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As identified in the outline for this course, there are eight major themes, some of which are covered by Axelrod's book and some of which aren't.
Axelrod's book does not, for example, give a history of budgeting in U.S. Public Administration, per se, but the book does give a history of budget reform. This touches on all of the major budgeting concepts from the Congressional-based budget to "reinventing government."
Like this course, Axelrod does differentiate between appropriations and budgeting. An appropriation provides the budgeting authority. This allows the incurring of financial obligations that will result in immediate or future outlays of government funds. Appropriations, then, give the permission to budget. The appropriations process schedule is explained in an historical context, starting with the "Five Cycles of Congressional Budgeting." As it now stands, various budget committees and authorizing committees have taken away some of the powers of the appropriations committees, but they still, alone, examine the entire presidential budget.
Unlike this course, Axelrod does not go into any detailed analysis of systems or in the consideration of the budget itself as a system. He's more concerned with processes and issues arising out of those processes than in more theoretical matters.
On the other hand, his consideration of the various "reforms" in the history of budgeting constitutes a kind of analysis of systems-based budgets. After all, PPBs could be considered a kind of systems-based budget proposal in that in considers inputs, outputs, and transformation-under the control of management. Axelrod, moreover, doesn't take a lot of interest, directly, in the subject of analysis and budgeting, except, again, when considering the various budget reform proposals.
Axelrod is, however, interested in the subject of budget decisions. Involved in these decisions he finds six "separate paths" leading to the budget. These include:
1) determining the resources required to achieve program goals 2) determining the need for improvements in capital facilities 3) coordinating policy development and legislative planning 4) identifying the needs for management improvement 5) evaluating cost and expenditure trends 6) taking into account external studies and investigations
When these paths "converge," an agency has the information to assemble its budget. This budget is then "sold" to the government. Informal and formal hearing occur with the OMB and, eventually, a budget is approved by the legislature. As this is a complex process, naturally there is considerable conflict and argument along the way. Thus, while this course is more concerned with linking theory, specifically systems theory, to the budget process, Axelrod's focus is more on the process of the budget and historical context.
The Federal government is required, by Humphrey-Hartley, to strive to achieve four goals 1) full employment 2) no inflation 3) sustained economic growth 4) stable prices. This means that, when necessary, it must change its revenues and expenditures to achieve these goals.
Three major schools of thought have dominated the federal economic debate. The most prominent is the Keynesians. The federal government, under Keynesian advisors, attempts to spend more money in periods where the economy is sluggish, stimulating economic growth and employment. During periods of excess growth and inflation, the government tries to slow the economy by raising taxes and cutting its own spending, hopefully to the point of balancing the budget. The federal government has proven quite willing to spend more money when Keynsian advisors thought this the correct course of action as during the Kennedy era. Unfortunately, the government has proven less willing to cut its own spending, leaving most economists to term governmental Keynesians "one-eyed" Keynesians.
A second school of thought, the Supply-Siders, was influential during the Reagan area. They argued that cutting taxes, in order to encourage investment, would stimulate production. Unfortunately, cutting taxes did not stimulate production so much as it increased the debt. Thus, the government was forced to compete with businesses in economic markets for investment dollars to finance the debt.
A third school of thought, the monetarists, believe that control of the money supply is the best means of running the nation's economy. They center their interest on monetary, not fiscal, policy.
While each government maintains its theorists, far more mundane concerns govern the budget. Typically there are only incremental or decremental changes made to funding levels. While the government may, in theory, pledge to change the economy, in fact its powers to do so are considerably hampered by political realities and the debt. As a result, the budget may grow in an attempt to stimulate production only because a high unemployment rate is more politically poisonous than a week dollar. Taxes may be cut, as they will be this year, even when most economists think that more spending will probably cause overheating of the economy and inflation.
