Should the Feds Do Two-Year Budgets?

Some states have luck with biennial budgeting. A pair of senators say it's time for Congress to give it a shot too.
by | September 29, 2011
 

Two U.S. senators are calling on Congress to adopt a technique used by some state legislatures: biennial budgeting. Earlier this week, Sens. Jeanne Shaheen (D-N.H.) and Johnny Isakson (R-Ga.) earlier sent a letter to the deficit super committee, urging it to consider implementing a two-year federal budget process.

Their thinking is that if Congress only has to debate the budget every two years instead of annually (or more frequently than that, as of late), it can devote more time to oversight.

“A two-year budget cycle would allow Congress to dedicate every other year to reviewing these authorizations,” the senators wrote. “At the same time, this legislation would make federal agencies more efficient by allowing them to devote less time to the budget process and more time to doing their jobs.”

Isakson introduced a biennial budget proposal earlier this year.

According to the senators, since 1980, Congress has only twice completed the entire appropriations process before the start of the fiscal year on Oct. 1.

The recent budget debates show just how disruptive the process has become. The last day of the fiscal year is tomorrow. Earlier today, the House passed a temporary resolution that will fund the government through Tuesday in order to avoid a shutdown. After that, legislators consider another plan to temporarily fund the government through Nov. 18. At that point, they hope to have a spending plan for FY 2012 – more than six weeks into the fiscal year.

This all comes after Congress narrowly averted a shutdown earlier this spring, when its budget authority from yet-another temporary spending bill nearly ran out.

Shaheen, a former New Hampshire governor and state legislator, wrote that Congress has “the opportunity to take what works in the states and apply it at the national level,” and that in her state – which does biennial budgets -- agencies heads can spend more time focusing on their actual jobs than engaging in the budget process.

But is biennial budgeting really a cure-all? Not necessarily.

States have actually been trending away from biennial budgets. Seventy years ago, 44 states had two-year budgets, but today, that figure is down to 19, according to a report earlier this year by the National Conference of State Legislatures.

The major disadvantage of two-year budgets is that it's difficult to make revenue predictions so far into the future.

Dick Lavine, a former senior researcher and budget expert for the Texas legislature’s House Research Organization, tells Governing that it’s been especially challenging to make revenue projections during the economic downturn. Forecasters typically face pressure to make extremely conservative projections so they won't look bad if the figures don't pan out, Lavine says.

NCSL's study cites data indicating that biennial budget states make revenue forecasts that are more than twice as inaccurate as the other states. (That may be less of a concern at the federal level, since state budgets – largely dependent on property and sales taxes – are particularly susceptible to changing economic conditions.)

And a Connecticut state committee, tasked with reviewing the state’s switch to biennial budgets, reported in 2003 that the change failed to meet expectations. It found “no evidence legislators or state agencies give greater attention to program outcomes and performance measures in the second year of the (budget) cycle.”

In 2000, NCSL surveyed fiscal analysts in biennial states to ask if the legislature increased oversight in the non-budget year. Staff in two states said they do, but staff in nine states said they don't. “Although intuitively it seems likely that biennial budgeting  encourages legislative performance evaluation, the evidence is very weak," NCSL wrote.

The upside is that states with biennial budgets are unlikely to see dramatic year-to-year budget changes, Lavine says.

Yet, Minnesota -- one of the states with two-year budgets -- had a shutdown for nearly three weeks in July. "It's absolutely no substitution for willingness to compromise," says Minnesota State Sen. Scott Dibble, a Democrat. "It sounds good, but I don't see it as a solution."

A Texas A&M report, cited by NCSL, may have summed up the argument best: "The success of a budget cycle seems to depend on the commitment of state officials to good implementation rather than on the method itself.”

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