Philip G. Joyce

Using Performance Measures for Federal Budgeting: Proposals and Prospects

The political system, the popular press, and the public have recently been concerned about measuring government performance. This concern for measuring performance should imply a concern for measuring it correctly. With this in mind, the Congressional Budget Office (CBO) recently conducted an analysis of the use of performance measures in the budget process. The study attempts to review the issues raised by performance budgeting in the context of past and current efforts to link performance measures and budgeting. This article focuses on two portions of that study: The status of the current federal performance measurement efforts and specific observations designed to inject a note of caution into the current debate about performance measurement and budgeting.

What's So Magical about Five Percent? A Nationwide Look at Factors That Influence the Optimal Size of State Rainy Day Funds

State rainy day funds have increased in popularity as countercyclical planning devices over the past 15 years. The view is widely held that all states need a rainy day fund balance of five percent in order to guard themselves against the threat of budgetary dislocation. This article compares the actual balances in state rainy day funds in 1997 to several factors affecting budgetary volatility. Little relationship is found between rainy day fund balances and the actual level of volatility in a given state. The article finds no justification for a “one size fits all” approach; each state should design policies based on its own peculiar needs.

The Effect of Underforecasting on the Accuracy of Revenue Forecasts by State Governments

In the budget process of any unit of government, the revenue forecast sets the parameters for the allocation of dollars among competing priorities. Because revenues are typically forecast 18 to 24 months prior to the beginning of each fiscal year, there is the potential for substantial error. If revenues are overestimated, disruptive midcourse corrections must be made. The recent recession in FY91 forced many states to increase revenues or cut spending in midyear because actual revenues (and spending) were out of line with earlier forecasts. The most notorious examples were the states of California, Connecticut, and New Jersey, where well-publicized disputes between governors and legislatures ensued after the discovery of huge budget shortfalls. In this article, we will examine the proposition that state governments have consistently underforecast revenues every budget period in order to provide a cushion in the event of an unanticipated downturn in economic conditions. We will evaluate the extent and degree of underforecasting in all states during periods of economic expansion as well as periods of recession over an 18-year period. First, we will explain how past research has treated forecasting error, and how our theory of underforecasting fits within the much wider context of previous research on revenue forecasting. Second, the hypothesis that states cushion their forecasts by underforecasting revenues will be tested by comparing data on forecast errors that were provided by state governments from FY87 through FY92, in addition to considerable evidence from states that provided us with forecast data for earlier years as well. Explanations of Revenue Forecast Errors from Past and Current Research The general focus of recent work on revenue forecasting has been on improving forecast accuracy, such that the smallest possible difference (or error) results between the revenues that are forecast and the revenues that are collected. Most of the existing research consists of improving forecasting models, so that all of the factors that influence revenue collections are taken into account. This is a reasonable pursuit; indeed, such efforts have made an important contribution to improving the reliability of forecasts. Despite the dedicated efforts of researchers and forecasting professionals to incorporate all factors into their models that have the potential to influence revenue streams, any single forecast may be wrong (Vasche and Williams, 1987; 66), sometimes significantly (Roberds, 1988). When revenues are overestimated, program cuts or revenue increases may be necessary (Schroeder, 1982; 122). In the case of underestimates, revenues exceed expectations and the door is open to criticisms of excessive taxation (Vasche and Williams, 1987). In either case, inaccurate estimates have the potential to cause nightmares for both government officials and political leaders. Recent advances in forecasting technology, while significant in their own right, have focused on evaluating the impact of a wide variety of economic, political, and institutional factors on forecast accuracy (e.g., Bahl, 1980; Bretschneider & Gorr, 1987). For example, the relationship between unemployment and revenues is fairly clearly established (Belongia, 1988; Kamlet, Mowery, and Su, 1987). If the timing of an economic downturn is misforecast, the effect of unemployment on revenues in any single year may be substantially misforecast as well. This type of error evens out over the long run, since it tends to be equally likely that the economy will perform better than the forecast or worse than the forecast in any particular year. The presence of uncertainty in revenue forecasts means that it is in the best interests of revenue forecasters to provide themselves with a cushion to guard against a drop in revenues that is unanticipated (Rubin, 1987). If forecasts of revenues incorporate a safety valve in the form of a cushion, then revenues will be consistently underestimated every forecast period, whether the forecast reflects the expectation of expansion or one of decline. …