While the federal budget attempts to influence the economy, state budgets are more influenced by the economy. Partly this is because states simply have less money to toss around, and also because states typically have more constraints on their spending. Most have, for example, balanced budget amendments. Their funds, further, often dependent on federal transfers, leave less discretion for spending or priming the local pump. Finally, since the eighties, the states, which normally can't stimulate the economy during recessions, lost a lot of their ability to curb the economy during periods of inflation due to Federal funding cuts. Some states, for example, found themselves raising taxes during the recession, due to constitutional requirements, when lowering taxing would've made Keynesian logical sense.
That doesn't mean, however, that states can't attempt to influence the local economy. During the second oil crisis, for example, desperate Michigan made purchases of American cars state tax deductible. Other states resorted to starting governmental corporations, a form of off-budget debt, in order to pump money into local economies and decrease unemployment.
Accounting is considered, by this book, to be the "bedrock" of budgeting. It provides the information necessary for the collection, allocation, assessment, and distribution of assets. There are several different systems of accounting; appropriations accounting; fund accounting; cash accounting; obligation accounting; accrual accounting; cost accounting; and revenue accounting. They are not mutually exclusive, but complementary. One system may be correct in one situation but not in another.
Appropriations accounting are the legally adopted budget, mirroring all of the allotments. They show the timing of expenditures and revenues; the perspective; the basis for accounting; and the format and entity.
Fund accounting serves to divide the accounts into different categories. These divisions serve the same basic purpose as the different accounts in a business accounting system, except the categories are more political than logical.
Cash accounting captures the flow of assets into and out of a budgetary account. If the output exceeds the input, the government is forced to borrow.
Obligation accounting shows what the government is pledged, or obligated, to purchase. This allows a more complete picture than cash accounting because it considers things that will be used by the government as well as what is being used.
The accrual basis of accounting is what is used by business: transactions are recorded as events in the period in which they occur, regardless of when the cash is received or paid. While this system has been proposed for the Federal government, the government's accounts are considerably more complex even than those of General Motors'.
Cost accounting attempts to be even more comprehensive than accrual accounting. It considers all resources used in a program, not just those recorded as transactions. This is very expensive to use in practice and is suitable more for a particular study or audit than as a general tool.
Accounting systems, then, provide a means of making the budget physical and quantifiable. This information can be used in any kind of auditing system as well to provide an accurate picture of a governmental entity's budget.
Axelrod examines a whopping fifteen different budget reforms with a generally sympathetic perspective. The most basic of these was the executive budget, adopted in the 1920s. This placed the budget in the hands of the executive and out of that of the legislature in order to try to increase accountability. Functional budgeting represents a means of organizing the budget around general purposes. This can be combined with traditional, executive budget, to present the organized, line item, budget.
The next major reform was program and performance budgeting. For the first time this system linked resources to objectives. As might be expected, identifying all resources used by a program proved difficult. PPB is still practiced on the federal level and, as might expected, advances in information technology have made it a more viable option.
Multi-year budgets were the next supposed innovation. Most governments outside of the United States had used "five year plans," so this was not a particularly new concept. The problem that quickly arose, however, was the government could not very accurately predict the economic climate so that the Reagan administration pronounced the concept worthless. On the other hand, for particular programs, such as social insurance, where a good deal of information is already known, multi-year budgeting makes sense and is used. Further, Congress has found that some problems, particularly the debt, need to be dealt with using a long-term strategy and uses multi-year budgeting for these.
A unified budget attempts to look at all of the governments transactions, including funds such as social insurance, Medicare, Medicaid, etc. In 1969, there was an attempt to create such a budget, but, as the years passed, programs, including social security, again went "off budget." In part, this reflects the public's conception that some programs are simply not current expenses but long-term trusts and that the two should not be mixed.
The concept of PPBS (Planning, Programming, Budgeting) entered into the government along with Robert McNamara, a former Ford vice-president and "whiz kid." It attempted to allocate resources on the basis of in-depth economic analysis, focusing on ends and objectives, and to quantify objectives wherever possible. Further, it pledged to evaluate programs from scratch, measuring relationships between resources and outputs, and to expand choices for decision makers. As might be expected, all of this resulted in considerable paperwork and jostling. The system became entrenched in the Department of Defense, partly because Defense enjoyed a more stable budget and defined objectives. The program produced extreme supporters and critics. The most important residual concept seemed to have been that it forced government to look at achievements along with expenditures.
