports to the appropriation committees. In February and March, the staff make recommendations to the committee on every line item in the budget. As the JBC makes decisions, staff draft an omnibus appropriations bill (known as the Long Bill) by March 31. When the Joint Budget Committee approves the Long Bill, it is reported to the House and Senate appropriations committees and is discussed in the four legislative caucuses.   

  • The New Mexico committee completes its budget recommendations by the end of December, which are compiled in two volumes for submission to the legislature. Current practice is for the committee staff to draft a budget bill for introduction in January, at the time the governor's budget legislation is also introduced.

  • The Oklahoma staff prepare the budget in the form of shell bills in January for formal introduction in late January. Each chamber prepares bills for each agency. The final number of bills and their content is decided in conference committee at the end of the legislative session. 

  • The Texas Legislative Budget Board staff hold joint hearings with the governor's budget staff on agency budget requests beginning in August. The staff prepare a budget under the direction of the joint chairs of the budget board and submit it to the board over one or more days. The budget is introduced in both chambers in January.

E.      What staff resources are required?

  • The Arizona Joint Legislative Budget committee staff consists of about 30 professional analysts. Their work includes economic and revenue forecasting, fiscal notes on legislation and ballot issues, performance evaluation, and analysis of state taxation issues and policies.

  • The Colorado Joint Budget Committee staff includes 15 professional analysts. Their work is limited specifically to analysis of appropriations requests, preparing appropriations bills, and reports on appropriations. Their work does not include economic forecasting, tax legislation, performance reviews or fiscal notes, which are the responsibility of other legislative staff.

  • The New Mexico Legislative Finance Committee staff includes 32 professional analysts. Their responsibilities include budget and revenue analysis, capital outlay analysis, revenue and expenditure forecasting, performance evaluations, and limited sunset review.

  • Oklahoma has separate fiscal staffs for the House of Representatives and the Senate. The House has 10 fiscal policy analysts, including the director. The Senate has seven fiscal policy analysts including the director. Senate staff responsibilities are similar to those of the Colorado staff, plus analysis of agency performance reports. House fiscal staff, in addition, review executive branch revenue data and make independent estimates, and prepare fiscal notes on all bills at each stage of their process.  

  • The Texas Legislative Budget Board staff includes about 110 professional staff, plus 40 administrative and technical support personnel. These numbers reflect a very large state budget (the third highest state general fund budget, after California and New York) and an unusual number of responsibilities. These include direction and oversight of the strategic planning process for all state agencies, state econometric forecasting, performance reviews of school districts and institutions of higher education, and writing fiscal notes for all proposed legislation.

E.      What access do legislatures have to executive branch budget materials?

  • Arizona's JLBC staff receive agency budget requests from the governor's budget office when the agencies submit their requests to the budget office on September 1 or shortly thereafter.  

  • The Colorado General Assembly receives the governor's budget request for the coming fiscal year on November 1. The Joint Budget Committee does not have access to individual agencies' initial budget requests, which are provided only to the executive budget agency, but holds hearings with each agency before session begins based upon the agency requests as approved by the governor.

  • The New Mexico Legislature receives individual agency budget requests at the same time as the governor on September 1. The Legislative Finance Committee can request workpapers and background documentation for requests, but these are not automatically provided to the committee.

  • The Oklahoma Legislature receives individual agency budget requests and performance reports on October 1. The governor's formal budget recommendation is made to the Legislature on the first day of session in February. Staff have continuous access to all actual expenditures, fund balances, and cash balances, from a consolidated state accounting system.

  • The Texas Legislative Budget Board receives agency budget requests at the same time as the governor in August, and the staff hold hearings on the requests jointly with the executive budget staff.

F.       How is the budget base, or starting point, calculated?

  • The Arizona Joint Legislative Budget Committee's Budget Book begins its recommendations for the new budget with the previous year's appropriation level. That base is adjusted to remove one-time appropriations and make adjustments for institutional population or caseload growth for agencies like corrections, human services, K-12 and higher education. The base is also adjusted for the costs of public employee health insurance and pensions, and sometimes for state employee pay. The result is referred to as the "JLBC baseline."

  • The Colorado Joint Budget Committee's base is the previous level of appropriations reduced by one-time appropriations. The committee may agree to make across-the-board adjustments to the base, but inflationary adjustments, increases to reflect case load or institutional population growth, and state personnel costs are treated as separate decisions and are not initially built into the base. The committee considers but does not necessarily accept the governor's recommendations for adjustments to the base.

  • The New Mexico Legislative Finance Committee's budget base is the previous fiscal year's base less one-time appropriations, adjusted for workload and enrollment measures, utility costs for K-12 and higher education, and premiums for risk management. Inflationary adjustments and changes in compensation costs are not built into the base.

  • In the Oklahoma Legislature, the House and the Senate calculate the budget base differently. The Senate's base is the current-year budget minus one-time appropriations with no other adjustments.  The House staff calculate a "maintenance of effort" base that makes some additional adjustments, such as the adjusting for changes in federal funds to agencies and annualizing the cost of programs, personnel expenses, debt service costs and the like where necessary.

  • The Texas Legislative Budget Board staff construct a current-services base. It includes the existing level of appropriations, less any one-time appropriation, plus adjustments for population or caseload changes for agencies like corrections, human services, K-12 and higher education. It also includes adjustments for personnel costs, but not necessarily the full amounts that agencies request.

Acknowledgments

This report was originally written for the Kansas Legislature in June 2007.  It is partially based upon the NCSL report Legislative Budget Procedures and documents published on the five legislatures' Web sites, and a presentation made by David Abbey, Director, New Mexico Legislative Finance Committee, at the NCSL annual meeting in Boston on August 5, 2007.   Its distinctive information is attributable to the following legislative fiscal officers, who took time from crowded schedules for interviews, reviewing a draft report, and answering follow-up questions: Janice Buchanan, Director, House Fiscal Division Oklahoma Legislature; Randy Dowell, Director, Senate, Fiscal Division, Oklahoma; Cathy Fernandez, Deputy Director, New Mexico Legislative Finance Committee; John O'Brien, Director, Texas Legislative Budget Board;  Richard Stavneak, Director, Joint Legislative Budget Committee, Arizona; and John Ziegler, Staff Director, Joint Budget Committee, Colorado General Assembly.