Louisiana Budget Basics

Louisiana Budget Basics: A Guide to the Louisiana State Budget Inside The Louisiana Budget Project Distribution of State Spending Understanding Budget Terms Revenues: Where the State Gets its Money Expenses: How the State Spends its Money The State Budget Process Budget Development Budget Enactment Budget Execution Observations about the Budget Sources of Budget Information Your Participation 8 9 10 12 13 14 15 5 2 2 3 4 Budget Basics is designed to help all Louisiana citizens and nonprofit leaders better understand the state’s budget, advocate for fiscal policy and affect the financial priorities of the state. The Louisiana Budget Project (LBP) provides analysis useful for citizens to engage in the ongoing public policy debate about the budget. Fiscal Year 2008 Why Does the State Budget Matter? In the state budget process, Louisiana’s elected leaders debate, and ultimately decide, how public funds are going to meet the needs of Louisiana’s citizens. The budget proposed by the Governor and adopted by the Legislature is the most important policy document of any legislative session. Louisiana’s Constitution makes the Governor and the Legislature equal partners in forming the budget. Citizens have an opportunity to provide input through the legislative committee process. The Fiscal Year 2008 (FY08) state budget is $29.7 billion. Citizens need to know about state services and the policy choices being made. The state budget is the method for financing state services and the primary indicator of the state’s real priorities. Our state and nonprofit agencies will only meet our collective policy goals if we are clear about how we are allocating our resources, about whether we are doing so transparently and ethically, and about whether we are getting the best social return on our investment. Louisiana Budget Project Staff Melissa S. Flournoy, PhD LANO President and CEO Ernest LeBlanc, Jr., MS Director, Louisiana Budget Project Jeanette Eckert, MBA, MS, CPA, CIA Senior Analyst, Louisiana Budget Project Bob Keaton Senior Consultant Angela Vanveckhoven Director of Communications Ashley Herad, MPA Statewide Director of Public Policy Elisabeth Gehl, MSW Director of Public Policy, New Orleans A New Governor and Legislature: Challenges and Opportunities in the State Budget With the state budget approaching $30 billion, the next fours years will be a time of opportunity for the Governor and Legislature. New legislators have a steep learning curve to understand the steps in budget development and advocates can play an important role in influencing legislative priorities. The Louisiana Budget Project sees this changing of the guard as an opportunity to increase citizen’s access to and participation in the budget process. As Louisiana moves forward, the LBP is prepared to lend its expertise to the Governor and legislators in addressing budget and tax issues that impact low- and moderate-income families and the nonprofits that serve communities. The Louisiana Budget Project (LBP) is part of a national network of the State Fiscal Analysis Initiative (SFAI) sponsored by the Center on Budget and Policy Priorities. There are similar independent research and advocacy organizations working in over 30 states. In designing the project, LANO adopted best practices from nationally-recognized state fiscal analysis programs in Maryland, Michigan and Minnesota. The Louisiana Budget Project is supported by the W.K. Kellogg Foundation, the Open Society Institute, the Annie E. Casey Foundation, the Public Welfare Foundation and other regional and local foundations. This publication offers a brief introduction to the budget process. Budget Basics: A Guide to the Louisiana State Budget is updated for Fiscal Year 2008 (FY08). The LBP is guided by an advisory committee of nonprofit, business, labor and community leaders. The LBP develops reports and trainings on state and federal fiscal policies that affect vulnerable citizens, as well as the important community based nonprofit organizations that provide services to strengthen communities. For more information on the Louisiana Budget Project, visit www.labudget.org. For more information about LANO or to receive our public policy alerts on crucial issues that impact your work, sign up on at www.lano.org. 2 Louisiana Budget Basics the vision of strong, accountable, efficiently run nonprofits addressing the needs of Louisiana. With over 1,000 members and branch offices across the state, LANO’s mission is to strengthen, promote and build the capacity of Louisiana’s nonprofit sector through education, advocacy and member services. The LANO Board of Directors represents all sectors of Louisiana's nonprofit community and every region. LANO is certified in compliance with the National Standards for Excellence and founded the Louisiana Standards for Excellence. A member of the National Council of Nonprofit Associations (NCNA) and Independent Sector, LANO provides leadership and capacity building resources to strengthen Louisiana's communities – one nonprofit at a time. Why is LANO Involved with the State Budget? Louisiana Association of Nonprofit Organizations (LANO) was created to strengthen Louisiana’s nonprofits to improve the quality of life in our state. To better serve their communities, nonprofits must become influential participants in the debate about the state’s fiscal policy, which is embodied in the state budget. LANO is a statewide network of nonprofits, foundations and individuals representing every region of our state, dedicated to Distribution of State Spending in FY08 The following charts show the functional distribution of state spending for FY08. Chart 2 reflects the division of the current state budget according to six functional areas. Federal funding in FY07 doubled or increased by 110% over FY06. Currently, there is $8.3 billion of hurricane disaster funding appropriated for FY08 that is allocated in the General Government category. Chart 1 Growth of Enacted State Budget from FY03-04 to FY07-08 $30,000$26,719 $25,000$20,000$16,794 Millions $15,000$10,000$5,000$0$18,728 $17,541 $29,741 2003-2004 $6,372 $6,536 $3,886 2004-2005 $6,323 $6,840 $4,378 2005-2006 $6,710 $7,260 $4,758 2006-2007 $14,054 $7,298 $5,367 2007-2008 $15,821 $8,565 $5,355 Federal Funds State General Fund Special Funds 3 Chart 2 Fiscal 2008 Enacted Budget $10,000$8,000$6,000$4,000$2,0000- Millions Public Safety Human Resources $8,774 $8,526 General Environmental Government and Natural Resources $6,872 $1,253 $530 $530 Education Business and Infrastructure $2,399 $2,399 Total Means of Financing (MOF) Total MOF minus Hurricane Disaster Funding $3,583 $1,345 $7,580 $7,176 Understanding Budget Terms Budget – The budget is the financial plan for the state, which begins as a proposal by the Governor to the Legislature. The budget is converted into a legislative instrument, or bill, and is the first bill submitted in the House of Representatives (HB1). After legislative review, it is adopted by both houses of the Legislature (House of Representatives and Senate) and signed into law by the Governor. Results or Performance-Based Budget – This approach to budgeting, used by the state of Louisiana, is supposed to identify programs that are successful (i.e., meeting or exceeding their performance standard) and those that are not successful, so that the state’s scarce financial resources can be allocated accordingly. Revenue – Money raised by the state through the collection of taxes, fees from individuals and corporations and transfers from the federal government. Money raised from these sources is used to fund or pay for public goods and services. Expenditures – Spending of revenues on public services or programs, such as education, social services, transportation, economic development and others. Allocation – This is the means by which the state determines how resources are spent, and on what “mix” of services. There are several ways in which government allocates public resources: direct provision of goods and services; incentives that influence economic decisions through tax breaks and subsidies; or the regulation of private sector activity (public utilities, private schools, etc). Appropriation – the legal authorization to withdraw money from the state treasury for a specific purpose. There are two types of appropriation: appropriations made by the constitution that require no action by the Legislature (to pay for things like debt service and the homestead exemption); and appropriations made by the Legislature to pay for the ordinary expenses of government. The bill that contains appropriations for the ordinary expenses of government is generally referred to as the “General Appropriations Bill.” Governor’s Supplementary Budget – The Louisiana Constitution prohibits the Governor from proposing a budget that exceeds the Official Revenue Forecast. (see Revenue Estimating Conference box) Likewise, the Legislature is prohibited from adopting a budget that exceeds that forecast. This keeps the Governor from being able to include in the Executive Budget expenditures that are contingent on the Legislature increasing revenue by enacting new taxes, licenses or fees. The Supplementary Budget is a legal means for a Governor to make known to the public how revenues in excess of the Official Revenue Forecast that existed at the time that the Executive Budget was issued would be spent. 4 Louisiana Budget Basics The Revenue Estimating Conference (REC) The amount of money available for budget purposes can vary from year to year as a result of economic conditions, changes in tax law and other factors. After years of operating without an organized system for estimating revenues, Louisiana adopted a revenue estimating process in 1987 that has become a model for the rest of the country. The REC is a constitutional body that sets the revenue forecast for the state by a unanimous vote of the four members. Members of the Revenue Estimating Conference are the Governor, the President of the Senate, the Speaker of the House and a university professor with revenue estimating expertise and experience. The Governor, President, and Speaker can appoint proxies, but the university professor may not. With the exception of the Governor, who usually appoints the Commissioner of Administration, all of the other members represent themselves. The requirement of a unanimous vote forces compromise because, if there is no unanimous vote on a new forecast, the last forecast approved by a unanimous vote remains the Official Revenue Forecast. The REC is required to meet at least four times a year. They can, however, meet more often if at least two members of the Revenue Estimating Conference call for a meeting. The chairmanship of the REC rotates among the members annually. The Revenue Estimating Conference does not estimate federal funds or self-generated revenue; these revenues are projected by the collecting agencies. Revenues: Where the State Gets its Money Revenue Sources State General Fund (SGF): The State General Fund includes sales tax, personal income tax, corporate tax, mineral revenues and gaming. The following represents the five major sources of State General Fund revenue. 1) State Sales Tax Louisiana’s sales tax rate is 4 cents on the dollar. The Official Forecast for FY08 estimates sales tax revenue at $2.849 billion. 2) Personal Income Tax Louisiana’s personal income tax rates range from 2 to 6 percent. Act 399 of the 2007 Regular Legislative Session is a partial repealing of the 2002 Stelly Plan. The Act, authored by Rep. Townsend (D-23) allows for excess federal itemized deductions to be taken on a state income tax, which will result in a reduction of the State General Fund of $157 million in FY08. 3) Corporate Tax Corporations pay taxes at rates ranging from 4 to 8 percent. Franchise taxes are based on the amount of capital stock and borrowed capital (this tax is being phased out with the 100% exclusion of borrowed capital from the franchise tax beginning with tax year 2012). 4) Mineral Revenues Mineral tax revenues come from severance taxes, royalties, bonuses and rentals. Severance taxes and royalties are based on the extraction of minerals, while bonuses and rents are based on the sale of mineral rights on state-owned land. 5) Gaming The state levies various fees on riverboat gaming, video poker and slot machines at race tracks and also receives 35% of lottery proceeds. A minimum of $50 million is received annually from the landbased casino in New Orleans. Other State Generated Revenue The following represents the four sources of other state generated revenue sources. 