Public Budget and Finance in the 21st Century
by Julie Ann Racino, MAPA
Syracuse University Maxwell School of Citizenship and Public Affairs
January 21, 2016
In 2016, the federal deficit and its implications for the average American citizen is one of the most crucial concerns on the budget and finance agendas. Why? If the government defaults, your home, your property, your schools, your water and emergency services and so forth are all at-stake. In Winter 2015, the journal of Public Budget and Finance examined pensions and city bankruptcy, the implication for general funds versus special funds,"cloudy" budget reporting, state credit and economic crises, and the convolusion of the property tax.
At the city "coffers", many basic services are offerred which range from trash pickup and recyclables, the traditional roads and sewers, public records (e.g., births and deaths; properties and assessments), information, codes and licensing, now professionalized to water management, transportation services, emergency management, and housing and recreation development, among others (e.g., health and human services, such as senior or veteran services).
In Spain, similar to the US, transparency was studied and its implications for fiscal stress, fiscal balance and and debt. Not surprisingly, the "elective" factor in "general fund expenditures" includes moving items "off budget" into special funds for "favored programs or constituencies, or to quietly reduce or eliminate certain spending categories" (Hudspeth, Merriman, Dye and Crosby, 2015, p. 74). The authors indicated in their early work they found it hard to track government spending over time due to "complex accounting conventions".
The good news is that only a handful of municipal defaults did occur (Moldogaziev & Guzman, 2015, p.61) and that property tax caps were instituted at the state levels to assure local areas that "levy" would not push citizens out of their homes. Ross, Farrell, & Lang (2015) reported on Indiana's property tax cap, the effect on local government revenue, including taxation by overlapping jurisdictions (e.g., city, county, township). 27 states have property tax limitations (p.18), and these authors believe the states wish to "restrict revenue from which local governments can spend" and have a range of tax and expenditure limits imposed.
Legal mandates and fiscal transparency laws were cited which increase public scrutiny: 1946 Administrative Procedure Act, the 1966 Freedom of Information Act, and the 1989 Whistleblower Act, and President Obama's Memorandum on Open Government and Transparency (2009). [e.g., Piotrowski & Van Ryzin, 2007 cited in Hudspeth et al, 2015] In 2015, already the university sector in the US has indicated that it need not comply with citizen requests as stated in the laws, and government offices are known to place cumbersome and costly procedures for release.
Another Look at Detroit, Michigan: Home of the Auto Industry
On the pensions, Detroit "like other cities" has separate pension funds for public safety workers and all other workers (Stone et al, 2015). In this article, the authors indicated that funds needed to be moved from the general funds into these special funds at a rate of 1/5th to 1/6th of the total funds ("13th month checks"). The authors report both a lawsuit by the Policemen and Firemen Retirement System (plan's funded ratio below 80% in 2004 for a $35 million payment) and review recommending pension obligation certificates which did, however, increase long-term debt, reduce borrowing, and contribute to the decline in the city's credit rating.
Detroit plans involve $5.7 billion in unfunded health, life insurance and death benefit obligations which are expected to encumber its future fiscal capacity. The authors call these pension and benefit situations "calamity" indicators and pensions owed today are a major concern in all US states; the authors recommend a wholistic approach to financial indicators most of which are stable in Detroit and disaggregation in decisionmaking. This author would also suggest a study of pensioners and the effect on quality of life to assure that the rationales behind the pensions, the labor-management agreements (not in this article), and the future of middle class and working class incomes be addressed in a larger picture.
In conclusion, I would suggest that data does indicate a need to look first at the health care costs and what could be considered the "gouging" of the American citizen in that arena. For the money involved, the American citizen does not get back what the plan user places in. The new Health Care Exchanges are in place, and President Obama is commended for tackling the area and attempting to "wrestle the industries" to the ground! To understand what to expect, Spring 2014 Public Budgeting and Finance also highlighted "revenue shifting strategies in local government" and in Fall 2013, The impact of budget stabilization funds on state pension contributions.