A Framework for Analyzing Emergency Management with an Application to Federal Budgeting

Emergency management is a complex policy subsystem that involves an intergovernmental, multiphased effort to mitigate, prepare for, respond to, and recover from disasters. This article develops a framework for analyzing the fiscal and functional aspects of disaster policy. It uses established theories of intergovernmental relations to offer a rationale for examining the capabilities required to implement disaster policy and the behavioral incentives that drive policy formulation. In particular, the article identifies the extent to which the capabilities and political objectives characteristic of each level of government are aligned, and illustrates the interplay between incentives and competencies by reviewing the federal disaster funding process. The current rules for federal budgeting may inappropriately promote spending on disaster response and recovery, while de-emphasizing mitigation and preparedness. Various proposals for reform could establish more coherent incentives, making disaster spending more consistent with the relative functional capabilities of the various levels of government.

The Reiterative Nature of Budget Reform: Is There Anything New in Federal Budgeting?

This article will attempt to demonstrate the limitations of budget reforms to bring about fundamental change in budget outcomes. In an effort to determine the extent to which these reforms have had any lasting effect, the author first discusses the history of federal budgeting since the advent of the executive budget in 1921. Second, the author reviews three reforms that are prominent in the U.S. Congress current budget debate—enacting fixed budget targets, granting the president increased power in the budget process through enacting a line item veto, or implementing a performance-based budget. Lastly, the author will cite the limitations of each to bring about lasting changes in budget outcomes or decision processes.

Appraising Budget Appraisal: Can You Take Politics Out of Budgeting?

No abstract available.

An Analysis of the Factors Affecting the Employment Tenure of Federal Political Executives

The issue of tenure among political executives has been hypothesized to be important in understanding the ability of presidents to implement policy. While it has been demonstrated that these executives remain in their appointed position for a very short period of time and theories have been developed to explain this short tenure, previous work has not tested these hypotheses statistically. This article uses data from a 1985 National Academy of Public Administration survey of political appointees and, using multiple regression methods, addresses the specific factors that have been theorized to influence the tenure of these executives. Specifically, two key factors are found to negatively impact tenure: poor relations with the career bureaucracy and the lure of greater private sector salaries. Other hypotheses are tested as well. The results provide a clearer picture of the motivations of these officials and may be of assistance in promoting an increased length of service through better recruitment and retention methods.

Budgeting during the Clinton Presidency

This article assesses the Clinton administration record of budgeting. During President Clintons two terms, the federal government moved from an era of large deficits to one of equally large surpluses. This turnaround was caused by both the strong economy and the deficit reduction deals of 1990, 1993, and 1997. Defense spending and interest declined as a percentage of the budget, whereas mandatory spending and nondefense discretionary spending increased. Acrimonious interbranch budgetary relationships dominated, with Clinton ultimately winning far more fights than he lost. Executive branch budgetary and financial management capacity improved during the Clinton administration.

Congressional Budgeting at Age 30: Is It Worth Saving?

The congressional budget process is now 30 years old. We review this history to describe why the process was adopted, how it has evolved, and what it has produced. In the early years, the process institutionalized but did not prevent the creation of a significant deficit. During the 1990s, the process was improved and the deficit was converted to a surplus. Since 1999, both the budget process and budget discipline have greatly eroded. We propose some technical and organizational changes that might improve the process, but in the end, what is most needed are leaders who will promote fiscal responsibility for the federal government.

Introduction: Reflections on Two Decades of Congressional Budgeting

Even casual observers of federal policy making cannot help but notice the increasing preeminence of the Congressional budget process. The Congressional Budget and Impoundment Control Act of 1974, which created this process, brought forth profound changes in budgeting practices, both within Congress and between Congress and the president. In addition, the last decade has seen numerous attempts to use the process for deficit control. The goal of this special symposium is how congressional procedures - adapted over time - have affected the federal budgeting process. Each article examines the original purpose of the 1974 statute and analyzes the statutes impact over more than two decades.