1) Statutory Dedication Statutory dedications are revenues dedicated by Legislative law or the Constitution. Two examples of statutory dedications are as follows: • The gasoline and special fuel taxes go into the Transportation Trust Fund, which can only be used for operations of the Department of Transportation and Development, including the construction and maintenance of state roads and bridges. • Hunting license and boat registration fees are dedicated to the Department of Wildlife and Fisheries and can only be used to fund expenses of that department. 2) Self-Generated Revenues Self-generated revenue is most often generated by fees state agencies charge to defray all or a portion of the cost of services 5 Revenue Sources, continued provided by that agency. Citizens who use the service pay the largest portion of the cost of providing the service. Revenue from these fees cannot be transferred to another agency to be used for another purpose, even if the revenue exceeds the expense of maintaining the designated agency services. Any surplus or unprotected fees remaining at June 30 of each fiscal year reverts to or is transferred into the State General Fund. 3) Interagency Transfers In many situations, especially where federal funds are involved, one state agency receives the funds and transfers them to another agency, where they are spent to provide a state service. In these situations, the budget for the agency receiving the funds would show the actual source of the revenue as, say, “Federal Funds,” and the agency that actually spends the money would show the funds as interagency transfers. Without this procedure, the funds would show up as Federal Funds in both agencies’ budgets. When calculating the total budget, interagency transfers are not included in the calculations. This permits the tracking of funds from the time they are received until the time they are spent without counting the money twice. 4) Federal Funds Federal funds are designated for specific programs in which Louisiana participates and come with restrictions regarding how those funds can be spent. While federal funds appear in the budget of many state departments, the largest allocations go to the Department of Health and Hospitals (Medicaid), the Department of Social Services (TANF) and the Department of Transportation and Development. Charts 3 and 3A-C illustrate the appropriation for each area by means of financing, i.e. State General Fund, federal funds and other funds (self-generated and statutory dedications). Chart 3 FY08 Total Enacted Budget ($29.7 Billion) General Funds $8.5 Billion 29% Federal Funds $15.8 Billion 53% Special Funds (State Source) $5.3 Billion 18% 6 Chart 3A Louisiana Budget Basics FY08 Recommended State General Fund Expenditures by Functional Area Public Safety 10% Human Resources 22% Business & Infrastructure 2% General Funds $8.5 Billion 29% General Government 10% Environmental and Natural Resources 1% Education 55% Chart 3B FY08 Recommended Other State Special Fund Expenditures by Functional Area Human Resources 18% Public Safety 8% Special Funds (State Source) $5.3 Billion 18% General Government 7% Business & Infrastructure 36% Environmental and Natural Resources 7% Education 24% Chart 3C FY08 Federal Fund Expenditures by Functional Area Public Safety 14% Business & Infrastructure 2% Education 10% Environmental and Natural Resources 1% Federal Funds $15.8 Billion 53% Human Resources 37% General Government (includes Recovery Funding) 36% 7 Expenses: How the State Spends its Money Louisiana’s total expenditures can be divided into six functional areas: 1) Education $4.8 billion State General Fund (SGF) – $7.6 billion total At 55% of the State General Fund, this is the state’s largest category of expenses. Allocation of funds goes to the Department of Education, Higher Education, Special Schools and Commissions and Higher Education Debt Service. 2) Human Resources $1.9 billion (SGF) – $8.8 billion total Recovery Authority; Board of Tax Appeals; Secretary of State; Lieutenant Governor; Treasury; Revenue; Civil Service (except agencies listed in Public Safety); Retirement Systems; Interim Emergency Board; Video Draw Poker - Local Government Aid; Governor's Conferences and Interstate Compacts; State Aid to Local Government Entities; Non-Appropriated Requirements; Judicial Expense; Legislative Expense and Special Acts. The second largest allocation of State General Fund dollars, this category represents 22% of all General Fund revenues. Allocations are to: the Departments of Health and Hospitals, Social Services and Youth Services; Local Housing of State Juvenile Offenders; Louisiana State University Medical Center - Health Care Services Division; Mental Health Advocacy Service; Patients' Compensation Fund Oversight Board; Office of Women's Policy; Office of Elderly Affairs and Veterans' Affairs. 5) Business & Infrastructure $143.4 million (SGF) – $2.4 billion total 3) Public Safety $859 million (SGF) – $3.5 billion total 10% of all State General Fund appropriations, allocations are to: Corrections Services; Local Housing of State Adult Offenders; Corrections Debt Service; Prison Enterprises; Public Safety Services (and related ancillary agencies); Governor's Office of Homeland Security and Emergency Preparedness; Military Affairs; Office of the Attorney General; District Attorneys & Assistant District Attorneys; Supplemental Pay to Law Enforcement Personnel; Louisiana Commission on Law Enforcement; Municipal Fire and Police Civil Service; State Police Commission; Two Percent Fire Insurance Fund; and Emergency Medical Services - Parishes & Municipalities. 