Building A Better Budget Process | Eastern North Carolina Now

    Publisher's note: The author of this post is Sarah Curry, who is Director of Fiscal Policy Studies for the John Locke Foundation and contributor to the Carolina Journal, John Hood Publisher.

    RALEIGH — Efficient, effective, accountable, and transparent — legislators and policy advisers tout each of these goals when crafting the state's budget. While these outcomes are goals for lawmakers, many decisions must be made in order to achieve these goals.

    The budget process is not set in stone, and while state government has evolved over the years, so has the budget process. Many state governments use the traditional line-item approach to budgeting, but over the years there have been attempts to integrate more information into the decision-making process — an attempt that has been embraced by Democrats and Republicans alike in North Carolina.

    One reason for bipartisan support is that it is not simply a budget-cutting exercise. Instead of focusing solely on how much is spent, North Carolina's budget process has evolved to focus on more efficient resource allocation.

    This may result in net government savings, but the focus is on how the process directs the investment of scarce resources toward more effective programs. This is not a change that has happened overnight, and work still needs to be done.

    Historically, North Carolina's approach to budgeting has been to use "line items." Lawmakers and the governor make appropriations to agencies and departments for specific activities or purposes. When a budget is broken down at the line-item level, it ensures more legislative control. Agencies and departments must use their appropriations for the intended purposes without much flexibility. This method also allows for a transparent timeline that shows the incremental changes from the prior year's budget.

    While the traditional line-item approach still exists in North Carolina's budget process, a change occurred to integrate more information during the Easley administration. The 2007-09 budget saw the initial phase of a new budget initiative, results-based budgeting. This was an attempt to affirm the why, what, and how of state agencies and began the process of emphasizing performance and accountability in the state budget process.

    Expanding on the groundwork former Gov. Mike Easley had set, one of Gov. Beverly Perdue's first actions was issuing an executive order to establish performance budgeting during her term. Even with an executive order, a lot of work still needed to be done to make this a substantial part of the budgeting process.

    To incorporate a performance budgeting process, methodology is required to determine what performance is, as well as how it may be measured, analyzed, and reported. During her four years as governor, Perdue was able to establish a database through which the Office of State Budget and Management tracked performance data.

    Unfortunately, the end result was not a thorough collection of performance data from all agencies. An example of this is seen when comparing data for community colleges and the Commerce Department. Community colleges tracked the "percentage of graduated employed within one year of completion," a desirable output measure for lawmakers, while the Department of Commerce tracked expenditures and full-time employees, a meaningless figure that in no way shows input, output, efficiency, or effectiveness.

    The difference in data collection shows that, while meaningful performance data were collected for some agencies, others did not comply with the governor's order, and OSBM has little power to force agencies to comply.

    Following his predecessors, Gov. Pat McCrory expanded on their groundwork and decided to place an emphasis on program budgeting. This approach to budget construction identifies programs or activities, rather than line items, as the primary budget items, and presents information on program missions, goals, and measurable objectives.

    To accomplish this, McCrory created NC GEAR, a team of analysts within OSBM to execute his application of program budgeting. NC GEAR's purpose is to review and analyze the efficiency and effectiveness of state government with the focus on identifying specific strategies for making government more efficient and effective. This information will aid the executive branch and legislature in understanding broader policy implications of their funding decisions and the expected results of services and programs.

    So while many believe North Carolina has a long way to go when it comes to crafting an effective budget that is a good use of taxpayer dollars, one thing is certain: We are closer to accomplishing that goal than we were 10 years ago.
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