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Instead of the need for good quality housing, we continue to have new programs and departments (now to substance abuse targeting) to address homelessness, the latter a pre-1970s approach to annual poverty agency funding. Describing the rules of the new programs was the Low Income Housing Institute in Seattle, Washington on Sunday, March 20, 2016. Thank you for the panel which was one of the few which focused on food insecurity (e.g., food banks which provide discount food for meals on wheels, a pre-1970s program which is very good but has not been expanded), equity and social justice as wage disparity ($15 minimum wage discussion, as job-no job), and homelessness/housing (only specialty provider of "housing"). The Panel included Washington Food Coalition and a member of the Washington State Senate, 37th Legislative District. Very good attendance and interest in the presentation room, and excellent presenters with indepth information.
ReplyDeleteTransportation and public transit development (and replacement!!)is expensive, especially when "bids" for the planning exceed the budget for the replacement and upgrades. Dr.Thomas Seekins indicated that he typically refers to the Transportation Equity Act (TEA) of the 21st Century and revisions, the original 1970 Urban Mass Transportation Act and the 1975 Section 5310 provision for Transportation for Elderly Persons and Persons with Disabilities. Now, the 1970s was the "change" from segregation to integration which means the original acts are often supporting "separate but equal provisions" (against Brown vs. the Board of Education, US Supreme).
ReplyDeleteOn the US infrastructure and transportation, the "new groups" near disability (ASPA, social equity; Seekins on inclusive, rural communities)are societies of civil engineering, public works management, state departments of transportation, planning and land use, environmentalists, insurance and highway safety, and urban and rural studies, among others.
New Spring 2016:
ReplyDeleteReform initiatives in the budgeting system of India (Pratap Ranjan Jena, Associate Professor of National Institute of Public Finance and Policy)
-making the budget performance oriented
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-establishing a rule-based budget system.
Why now? "Many countries faced severe fiscal stress during the economic crisis and breached the limits imposed by their fiscal rules." (p.120 of Public Budget and Finance) He continues, "The EU- European Union- member countries that were hardest hit by the economic crisis were at the forefront to revise their fiscal rules. The experiences of some countries like Brazil, Chile, and Norway, where effective fiscal rules played a positive role in addressing the emergence of fiscal imbalance during the economic crisis, influenced the idea of strengthening the rules." (p.120)
So, what is one of the first references I might look up from this author?
Schick, Allen. (2003). "The Role of Fiscal Rules in Budgeting". OECD Journal of Budgeting. 3(3): 7-34.
And what are the "oversight bodies" in the reference list:
International Monetary Fund
National Performance Advisory Commission (2010)
World Bank
Government of India
Disciplinary Field: Public Financial Management, International Budget and Financing
Allen Schick of the Brooking Institution (known as a conservative think tank)published an article in 2003 on The role of fiscal rules in budgeting in OECD Journal of Budgeting. And, "we" all know that the university students study rules and the changing of rules (and their opposites)as part of their sociological studies. By p.28, the authors indicate that case studies (Yin, 1994)of fluctuating budget results indicate the fragility of fiscal rules.
ReplyDeleteThe General Accounting Office, now Accountability Office, found that 5 countries (i.e., Australia, Germany, Japan, Mexico and the United Kingdom)which restructured their budget rules eliminated their deficits, but sustaining this accomplishment in the long term was difficult (4 reverted to deficits). Among the measures taken and cited were: "top-down, multi-year limits on aggregate spending", curtailing "public wage sector bill" (i.e., public employees) and "some social benefits", promoted budget austerity, trimmed capital spending and reduced payments to sub-national governments. The study cited in the bibliography is: US General Accountability Office. Deficit Reduction: The experience of other nations, AIMD-95-30 (1994).
The bibliography also includes:
Zbaracki, M. (1998). "The Rhetoric and Reality of toal Quality Management". Administrative Science Quarterly, 43, pp. 602-636.
Wyatt, A. & S. Grimmeisen. (2001). Policy Transfer and Lesson-Drawing: Towards a Set of Principles to Guide Practitioners, paper by the Centre for Management and Policy Studies, United Kingdom Cabinet Office, London, August.
Total Quality Management (TQM), popular system with the US government and the non-profit sector with the goal of continuous quality improvement.
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