The 30-Day Money Cleanse: Take Control of Your Finances, Manage Your Spending, and De-Stress Your Money for Good (Personal Finance and Budgeting Self-Help Book) Feinstein
Louisiana Getting Around the No-Tax-Increase Pledge 43
A Tax Increase in Philadelphia 46
Wisconsin and Unexamined Tax Breaks 54
Illinois and the Role of the Press 55
Tax Breaks for Hedge Fund Managers 57
California and Enterprise Zone Tax Breaks 59
North Carolina and Business Tax Breaks 61
Michigan Terminating its Film Subsidy 64
New Mexico and Tax Expenditure Reporting 66
Georgia Tax Reform Left Hanging 72
Michigan Tax Reform or Class Warfare? 74
The Tax Cuts and Jobs Act: Is It a Tax Reform? 75
Harrisburg Whose Priorities Dominate? 84
Republican Macrolevel Reform Proposals 89
Micropolitics Bending the Rules to Win Individual Decisions 90
How the Governor’s Veto Is Used 94
Maine The Governor Versus the Legislature 98
Limits of Governor’s Vetoes in New Mexico 99
San Diego Fiscal Problems, Strong Mayor, and Veto Powers 103
New York State Powerful Governor, Weak Legislature, Informal Budgeting 114
The Governor Versus the Courts 115
Deeming Resolutions and Ad Hoc Budgeting 127
Ad Hoc Scoring Rules 128
Overseas Contingency Operations 133
Budget Process Reform 2018? 135
Maryland’s Legislative Budget Power 138
South Carolina’s Legislatively Dominated Budget Process Begins to Budge 140
The Executive and the Legislature in Florida’s Budgeting 142
Florida and Unfunded Mandates 151
A $17,000 Drip Pan 160
Homeland Security A Program Tied to a Goal of Unlimited Worth 163
Amtrak Train Wreck 165
Congressional Budget Office and Scoring 167
Budgetary Implications of Direct College Loans Versus Loan Guarantees 169
An Open-Ended Discretionary Program Immigration Enforcement 171
Trump, Immigration Enforcement, and the Threat of Grant Denial 174
California and Mandatory Spending on Redevelopment Agencies 179
Fannie and Freddie: Government Bailout, a Loan, or Investment? 180
New Jersey’s Fund Diversion From the Unemployment Insurance Fund 183
Was the Wisconsin Budget Balanced? 201
Balance in the Federal Highway Trust Fund 202
Illinois Funds Sweep 203
Chicago’s Parking Meters 211
Iowa’s Privatization of Medicaid 211
Detroit Bankruptcy 231
Why Did Jefferson County, Alabama, Declare Bankruptcy? 235
The Politics of Deficits An Urban Example 237
Policy Deferrals in the Department of State 251
Using Holdbacks to Change Legislative Priorities Maryland 252
Herbert Hoover and Legislative Vetoes 255
The National Weather Service Reprogramming 261
Congressional Oversight and the Zombie Apocalypse 268
Louisiana Inspector General 271
President Obama Fires an IG 279
Who Guards the Guards? Not the Guards Themselves 282
Acting IG for Homeland Security Too Close to the Department 283
The Massachusetts Inspector General Versus the Governor 286
New York State and Medicaid 288
Baltimore’s Departing IG 291
Foreword
Budgetary politics, never dull, has become even more exciting in recent years, with dramatic partisan standoffs and hostage taking, with sworn unbreakable oaths, with magical offsets from imaginary balances, with symbolic stands, black (secret) budgets, and off-budget spending.
While some spending seems to disappear, some persists for years, defying reason, such as a white elephant of a military blimp that eventually escaped and floated free across the countryside. Equally odd in its way, those tasked with overseeing the budget, the so-called junkyard dogs, sometimes find themselves chained up, limited in what they can investigate or to whom they can report their results.
Votes and quotes may be symbolic, meant to appeal to supporters and demonstrate support for a given policy, but without intent of actually doing anything other than claiming the politicians are on the “right” side. Supporters and opponents of given spending or taxing options may exaggerate, quoting from biased sources to back up their arguments; alternatively, they may press professional budget staff to come up with the numbers they want to use and threaten to cut staff budgets if they resist.