2% of the total State General Fund, allocations to: Economic Development; Culture, Recreation and Tourism; Labor; Insurance; Public Service Commission; Transportation and Development; Capital Outlay; Sales Tax Dedications; Parish Transportation; Sabine River Authority; Municipal Facility Revolving Fund; Louisiana Manufactured Housing Commission; Workforce Commission Office; Louisiana Stadium and Exposition District; Louisiana State Racing Commission; Office of Financial Institutions; Louisiana State Board of Cosmetology; Louisiana Health Insurance Association; and Louisiana Gulf Opportunity Zone Loan Fund. 6) Environment & Natural Resources $60 million (SGF) – $0.5 billion total 1% of the State General Fund, including allocations to Environmental Quality, Natural Resources, Wildlife and Fisheries and Agriculture. Did You Know? The Capital Outlay Bill identifies capital projects, land acquisition, repair, renovation and construction projects for governmental and nongovernmental entities, as well as capital assets to be funded through the issuance of state general obligation bonds. 4) General Government $852 million (SGF) – $6.9 billion total Also 10% of the budget, allocations to: Executive Office; Office of Indian Affairs; Division of Administration (and related ancillary agencies and DOA Debt Service and Maintenance); Louisiana 8 on App r sent opriatio n to st ate letters de p artm ents Louisiana Budget Basics Requ state est form s next agencie sent to s for fisca l yea th r’s b e udge t Dep a bud rtments get s u bm re follo wing quests f it or fisca l yea the r Reve n Con ue Estim fere ating n fore cas t ce m e e t st cu next year rrent a o nd s’ re venu e Figure 1 - Louisiana State Budget Annual Timeline Fisca l July Year b egin 1 s July August September October November December The Revenue Estimating Conference meets to adopt the official forecast for current and ensuing fiscal years. Agencies must make decisions about their budget needs and priorities, then prepare their request. Agency requests must contain performance data, financial data or estimates for the prior, current and upcoming fiscal year. Each agency’s budget request is due in to the Division of Administration’s Office of Planning and Budget by November 15. The State Budget Process The operating budget request documents that are presented by budget units (departments, agencies or other spending authorities) contain a wealth of detailed information on means of financing, expenditures and performance. This voluminous material must be evaluated and then condensed into the program narratives, financial analyses and funding recommendations contained in the Governor's Executive Budget and the executive budget supporting document. By the end of the appropriation process, each budget unit’s appropriations are aggregated summary data and take up only a few pages in the general or ancillary appropriation act. General Appropriations Bill The spending plan contained in the Executive Budget is converted into three legislative instruments - the General Appropriations Bill, the Legislative Expense Bill and the Judicial Appropriation Bill. Once passed and signed into law by the Governor, these bills provide the legal authority for making expenditures. The Louisiana Constitution limits appropriations to only one year, so spending authorizations contained in the bills expire on June 30 of the fiscal year. The General Appropriations Bill (HB1) originates in the House of Representatives, because the Constitution requires that all spending bills originate there. This bill contains spending authority for all agencies in the executive branch of government. Spending authority for the Legislature is contained in the Legislative Expense Bill and for state courts in the Judicial Appropriations Bill. All of these bills have an effective date of July 1 of the fiscal year. In developing the state's operating budget, the process can be divided into three overlapping phases: The first phase is budget development, which is controlled by the Governor via state departments and the Division of Administration in compiling the Governor’s Executive Budget. The second phase is budget enactment, which is controlled by the state Legislature as it reviews and modifies the Governor’s Executive Budget before enacting it into law. The final phase is budget execution. After the Executive Budget is enacted into law, expenditures are monitored for compliance with executive and legislative intent by the Division of Administration and the Louisiana Legislative Auditor. 9 Gov e get rnor’s E xecu pr e s e t Le gi slati nted to ive Budve C the J the B o udge ommi ttee int t on HB1 d App ebated ropr iatio in Hous e ns C o mm ittee HB1 d Fina ebated n ce Com in Sena mitte te e App e ar e al m e e t sc he ings d de p artm uled wi th ents January Appeal meetings are scheduled with the Commissioner of Administration February Governor reviews preliminary executive budget March Governor’s Executive Budget presented to Joint Legislative Committeee on the Budget by March 1 April Governor’s Executive Budget (HB1) debated in legislative committees May June HB1 approved HB1enrolled by first the House then the Senate Phase 1: Budget Development (July - March) The budget development phase is controlled by the Governor, Division of Administration and state departments. During the development phase of the budget process, budget requests are presented to the Division of Administration by all departments in the executive branch of government. The Division of Administration analyzes each budget request and makes recommendations to the Commissioner of Administration and the Governor. The Governor’s Executive Budget is developed by the Division of Administration and presented to the Joint Legislative Committee on the Budget (JLCB) 45 days prior to the start of the legislative session. The Executive Budget submitted during the first year of each new term shall be submitted no later than 30 days prior to the regular session of the Legislature. Budget Players and Their Roles Governor Revised Statutes 24:652A stipulates that the Governor shall cause to be prepared an Executive Budget presenting a complete financial and programmatic plan for the ensuing fiscal year. The budget shall include recommendations for appropriations from the State General Fund and dedicated funds, not exceeding the amount of the official forecast of the