The Nixon administration had a more simplified focus on reform: MBO (Management by Objectives). The idea, here, was for an agency to target particular goals and costs.
Budgeting for Productivity Improvement is not a federal mandate as it is a use of productivity data for budgeting purposes. This has resulted in such ideas as incentives for higher performance and productivity quotas.
Jimmy Carter brought Zero-Based Budgeting (ZBB) from Georgia to the White House. The idea was that all programs would, essentially, face total elimination if they could not be justified by their outcomes. Managers filled out "decision packages" for major activities, showing resources to be used for: minimal level; current level; intermediate level; or improvement level. ZBB did not prove popular as it threatened managers with losing power and responsibility instead of rewarding them for cutting waste.
Target budgeting takes a different tack. Before budget preparation begins, the chief executive gives agencies a maximum target figure. The idea is to force agencies to cut from within their agencies rather than having them play against one another in trying to justify the higher figure obtainable by "selling" their program. In our present era of governmental austerity, it holds considerable promise.
There are several other minor budget reforms. The most significant of these is "reform by ballot box." This means, simply, the voters vote their taxes down, forcing government to cut service and/or increase efficiency. While there's a certain irrationality to this process, it shows the public's growing realization that maybe government has been charged with responsibilities and duties it cannot perform. This "ultimate reform," then, is to have the people simply take more responsibility on themselves by giving themselves the tax dollars that would otherwise go to government.
Axelrod waxes relatively optimistic about the future of reform. He believes that, while none of the concepts listed above surfaced as "the answer," most of them left behind valuable ideas, concepts, and practices that result in improved performance. To state it another way, had reform never occurred at all, we'd have a gigantic legislatively created budget organized in no fashion whatsoever that would leave no means for the public or politicians to assert control or access outcomes. Instead, we have a process that has some controls, some means of organization, and some means of auditing and performance evaluation. In general, I agree, but I have to question whether some of the "reforms" listed above really resulted in anything significant as some of them tended to duplicate others and all of them caused increasing amounts of paperwork.
The Reinventing Government Movement, if history repeats itself, should have some, but not a lot of impact on the governmental budgeting and management process. As Alexrod explains, the Gore commission's finding are nothing new. Numerous attempts have been made at management-directed improvements since the 1920s. All of these movements fall prey to several common weaknesses.
First, the political climate changes. Management directed improvements tend to be incremental, not dramatic. Politicians want political victories, not long-term improvement strategies and, hence, tend to focus their attention on new programs once the glare of public attention shifts.
Second, the budget process focuses on a number of management agencies. The OMB, which has the power over resources to enact change, has a grinding workload in the budget process itself. The OMB must also face the certain hostility of the various agencies if they see their funding or independence threatened. Not only this, sometimes responsibility for improvement has rested with other agencies, such as the GAO. This decentralization tends to undermine the process.
Third, the process of governmental growth is incremental and constant. Each new administration tries to create its own new agencies. At the same time, the constant stream of new legislation expands the functions of extant departments. Nor do program directors have any incentive to "tighten their belts" other than their "sense of duty."
This doesn't, however, mean that Gore's program is totally without merit. It is outside commissions, such as the Hoover commission, that have achieved genuine results. They were able, for a fleeting second, to open a window of opportunity towards reform. Also, Clinton seems intent on focusing reform efforts on the OMB, so that a single "managerial" agency has the power to try to cut down on waste and link program goals to their costs. The "Government Performance and Results Act of 1993" shows correct intentions. Whether anything material will result from the Gore Commission, however, depends a lot on how long 1) the government can stay focused 2) the Clinton administration lasts (I would predict, two more years). It is quite likely that a new administration will launch a new Gore-type commission, a new slogan, and make a few improvements. Then it's back to business as usual.
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