Constitutions, laws, and rules frame the action, but they do not completely determine what happens. If laws or rules are considered too restrictive, politicians sometimes find ways around them. As a result of symbolic stances, exaggerations, omissions, and evasions, what is written and shown to the press and the public is not always a literal rendition of what is going on.
The purpose of this book is not to argue that public budgeting is some kind of disaster area or to show where the bodies are buried. Most of the time, public budgeting works well, just not all the time. Rather, the aim of the book is to explain what lies behind the surface, what produces the sometimes odd results, like a homeland security training about an invasion of zombies or a tax reform that doesn’t reform taxes and results in hundreds of billions of dollars of increased annual deficits. Students, practitioners, the public, and
the press need to be able to penetrate the increasingly extreme rhetoric and position taking that surrounds public budgeting.
How should claims and counterclaims be viewed? When are neutral evaluators called on for their judgment between competing camps, and are they able to maintain their neutrality in the face of pressures to lean to one side or the other? When are biased interpreters used instead? How is any budget ever passed where the executive and legislature are dominated by different political parties?
How much of budget outcomes, the who-gets-what question, is determined by interest groups? The bureaucracy, the courts, or the public? What is the role of the press? How much influence does the chief executive have, formally and informally? When do less visible informal processes take over from formal, stated ones? A weak mayor, in terms of formal powers, may completely dominate the budget process by dint of personality and tradition, and a governor with broad budgeting powers may be curtailed by the courts or the legislature. Influence waxes and wanes; what was true yesterday may not be true tomorrow. In a continuously changing world, actors and institutions continually vie for power. A description of a particular event or decision is not sufficient one needs to know what came before, and what before that, and ideally, what came afterward. Trends can reveal processes working out over time and both explain what is happening and predict what is likely to occur next. One needs to know the constitutional and legal constraints as well as the less formal rules and traditions, and keep an eye out for the interaction between the more formal and binding and the less formal responses.
As recounted in one of the chapters, a governor in Massachusetts tried to eliminate the Office of the Inspector General, but it is important to understand why the office was created, who supported it, how much independence it has, and the governor’s success or failure in curtailing the powers of the office. It is important to know that some budgetary watchdogs are leashed and serve symbolic functions, but it is equally important to learn that the investigatory powers of the watchdogs and their independence has been increasing over time. It is critical to understand that although auditors general, who often come from and report to the legislature and hence are not
likely to act as loose cannons, report to an audit committee of the legislature empowered to implement the auditors’ recommendations. Watchdogs need independence to work, but if they are viewed as uncontrollable, they may receive limited cooperation from agencies they oversee, and their recommendations may not be implemented. When something is perceived as too extreme, it sets in motion reactions and counter forces. If a little is good, it doesn’t mean a lot is much better.
This edition of The Politics of Public Budgeting, as in past editions, includes federal, state, and local budgeting. Looking at all three together gives a more accurate picture of the politics of public budgeting. For example, if one looks only at the national level, the federal income tax is generally progressive, that is, it taxes the rich at a higher rate than the poor; but the state and local governments generally do the opposite tax the poor more heavily than the rich. Looked at together, the burden of taxation is mildly progressive, but it barely changes the distribution of wealth in the society. Policies that reduce taxation at the national level and shift the burden more to the states and local governments also shift the burden of taxation more onto the poor.
Similarly, if one looks only at the national level, or only at the state and local level, one cannot see the interactions between them the grants, the mandates, the shared programs, and how they operate. In our federal system, the national government is not the head of a bureaucracy that includes state and local governments; it cannot command compliance or simply mandate implementation of federal laws and policies. Rather, it must request and persuade, and money is the key persuader, in the form of grants. Watching the dynamics of federal–state financial interactions describes the nature of federalism as it actually operates, as opposed to some model or theory.
A few recent examples illustrate how relevant the politics of public budgeting is to understanding the headlines.
President Trump campaigned on closing the southern border of the country to immigrants. His solution was to build a wall along the border. Opponents argued that a wall was not only inordinately expensive, but also ineffective, that other measures worked better. Congress, although the president had a majority of his party in both houses, did not include funding for the wall Trump wanted in the budget for 2018. Frustrated, the president decided to
send troops to the border—the National Guard—to be funded out of the defense budget. Presumably the guard would stay until his wall was finally funded and built.