Revenue Estimating Conference. State Departments/Agencies The head of each state department and the Board of Regents must submit their budget requests for the next fiscal year to the Governor no later than November 15. State agencies have to balance three years of budgets. In the summer and fall, each department is trying to “close out the books” for the previous fiscal year that just ended on June 30. The department is beginning a new fiscal year, managing the implementation of programs and tracking these costs, and by October is beginning budget preparation for the next fiscal year. Division of Administration During the process of preparing the Executive Budget and prior to its submission to the Legislature, the Governor may examine or further investigate budget requests as deemed advisable. The Governor may hold or cause further hearings to be held, or direct changes or revisions in policy, programs or specific details. The Governor’s Executive Budget supporting document is prepared by the Division of Administration. This document describes in detail how the Governor proposes to spend, in a given fiscal year, money collected from taxes, licenses, and fees, as well as money received from the federal government. The Governor’s Executive Budget Supporting Document can be found on the Office of Planning and Budget’s website at http://www.doa. louisiana.gov/opb/pub/ebsd.htm. Other Players: Special interest groups prepare information for members of the Legislature and their staff, representing a specific point of view on items in the budget and appropriations bills. Members of these groups testify before the House Appropriations and Senate Finance Committees on areas of the budget affecting clients they are paid by or volunteer to represent. Le gi s ends lative Se ss Ju n e 23 ion Fisca l June Year e n ds 30 on Gov e pr e l r n o r r e v imin ary iews bu d get Le gi s beg lative Se ins M s arc h sion 31 10 Louisiana Budget Basics The State Budget Process Phase 2: Budget Enactment Phase – Legislative (March - June) Budget Players and Their Roles The budget enactment phase is controlled by the state Legislature. Spending by the Legislature from the State General Fund and dedicated funds for any fiscal year shall not exceed the official forecast in effect at the time the appropriations are made (Revised Statutes 39:54). Article 3 Section 16 of the Louisiana Constitution stipulates that no money shall be withdrawn from the state treasury except through specific appropriation, and no appropriation shall be made under the heading of contingencies or for longer than one year. In addition, all bills for raising revenue or appropriating money shall originate in the House of Representatives. The general appropriation bill, which is usually submitted as House Bill (HB)1, shall be itemized and shall contain only appropriations for the ordinary operating expenses of government, public charities, pensions and the public debt or interest thereon. House Committee on Appropriations When the general appropriations bill is introduced in the House of Representatives, it is referred to the House Committee on Appropriations. The chairman of the Appropriations Committee traditionally schedules extensive hearings on the bill. Staff from the Governor’s Office of Planning and Budget, House and Senate Fiscal Services, the Legislative Fiscal Office and state departments provide information to the committee. The chairman also sets aside limited time for input from the general public, usually at the end of committee hearings on each department. After HB1 is adopted by a majority vote in the House Committee on Appropriations the committee report, including amendments changing HB1, is forwarded to the House Clerk. House of Representatives (House) HB1 is retyped to incorporate all of the adopted amendments. The retyped bill is called the “engrossed” bill. At this point, the engrossed bill is put in line to be debated by the full House. Debate in the House can range from as little time as two to three hours to as long as three or four days. The House of Representatives adopts amendments as the discussion moves from schedule to schedule in the bill. Senate Committee on Finance Following House passage the budget bill goes to the Senate, where it is referred to the Senate Committee on Finance. The process in the Senate committee is much the same as in the House. Usually, the House Committee on Appropriation holds HB1 until the Revenue Estimating Conference meets in May to see if any additional revenue will be forecasted. Therefore, this gives Senate Committee on Finance less than a month to review and debate HB 1. When the Senate Committee on Finance has completed its work, the bill is sent to the full Senate for debate. Senate Floor The Senate debates and amends the bill in much the same fashion as the House of Representatives. Once the Senate has completed its work on the General Appropriations Bill, it is returned to the House with the Senate amendments attached. The House of Representatives must decide whether to accept or reject all Senate amendments. Fast Facts Amendments to the Budget • Only members of the Appropriations Committee or the Senate Finance Committee can offer amendments in committee, but amendments in draft form can come from any source. • Many amendments come from constituents, lobbyists and members of the Committee who want to add or subtract from what the Governor proposed in the Executive Budget. • Amendments to the bill are generally considered at the end of the hearing process, although members may indicate during the hearings their intention to offer specific amendments. • The majority of amendments come from the Division of Administration, which is the administrative arm of the Governor’s Office. • The Appropriations Bill is usually debated by the House of Representatives and the State Senate as a “special order” bill, and debate is generally limited to less than one day. 11 They vote on the amendments as a whole. If one amendment added by the Senate is unacceptable, the House of Representatives must reject all of the Senate’s amendments and send the bill to the Conference Committee. Conference