The budget process itself requires new thinking. The Romney administration and
the staffs of the Ways and Means Committees should standardize the way in which
budgetary information is collected, maximizing efficiency and allowing state
agencies to focus on their missions.
Once the data is collected, budget writers
should focus on the long-term impacts of their actions with future fiscal and
economic impacts informing current decisions.
Taxes should also be viewed in the context of their long-term impact. Tax changes
should be dynamically scored – a process that takes into account how
their impact on decisions made in the private economy will affect tax receipts.
The Commonwealth currently has over 100 minor fund accounts, none
of which are required for proper accounting methodology. Since they are not
overall fiscal balance calculation, these minor funds unnecessarily obscure
our actual position and thus they complicate accounting and reporting systems.
number of these funds are structurally imbalanced and fund revenues are insufficient
to support appropriations from the fund, resulting in chronic deficits. The
Romney budget eliminates all unnecessary minor funds and simplifies fund accounting
by recognizing only:
- General Fund (the basic fund for operating budget appropriations)
- Stabilization Fund (for reserves)
- Highway Fund
- Intragovernmental Service Fund (for payments between agencies)
- Tax Reduction Fund.
Master accounts and flexible line items
The Fiscal Year 2003 budget contains
about 700 individual line items, excluding trusts and grants. Including all
spending sources, the number of line items
is nearly 1800. A line item constitutes an absolute spending limit as well
restriction on alternative uses of the funds. If two related line items serve
essentially the same objective – homelessness, for example – and
one is depleted while the other has a surplus, funds cannot be transferred
across line items without legislative action. Line items are the foundation
behind the “silo” structure
of state government.
The Romney budget modifies traditional line item budgeting.
Line items will be retained for accounting and control purposes, but greater
will be created through 72 new master accounts covering all state spending.
following management flexibility applies equally to all branches of government:
cannot exceed the total of any master account
- Restrictions, if any, remain
in effect for federal grants
- Within each master account, Secretaries will have the discretion to transfer the lesser of:
- $250,000 or 5 percent of any individual line item amount
may be transferred to another line item within the master account with
prior notification to Administration
and Finance (A&F)
- an additional $1 million or 20 percent of any individual line item
amount may be transferred with prior A&F approval and notification to
House and Senate Ways & Means
- an additional $1.25 million or 25 percent of any individual line item
amount may be transferred with prior A&F and W&M notification
if not denied within 20 days
- an additional $2.5 million or 50 percent of any individual
line item amount may be moved with prior A&F and W&M approval.
The ability to transfer funds between
accounts will save money by reducing the need for supplemental appropriations.
The Romney budget provides important incentives
by establishing new retained revenue opportunities. Allowing departments
to retain a percentage of collected
fees creates an incentive to properly collect revenue and thereby reduce
appropriations. Within the Judiciary alone, new retained revenues will
save taxpayers $41.5
million in 2004.