The National Guard is an example of a joint federal–state program. National Guard troops may be funded by the national government, but they are controlled by the state governors. Arizona, New Mexico, and Texas, all with Republican governors, agreed to deploy National Guard units to the border to help with surveillance and road building, backing up federal employees, rather than stopping or arresting immigrants. California, a state with a Democratic governor trying to protect the state’s immigrant population, agreed to send only a small number of troops and tasked them only to deal with drug smugglers and other criminals, not as backup to the federal immigration function. Although the president threatened not to pay for such a limited deployment, the Defense Department assured California that it would indeed pay for the use of California’s National Guard.
The story is understandable only if one examines the powers of the president with respect to Congress when it comes to the budget; presidents cannot add items to the congressionally approved budget, they can only accept or reject each bill presented to them. One also needs to understand something about the structure of federalism, of shared programs between the states and the national government, in which the national government often pays, but the states determine the program details. In this case, the governors decided whether their National Guard units would cooperate with the federal immigration officials, how many troops they would commit, and what they would be tasked with doing.
In this case (and in others) the president tried to weaponize the budget, to force states to carry out his policies, despite the formal and legal independence of the states built into our federal system. States may voluntarily comply with federal government requests, but need not if they disagree. The president has threatened to deny federal funding to any states that do not cooperate with his immigration policies, and he considered California’s minimal compliance with his request for the National Guard as noncooperation.
Such threats have been challenged in court, and so far the courts have
determined that it is Congress that decides on how programs are designed and what conditions granting agencies may impose on funding recipients. Presidents cannot add conditions to congressionally approved grant programs after they become law. Separation of powers is a fundamental principle of the constitution. Similarly, states cannot be forced to carry out federal functions, and the threat of denial of funds falls into the category of forcing compliance.
Another recent example illustrates how a budget story can be unraveled and explained. Congressman Randy Hultgren from Illinois included the following in his newsletter.
On April 12, my colleagues in the House and I voted on a Balanced Budget Amendment to the Constitution. This would have required the federal government to only spend as much as it takes in and live within its means just as the states, businesses and you and I do. While the majority of the House did approve the measure, I was disappointed that it did not meet the two-thirds threshold necessary to amend the Constitution. Thanks to Democrat obstruction, this vital step towards reigning in out-of-control government spending was thwarted.
What actually happened and what did it mean? Yes, there was a vote on a balanced budget amendment in the House and it failed to reach the required two-thirds majority for a constitutional amendment. That much is factual. But it is necessary to see this proposed amendment in context. It followed by a very short time the passage of the 2018 budget, which was a compromise measure between Democrats and Republicans, each of whom added spending on their priorities, exceeding the spending caps for both defense and domestic programs, increasing the annual deficit. And that budget agreement followed a Republican-designed tax overhaul that provided large tax breaks for the wealthy, and added hundreds of billions of dollars to the annual deficit. Deficit hawks were duly disturbed at the projected trillion dollar a year deficits.
Having increased the size of the annual deficit, Republicans then insisted on a largely symbolic vote on a balanced budget amendment. It was symbolic
because it was clear that it was unlikely to pass the Senate with the requiredtwo-thirds majority. The vote in the House was thus not exactly meaningless, but not about actually balancing the budget. It was about saying the deficits are not our (Republican) fault, it is the fault of the Democrats who blocked the balanced budget amendment. This presentation would be called “spin,” in Washington, reinterpreting what you have just done to put it in a more positive light.
Finally, Hultgren used a popular argument based on a common misunderstanding, that the federal government needs a balanced budget amendment to keep spending within income just like the states and individuals. But individual budgets, state budgets, and the national budget differ in some key ways. The national government has responsibility for managing the economy and waging war, which has been interpreted to mean that at times, it needs to spend more than it takes in. Moreover, individuals do not always balance their budgets, neither do the states. If the analogy were accurate, as opposed to persuasive rhetoric, Hultgren should have argued for borrowing to build roads and bridges, to invest in education, and to buy capital items, as state and local governments and individuals do. Individuals often borrow to pay for college tuition, an investment they make in their own future earnings; while those loans are outstanding, their budgets are not in balance. They spend more than they receive in income.
Under pressure from the deficit hawks angry about the size of the 2018 budget, the president has proposed to rescind much of the spending. While Trump did not specify exactly what he wanted to cut, it was widely believed that he wanted to cut the social services and income support programs while maintaining the increases in defense spending. Even some Republicans in Congress objected to this plan, having worked so hard at getting to a compromise with the Democrats and finally passing a budget in the middle of the year; they did not want the deal undone, lest it prevent any future deal from being struck.