Committee The Conference Committee is where the House of Representatives and the Senate work out their differences on amendments. However, the Conference Committee has become a venue for many new amendments to make their way into the bill. A conference committee report is submitted to the Senate and House of Representatives itemizing the changes adopted by the Conference Committee. If the Conference Committee Report is not adopted by both chambers, the report fails and the process must start again, i.e. returning the report to Conference Committee if time permits or a special legislative session. Concurrence If the Conference Committee Report is adopted by both chambers, Conference Committee amendments are incorporated into the Reengrossed Bill. It is reprinted as the “Enrolled” Bill, which is the final budget approved by the Legislature, and is then sent to the Governor. Governor The Governor can sign the bill as presented or can make specific “line item” vetoes to eliminate certain language and amendments adopted by the Legislature. The Governor usually makes line-item vetoes and signs the bill after the Legislature has adjourned for the year. At that point the bill becomes law. The Governor issues a “veto message” which provides a complete list of the items that have been vetoed, along with a general rationale for each veto. If the Governor vetoes anything in the bill, the Legislature has the option to overturn the Governor’s veto with a two-thirds vote of the members of each chamber. If the legislative session has ended, legislators have the option of calling a special session to vote on overriding any or all of the Governor’s vetoes. • The Conference Committee is made up of three Senators and three Representatives. • A majority of the members (4) must agree on amendments for them to be adopted. • Once the conference committee completes its work, a conference report is issued. • At the end of the debate, each chamber must vote to accept or reject the Conference Committee Report. • If either chamber rejects the report, the budget does not pass. The Governor of Louisiana has special powers when it comes to appropriations bills and can veto the entire bill or exercise what is called a “line-item” veto, where a certain line of the bill is crossed out, thereby eliminating the language and dollar values that appear on that line. This power is not available in other legislation where the Governor may only veto the entire bill. Source: National Conference of State Legislatures There were 606 registered lobbyists in Louisiana in 2007. Source: Louisiana Ethics Commission final passage. (House Rules 7.8, 7.9, 7.20, 8.16, 8.17, and 8.20 and Senate Rule 7.8). Fast Facts The Life of a Bill Original Bill – The bill as introduced into the Legislature that is used in the legislative process until engrossed. (House Rule 7.2 and Senate Rules 7.4 and 7.6) bill which incorporates all committee amendments to the original bill adopted during the second reading in the originating house. (Rarely a bill is amended on the floor at second reading and the engrossed bill, including these amendments, is referred to committee.) The engrossed bill is ordinarily the version used on the House floor for debate on third reading and Enrolled Bill – Engrossed Bill – Original bill prepared with amendments adopted upon initial consideration by the house of origin incorporated into its text. Usually, a A bill in its final form, including all amendments adopted in both houses, to be submitted (Joint Resolutions excepted) to the Governor for approval or veto. (House Rules 7.12, 7.14, and 7.15 and Senate Rule 7.10) 12 What is Not in the Budget? Louisiana Budget Basics The Louisiana Budget Project has produced a report entitled Out of Sight, Out of Mind: A Discussion of Louisiana’s Tax Exemption Budget. Every year, approximately $2.0 billion in state revenues are not collected due to tax exemptions and credits authorized for various reasons. These tax expenditures are not addressed by either the Governor or the State Legislature like other state expenditures during scrutinization and allocation of state resources. In the 2007 legislative session, several tax exemption and tax credit bills were passed. Although many of these tax credits will be implemented over a two year period, the reduction in State General Fund revenue in FY08 is estimated to be $180.7 million. Utilizing data from various sources, the LBP surmised that expenditures growth could exceed revenue as early as FY09. The Revenue Estimating Conference will be able to adjust its official forecast for FY08 and FY09 at its next meeting. At that time, the current fiscal year forecast can change, resulting in increased revenues. Currently, the sources of the FY07 surplus have not been identified as recurring or nonrecurring. Phase 3: Budget Execution – (July - June) Budget Players and Their Roles Division of Administration No later than two weeks after the effective date of the approved budget, the Office of Planning and Budget (OPB) transmits appropriation letters detailing budgets by program and expenditure line item to budget units/agencies. The OPB enters the information into its automated budget tracking system. A copy of the budget is sent to the Office of the State Treasurer for verification and approval. Then, the OPB and Office of Statewide Reporting and Accounting Policy input appropriations into the state’s Integrated Statewide Information System (ISIS). For agencies under ISIS, the OPB utilizes various reports to monitor budgets for both revenue and expenditures. These reports compare actual amounts spent versus the amount budgeted, to ensure accuracy and conformity to the original legislative and executive intent. Noncompliance with legislative and executive intent may cause delay and/or rejection of funding requested by agencies. All questions which may arise about the meaning of items specified in any appropriation act or in the state budget shall be decided by the Governor (RS 39:57). However, the decision on the meaning of these items shall be based on the detailed estimates and other information in the budget request of the agency or unit as embodied