State Budget Process Tutorial
The way states produce their budgets vary from state to state. It is important for companies doing business with state governments to thoroughly understand the budget processes to effectively synchronize their sales and business development efforts with the budgeting cycle.
Budget Calendars and Cycles
| Most state fiscal calendars begin on July 1, although four states have different fiscal calendars: |
|
| Fiscal Year Begins April 1 |
Fiscal Year Begins September 1 |
Fiscal Year Begins October 1 |
| New York |
Texas |
Alabama
Michigan |
|
| There is also variation in the budget period with states using annual biennial budget cycles. |
|
| Annual Budgets |
Biennial Enactment of Two Annual Budgets |
Biennial Budgets |
|
Alabama
Alaska
Arizona
California
Colorado
Delaware
Florida
Georgia
Idaho
Illinois
Iowa
Kansas
Louisiana
Maryland
Massachusetts
Michigan
Mississippi
Missouri
New Jersey
New Mexico
New York
Oklahoma
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Utah
Vermont
West Virginia |
Arkansas
Connecticut
Hawaii
Kentucky
Maine
Montana
Nebraska
Nevada
Ohio
Virginia
Wisconsin |
Indiana
Minnesota
New Hampshire
North Carolina
North Dakota
Oregon
Texas
Washington
Wyoming |
|
Arizona has a bifurcated budget cycle. Seventeen large agencies operate on annual budgets; the remaining agencies two annual budgets biennially. Twenty small fee boards in Kansas budget biennially through two annual budgets.
For those states with some type of biennial budget cycle, it is important to know when the biennium begins:
|
|
| Biennium Begins on Even-numbered Years |
Biennium Begins on Odd-numbered Years |
|
Arizona
Arkansas
Connecticut
Hawaii
Indiana
Maine
Minnesota
Montana
Nebraska
Nevada
New Hampshire
North Carolina
North Dakota
Ohio
Oregon
Texas
Washington
Wisconsin |
Kentucky
Virginia
Wyoming |
|
Balanced Budget Requirements
| Unlike the federal government all states except Vermont have some type of balanced budget requirement. The requirement can be constitutional, statutory or interpretation of various laws.
|
| State |
Governor Must Submit Balanced Budget |
Legislature Must Pass Balanced Budget |
Cannot Carry over Deficit |
| Alabama |
X |
X |
X |
| Alaska |
X |
X |
X |
| Arizona |
X |
X |
|
| Arkansas |
X |
X |
X |
| California |
X |
X |
X |
| Colorado |
X |
X |
X |
| Connecticut |
X |
X |
|
| Delaware |
X |
X |
X |
| Florida |
X |
X |
X |
| Georgia |
X |
X |
X |
| Hawaii |
X |
|
X |
| Idaho |
|
X |
X |
| Illinois |
X |
X |
|
| Indiana |
|
|
X |
| Iowa |
X |
X |
X |
| Kansas |
X |
X |
X |
| Kentucky |
X |
X |
X |
| Louisiana |
X |
X |
X |
| Maine |
X |
X |
X |
| Maryland |
X |
X |
|
| Massachusetts |
X |
X |
|
| Michigan |
X |
X |
|
| Minnesota |
X |
X |
X |
| Mississippi |
X |
X |
X |
| Missouri |
X |
|
X |
| Montana |
X |
X |
X |
| Nebraska |
X |
X |
X |
| Nevada |
X |
X |
X |
| New Hampshire |
X |
|
X |
| New Jersey |
X |
X |
|
| New Mexico |
X |
X |
X |
| New York |
X |
|
|
| North Carolina |
X |
X |
X |
| North Dakota |
X |
X |
X |
| Ohio |
X |
X |
X |
| Oklahoma |
X |
X |
X |
| Oregon |
X |
X |
X |
| Pennsylvania |
X |
|
|
| Rhode Island |
X |
X |
X |
| South Carolina |
X |
X |
X |
| South Dakota |
X |
X |
X |
| Tennessee |
X |
X |
X |
| Texas |
|
X |
|
| Utah |
X |
X |
X |
| Vermont |
|
|
|
| Virginia |
|
|
X |
| Washington |
X |
X |
|
| West Virginia |
|
X |
|
| Wisconsin |
X |
X |
|
| Wyoming |
|
|
X |
|
|
Budget Processes
The most common budget process among states begins when the state budget office sends budget guidelines to agencies for the coming budget period. Agencies prepare their budget requests in accordance with the guidelines provided and submit their request to the state budget office, which reviews the agency requests. This review may include program and management evaluations, revenue analysis, any pertinent demographic data, as well as economic data to develop state revenue predictions. Frequent meetings occur between the budget office and agencies during this period.
After the agency requests have been thoroughly reviewed, the state budget office prepares recommendations for the governor. Once the budget is in accordance with the governor’s policy priorities, it is presented to the legislature. Governor’s use their state of the state addresses to emphasize particular priorities contained in the recommended budget.
Legislative committees then begin their review of the governor’s recommended budget. Each chamber approves its own version of the budget. Differences must be resolved in conference committees. Then the full legislative body votes on the conference report. Once the budget is passed by the legislature, it is sent to the governor. If the governor signs the budget, it is enacted. Governors may also veto all or portions of the budget, depending on line-item veto laws in each state.
Types of Budgets
States use several types of budgeting techniques:
- Line-item – the classification of expenditures on the basis of categories, often called objects-of-expenditure. This type of budget focuses attention on how much money is spent and for what purpose rather than the activity affected or outcomes. Line-item budgets are usually incrementally derived from the previous budget.
- Program-based – the classification of expenditures on the basis of programs, significant problems or policy issues. This type of budget focuses attention on the kinds of problems and policy issues agencies are expected to resolve and the resources required to solve them.
- Performance-based – the classification of expenditures on the basis of specific activities, the number of units performed and their costs. This type of budget concentrates attention on what a work unit does, how frequently it does it and at what cost.
- Modified zero-based – a budgeting approach where the expenditure amount for each line item or program is examined in its entirety each budget period regardless of prior funding. Those items or programs that cannot be justified are subject to elimination or significant reduction.
Budget Funds
State budgets are comprised of several different funding sources.
- General Funds – Revenues are received from broad-based state taxes.
- Federal Funds – Funds received from the federal government in the form of insurance, loans, grants, cooperative agreements or direct assistance.
- Other State Funds – Revenue sources restricted by law for specific government functions and may include provider taxes, fees, donations or assessments.
- Bonds – Issued by state or local governments to raise capital for day-to-day activities or specific projects.
- Rainy Day Funds – Reserve accounts funded during periods of economic expansion that can be used as a first line of defense in a weakening economy or recession.
- Capital Budget Funds – Finances long-term outlays such as fixed assets, major equipment purchases, or construction projects. Many states enact capital budgets separately from operating budgets.
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