These examples show the importance of context in understanding the politics of budgeting, demonstrating how to analyze budget-related stories. In one case, the context included court interpretations of law and the constitution, and the limited power of the president in budgetary matters, with respect to
Congress and with respect to the states. In the second case, the context included the process of bargaining to agreement between political parties when both exert power, as when supermajorities are required to pass legislation; the case further illustrated symbolic politics and the politics of blame shifting and spin.
For students, elected officials and professional staff, and reformers, this book offers more than an ability to penetrate the murk of budget politics; it provides real-world advice. How can one successfully raise taxes in an antitax climate, where many elected officials have taken a vow to never raise taxes and where a number of states require supermajorities to pass any tax increase? What differentiates successful and unsuccessful tax reform efforts?
What features should a budget process have to ensure transparency, to deal with conflicting priorities, to provide a budget on time, and come in at the end of the year with at least a small surplus? What features of budget processes address what kinds of problems? What happens when budget processes remain focused on prior problems and no longer match or address current ones? What is an effective balance between executive and legislative budget power, and how can it be achieved? How and why should the public be involved in budgeting?
What kinds of arguments are likely to be successful in making a budget request, and what is less likely to work? If you want to eliminate earmarks relatively small projects sought by individual members of congress to win their support for legislation—what are you going to put in its place, how are you going to build coalitions large enough to pass legislation, and will those alternatives be more or less expensive or wasteful?
What are the options for controlling waste, fraud, and abuse; how well do they work; how do they differ; and what are the best structures and legal foundations for such efforts? What happens when the budget overseers are overly aggressive or too close to the agencies they oversee?
In budget implementation, how flexible should the budget be during the budget year or biennium? What are the consequences of changing the budget substantially after it has been passed? What kinds of constraints on changes during the year exist, which ones are appropriate, which ones have been
abused, and what can be done about detecting and minimizing those abuses?
I would argue that there is no one best way to answer such questions, but the book looks at how federal, state, and local governments in the United States have approached such problems, examines successes and failures, and hence provides some field-tested options.
Acknowledgments
I would like to thank all those who provided the information on which this book revision is based, including legislative budget offices, investigative journalists, those who design and maintain openness websites, and staff who respond to my queries. I also want to acknowledge the struggles of those in the budgeting trenches, as they wrestle with tax and expenditure limits, with shrinking tax bases, with unfunded and underfunded mandates, and with contradictory demands from rigid partisans. Finally, I need to mention the terrific team at CQ Press, who have always been supportive of this project, and the gentle reviewers of the last edition who offered guidance and suggestions for this one.
Publisher’s Acknowledgments
SAGE wishes to acknowledge the valuable contributions of the following reviewers.
Jaclyn Bunch, University of South Alabama
Joseph Martin, University of Missouri
Shannon Vaughan, Western Kentucky University
1 The Politics of Public Budgets
A public budget links tasks to be performed with the resources required to accomplish those tasks, ensuring that money will be available to wage war, provide housing, or maintain streets. Most of the work in drawing up a budget is technical, such as estimating how much it will cost to feed a thousand shut-ins with a Meals on Wheels program or how much revenue a 1 percent tax on retail sales will produce. But public budgeting is not only a technical process, it is also necessarily and appropriately political.
Budgets reflect choices about what government will and will not do. They reflect the public consensus about what kinds of services governments should provide and what citizens are entitled to as members of society. Should government provide services that the private sector could provide, such as water, electricity, transportation, and housing? Do all citizens have a guarantee of health care, regardless of ability to pay? Is everyone entitled to some kind of housing? Should government intervene when market failures threaten people’s savings and investments?
Budgets reflect priorities between police and flood control, day care and defense, the Northeast and the Southwest. The budget process mediates among groups and individuals who want different things from government and determines who gets what. These decisions may influence whether the poor get job training or the police get riot training either one a response to an increased number of unemployed.
Budgets reflect the degree of importance that legislators place on satisfying their constituents and responding to interest group demands. For example, legislators may decide to spend more money to keep a military base open because the local economy depends on it and to spend less money to improve combat readiness.