in the Executive Budget and the supporting documents that were presented to the Legislature. And, the Governor may use the legislative summary of appropriations and other legislative reports to express executive and legislative intent. Louisiana Legislative Auditor The Louisiana Legislative Auditor serves as the watchdog of public spending, overseeing more than 3,500 audits of state and local governments and their related quasi-public enterprises. Conducting independent financial and performance audits of the State’s agencies, colleges, and universities, the state’s auditors find ways to improve government and identify critical issues to protect public resources and tighten government control systems. When necessary, the auditors follow up on allegations of fraud, waste or abuse. Audits are contained in the Legislative Auditor’s website and can be easily searched by choosing New Audit Reports. In addition, there is a link in the Louisiana Legislative Auditor’s website for entities that are not in compliance with the audit law. The Louisiana Legislative Auditor’s website is http://www. lla/state.la.us. The Joint Legislative Committee on the Budget The Joint Legislative Committee on the Budget is composed of the members of the House Committee on Appropriations, the Senate Finance Committee, and the Chairmen of both the House Committee on Ways and Means and also the Senate Revenue and Fiscal Affairs Committee. The committee may hold public hearings each year to review agency budget requests and the recommended executive budget. The Joint Committee reports its findings and recommendations two weeks prior to the start of each regular legislative session. During the interim, the committee is authorized to approve or disapprove transfers of funds and to approve requests for use of interest earnings and to change orders for capital constructions projects. The committee is often extended broad authority to interpret and oversee implementation of legislative intent regarding fiscal and budgetary matters. 13 Observations About the FY08 Budget The state budget never operates in a vacuum. Programs funded at the state level often are tied to federal aid. At the federal level, a change in leadership and political philosophy can affect not only what the state is able to collect through its own efforts, but also what it might receive in federal support. Indeed, when leadership in the White House or Congress changes party or when priorities shift, quite often the state and its executives are forced to become advocates to protect existing federal support or secure additional funds. It is also valuable to understand how the economy drives state budget decisions. In times of economic prosperity, when revenue collections often exceed annual forecasts, prospects for advocacy groups improve. The Governor works hard to leverage the state’s good fortune to their own political advantage, embarking on initiatives large and small that satisfy not only the general populace, but also key constituent groups that support them. Legislators work hard, as well, to identify projects that reflect not only their individual priorities but also those of the various constituent groups they represent and the larger interests that often play key roles in financing their reelection efforts. On the other hand, a slowdown in the economy can spell disaster for even the most skillful advocates, requiring most to shift to a “defend and protect” mode and leave new initiatives for another day. For example, entitlement programs are determined not by fixed dollars, but by the number of people who qualify. Also, spending requirements determined by law that are related to Medicaid, welfare and unemployment grow larger at approximately the same time the economy takes a dive. According to a report released by the Senate Fiscal Staff, 57% of the State General Fund is non-discretionary. A few nondiscretionary expenditures are constitutional restrictions such as Minimum Foundation Program, federal mandates such as Mandatory Medicaid Services, unavoidable obligations such as group benefits for retirees, and court orders such as representation for mental health patients and forensic mental health services. Chart 4 Comparison of FY08 Discretionary and Non-Discretionary State General Fund Allocation $3,000$2,500$2,000$1,500$1,000$500$0Public Safety Human Resources General Environmental Government & Natural Resources Education Business & Infrastructure Millions Non-Discretionary Discretionary 14 Louisiana Budget Basics million of the $1.0 billion surplus must be approved by a two-thirds vote of the state Legislature. The FY08 budget contains many new expenditures of a “recurring” nature, of which approximately $444 million is in pay raises. The Governor and legislators will most likely not have the kind of new money to spend as was available during the 2007 Regular Session. It is even possible that, as revenues settle down, there will be pressure on the budget that will require budget cuts in FY09. Chart 5 Observations About the FY08 Budget The expenditure limit will be a factor in the 2008 Legislative Session. In its meeting on September 18, 2007, the Revenue Estimating Conference forecasted that there will be a $1.0 billion surplus from FY07. The expenditure limit for FY08 is $11.6 billion. The FY08 appropriation, which is limited by the state’s expenditure limit, is $11.5 billion. This calculation allows the new administration and state Legislature to spend $0.1 billion of the $1.0 billion FY07 surplus in the current fiscal year. Spending of the remaining $906.3 Transparency The state has made great strides in improving public access to budget information, but there is still work to be done in this area. There should be a single website where the public can either access all published budget information or be directed to the information on other websites. The website for the Joint Legislative Committee on the Budget has the potential to be such a resource with work. The Governor and the legislative leadership should make this a top priority in an effort to increase budget transparency. Unfunded Budget Challenges for the Future Unfunded Accrued