Budgets provide accountability for citizens who want to know how the government is spending their money and whether government has generally followed their preferences. Budgeting links citizen preferences and governmental outcomes; it is a powerful tool for implementing democracy.
Budgets reflect citizens’ preferences for different forms and levels of taxation as well as the ability of some taxpayer groups to shift tax burdens to others. The budget indicates the degree to which the government redistributes wealth upward or downward through the tax system.
At the national level, the budget influences the economy, and so fiscal policy influences how many people are out of work at any time.
Budgetary decision-making provides a picture of the relative power of budget actors within and between branches of government as well as of the importance of citizens, interest groups, and political parties.
Budgeting is both an important and a unique arena of politics. It is important because of the specific policy decisions it reflects: decisions about the scope of government, the distribution of wealth, the openness of government to interest groups, and the accountability of government to the public at large. It is unique because these decisions take place in the context of budgeting, with its need for balance, its openness to the environment, and its requirement for timely decisions so that government can carry on without interruption.
Public budgets clearly have political implications, but what does it mean to say that key political decisions are made in the context of budgeting? The answer has several parts: First, what is budgeting? Second, what is public budgeting, as opposed to individual or family budgeting or the budgeting of private organizations? Third, what does political mean in the context of public budgeting?
What Is Budgeting?
The essence of budgeting is that it allocates scarce resources, implying choices among potential expenditures. Budgeting implies balance between revenues and expenditures, and it requires some kind of decision-making process.
Making Budgetary Choices
All budgeting, whether public or private, individual or organizational, involves choices between possible expenditures. Since no one has unlimited resources, people budget all the time. A child makes a budget (a plan for spending, balancing revenues and expenditures) when she decides to spend money on a marshmallow rather than a chocolate rabbit, assuming she has money for only one. The air force may choose between two different airplanes to replace current bombers. These examples illustrate the simplest form of budgeting, because they involve only one actor, one resource, one time, and two straightforward and comparable choices.
Budgeting is usually more complicated, with many possible options that are not always easily comparable. To simplify this complexity, budgeters usually group together similar things that can be reasonably compared. When I go to the supermarket, I compare main dishes with main dishes, beverages with beverages, desserts with desserts. This gives me a common denominator for comparison. For example, I may look at the main course and ask about the amount of protein for the dollar. I may compare the desserts in terms of the amount of cholesterol or the calories. Governmental budgeters also try to make comparisons within categories of similar things. For example, weapons are compared with weapons and computers with computers. They could be compared in terms of speed, reliability, and operating costs, and the one that did the most of what you wanted it to do at the least cost would be the best choice. If there is agreement on the goals to be achieved, the choice should be straightforward.
Sometimes, however, budgeting requires comparison of different, seemingly
incomparable things. How do I compare the benefits of providing shelters for the homeless with buying more helicopters for the navy? I may move to more general comparisons, such as how clearly the need was described or who received the benefits last time and whose turn it is this time. Are there any specific contingencies that make one choice more likely than the other? For example, will the country be embarrassed to show our treatment of the homeless in front of a visiting dignitary? Or are disarmament negotiations coming up, in which we need to display strength or make a symbolic gesture of restraint? Comparing dissimilar items may require agreement on priorities. Such priorities may be highly controversial.
Not only does budgeting have to deal with many sometimes incomparable possible expenditures, it also involves multiple resources, resulting in multiple and sometimes unrelated budgets. Budgeting often allocates money, but it can allocate any scarce resource for example, time. A student may choose between studying for an exam or playing softball and drinking beer afterward. In this example, it is time that is at a premium, not money. It could be medical skills that are in short supply, or expensive equipment, or apartment space, or water.
Government programs often involve a choice of resources and sometimes involve combinations of resources, each of which has different characteristics. For example, some federal farm programs involve direct cash payments while others include direct loans and still others provide loan guarantees for loans from commercial lenders. Federal budgets often assign agencies money, personnel, and sometimes borrowing authority, three different kinds of resources. Some programs offer tax breaks, while others offer direct payments and still others offer insurance that is unavailable or extraordinarily expensive in the private sector.
Balancing and Borrowing
Budgets have to balance. A plan for expenditures that pays no attention to ensuring that revenues cover expenditures is not a budget. That may sound odd in view of huge federal deficits, but a budget may technically be balanced by borrowing. Balance means only that outgo is matched or exceeded by income. Borrowing means spending more now and paying more