Liability (UAL) Statewide Retirement Systems $9.6 billion Road Construction & Rehabilitation Backlog $14.6 billion Rebuild LA’s Coastline $14 billion Higher Education Deferred Maintenance $1 billion UAL Group Insurance for Retirees $6 billion Sources of Budget Information 1. The Executive Budget and Executive Budget Supporting Documents for FY01 through FY07 can be found at http://www. doa.state.la.us/opb/pub/ebsd.htm. 2. Revenue estimates adopted by the Revenue Estimating Conference, Gaming Revenues, the appropriated version of the Children’s Budget, and a 10-year spending history from FY92 through FY02 can be found at http://www.doa.louisiana.gov/ opb/pub/budgetdocs.htm. 3. The State Budget (prepared to reflect the budget as it was adopted by the Legislature), the Fiscal Status Statement (a document that reflects changes to the budget throughout the fiscal year), and Act 67 Adjustments (a statement that shows cuts made to the budget in the aftermath of Hurricanes Katrina and Rita) can be found at http://www.doa.state.la.us/opb/pub/ state-budget.htm. 4. Revenue Estimates adopted by the Revenue Estimating Conference, as well as Revenue and Expenditure Fiscal Notes can be found on the Legislative Fiscal Office website at http://lfo.louisiana.gov/rev. 5. The Senate Fiscal Staff issues a report on the budget after the session has ended. This report can be found at http://senate.legis. state.la.us/FiscalServices/Publications. htm. 6. The House Fiscal Services Division also issues a report on the budget after the session has ended. This report, entitled Fast Facts and Fiscal Summaries can be found at http://house.louisiana.gov/housefiscal/ Publications/publications.htm. 7. House Legislative Services prepares a “highlights” report on the legislative session, which contains a section on appropriations. The report can be found at http:// house.louisiana.gov/Agendas_2007/ Highlights_2007.pdf. 8. The Center on Budget and Policy Priorities (CBPP) provides research and analysis on a range of federal government policies and programs and their impact on state budgets, with an emphasis on those affecting low-and moderate-income people. CBPP’s website is: http://www.cbpp.org/. 9. The Department of Revenue and Taxation produces a Tax Exemption Budget each year. This budget provides information on the cost of tax exemptions granted by state law. The website for current and past tax exemption budgets is http://www.rev.state. la.us/sections/publications/sp.asp. 15 Nonprofit Leaders, Volunteers and the Public Can Participate in the Budget Process One of the key activities of LANO is advocacy on behalf of its members and the nonprofit sector. Nonprofits, their executives, staff and board may also engage in advocacy and lobbying activities to protect the vested interests of their organization. Understand your issues • Have your facts and figures together • Testify at budget hearings Inform the media about your issues • Work collaboratively through coalitions Educate the Governor and Legislature about the needs of citizens addressed by your efforts Citizens and nonprofits can participate in the budget process in the following ways. P Watch the budget process. Use the Internet to check House and Senate legislative calendars to see when the budget bill is being heard and considered. The more you know about what is happening, the more able you are to influence decisions before they are final. P Establish a relationship with legislators. Like most people, elected officials are most likely to trust people they know. For best results, start communicating with them before a critical vote and maintain your communication between legislative sessions. P Speak out about your priorities. Let your Representative and Senator know your budget policy priorities. As their constituent, your input matters! If you don’t know who your elected representatives are, go to http:// www.legis.state.la.us and type in your home address to find out. Use the contact information provided by this tool to communicate with your State Representative and Senator, as well as your U.S. Congressmen. P Write a letter to the editor or an Opinion Editorial piece. Letters to the editor can raise awareness of important issues or express an alternative point of view from those being printed. The Opinion Editorial page is typically well read by politicians, businessmen and other community leaders. It is a good place to have an impact on the legislative budget process. P View live internet broadcasts of all committee meetings and floor deliberations. You can view live and archived broadcasts on the House’s website (http://house.louisiana. gov). Live broadcasts from the Senate are not as comprehensive as the House but still provide the opportunity for viewers to see the floor debate on the General Appropriations Bill. (http://senate.legis.state.la.us/ Session-Info/Live- Broadcasts. asp). P Pay attention to what issues are dominating discussions of budget and tax policy. Notice what is being written in the papers and aired on television. Also notice what is not being printed or aired. Sometimes the issues that are ignored are the most critical. P E-mail your legislators. E-mail addresses can be found on the website for the House of Representatives and Senate. Your representatives need to hear from you. It is important for nonprofit leaders to become more knowledgeable and engaged in the process. P Network with others who share your priorities. During legislative sessions, the State Capitol is filled with lobbyists and advocates for many interest groups. Legislators are overwhelmed by opinions, positions and causes. The more that you can work with others who share your priorities to deliver a single message, the greater the chances of convincing elected representatives and getting them to understand your needs. P Stay informed about state policies and the budget. You can attend the Appropria-tions Committee and Senate Finance Committee and submit a card to testify on certain days. P Join the LANO Public Policy listserve at www.lano.org You will receive regular updates during the legislative session, as well as updates on various issues throughout the year.