“We have a convoluted (base budget) system up here. It causes a lot of anxiety for people, more so than is needful” – GOP Gov. Gary Herbert, as quoted in The Salt Lake Tribune, in addressing his own Education Excellence Commission this week.
Indeed, as I have watched the legislative budget process over the last 30 years, I can say that the current “base budget” system – where GOP lawmakers adopt early in the session a budget that in recent years has been less than the current year’s – does cause much turmoil.
For a few weeks.
Then, after the February tax revenue updates – due early next week -- the majority party “plugs holes” in the base budget and, in most cases, state agency bosses, school districts and teachers, higher education professors and students, and a whole host of Human Service advocates and clients, can take a large sigh of relief.
They get most of what they ask for.
Herbert, as reported in the Tribune, doesn’t think much of the process, however.
He sees all kinds of folks getting upset and worried, only to find their state-related concerns fall away, in most cases, when the final budget bills are passed at the end of the session in early March.
Said Herbert: “What I think the Legislature is starting to realize is it really does kind of give them a black eye (before the public). There’s a lot of confusion out there.”
He adds: “I’m hopeful legislative leadership, Republicans and Democrats alike, will change the rules so that, next year, we don’t have to do this.”
The Legislature is full of irony – and the “base budget” process is not immune.
You see, Herbert’s new chief budget officer, former Utah House Budget Chairman Ron Bigelow, is one of the main architects of the base budget way back in 2004-2005.
And now the executive branch is saying that process isn’t working well – and should be changed, if not abandoned.
In an interview with UtahPolicy on Thursday afternoon, Bigelow – who resigned his House seat last year to accept Herbert’s job offer – said that times have changed. And, indeed, it would be wise for the Legislature to either modify how it uses a “base budget,” or even do away with it all together.
Not having early budget decisions each general session “worked well” for most of the state’s history, said Bigelow.
“Should you even have a base budget? I think that question should be considered.”
At the very least, legislators should not be “making important policy decisions on the budget” – as he sees them doing now – “before the session even starts. It takes more time, more input, for that to happen,” said Bigelow.
Some history here: Former GOP Gov. Olene Walker in the 2004 Legislature wanted $30 million for a new public school reading program. Even though in those pre-recession days the Legislature had hundreds of millions of new dollars in tax revenue in 2004, GOP legislators balked.
Toward the end of the session Walker threatened to veto the main budget bill if the money wasn’t provided.
Legislators were in a tough spot. If they didn’t come up with the cash, they would look (1) mean-spirited toward kids who needed special help in reading and (2) would have to come back into a special session to pass the next fiscal year’s spending plan.
They provided the money.
But GOP leaders also started quietly studying how they could get around such a political “blackmail” in the future.
Being smart fellows (Bigelow one of them), they came up with the idea of passing a “base budget” early in the 2005 Legislature.
During the 45-day session, any bill that comes to the governor’s desk must be signed or vetoed within 10 days, or it automatically becomes law.
By making the governor act on a base budget, should he or she veto it lawmakers would already be in session and could override it. Or, already in session, they would have more power to renegotiate the final budget.
Under the new system legislators would pass “base budget” bills early in the session, and then just add extra money to those budgets (assuming there was new tax revenue) in separate bills at the end of the session, and then adjourn.
If the governor didn’t agree with the added spending bill(s) and vetoed them after the session ended, lawmakers would just let the base budgets already in place stand, and the state would move forward next year with the same spending as agencies and education had the year before. That was the early thinking.
In practice, GOP leaders decided put in extra money in some base budgets – money for growth in public education, Medicaid and a few other programs that – should the worst happen and the governor vetoed the final/added budget bills -- the state could move into a new year with critical programs still adequately funded.
It all worked as planned.
Incoming freshman Gov. Jon Huntsman, Jr. (Herbert was his rookie lieutenant governor) didn’t want to upset the 2005 Legislature (their first), so they want along with the new base budget process – Huntsman signing the base budget bills early in the 45-day session.
If he had vetoed them, setting a different precedent, the new base budget process may have stumbled.
But flush with new tax revenue, Huntsman/Herbert saw no need to blast fellow GOP lawmakers.
Besides, Walker, considered a moderate, had been defeated by the Huntsman/Herbert ticket in the GOP state convention the year before, and she was no longer in office to cause any trouble, all agreed.
All went well for the next few years, although there was some worry in Capitol hallways early each session as agency bosses and special interests saw base budget bills passed and signed by the governor that didn’t have in them the increased spending desired.
Still, the governor was able to reach budget agreements in the final/added budget bills without the threat of veto.
But then came the Great Recession, and state tax revenues plummeted.
Over the last three years, lawmakers have trimmed more than $1.5 billion from state spending.
Suddenly, GOP legislators were CUTTING the current year’s budget in the early-session base budgets. And in doing so, says Bigelow, “they are creating policy.”
And for several weeks, until the new February tax revenue estimates came in, all kinds of folks were upset, fearful, even desperate, as they saw their programs cut by 5 percent, 7 percent, 10 percent, even 12 percent.
Ultimately, a few critical budgets were restored in the late-session budget “fill-backs.” But other state programs remained severely trimmed back – as lower tax revenue required.
This year, however, something different happened.
Republican legislators cut the base budgets by 7 percent, even though Herbert and legislative economists agreed in December that next fiscal year (starting July 1) the state would have an additional $215 million to spend.
Republicans in the House and Senate want to further trim state spending in an attempt to do away with a $312 million “structural deficit.”
Over the last lean years, legislators and governors took one-time cash surpluses – some from the state’s Rainy Day Fund, some in federal “stimulus” monies – and put the cash into ongoing programs. That means ongoing programs had one-time monies in them – creating the “structural deficit.”
Herbert and legislative Democrats suggest trimming back the structural deficit by $100 million in next year’s budget, and further reducing that problem in years ahead as state tax revenues grow.
Republicans want to bite the bullet now and make up the whole $312 million.
Thus Herbert’s frustration with -- in times of growing tax revenues -- GOP legislators, who are still cutting back spending in the base budgets and, in the governor’s mind, unnecessarily upsetting folks.
Senate Budget Chairman Lyle Hillyard – who drafted those early base budgets with Bigelow as co-chairs of the Executive Appropriations Committee – says there is still value in the base budget process.
First, Hillyard says, not all the problem was with Walker and her 2004 $30 million reading program.
“There were legislators – I won’t name them – who were holding up the budget process. It was very hard at the end of each session to put together the final budget bills when someone was holding it up just to get some special spending for his area,” said Hillyard on Thursday.
The base budget process did away “with that internal game playing, as well,” he added. Otherwise, “we as leaders had to cave in to some spending that” the GOP caucuses otherwise may not have agreed with, he said.
Holding state agency bosses and education administrators to current year’s spending early in each session also made them examine their operations, says Hillyard.
How were they going to deal with the same – or in recent years, even less – money?
“It was an education process” for the executive branch of government, Hillyard says. “We did take care of growth in public education students. We did take care of most of the growth in Medicaid and other programs” during the good tax years.
And the process allowed for a more stepped, thoughtful process when most budgets had to be cut over the last three years, he added.
Now is not the time to abandon the base budget process, even if Herbert believes it should go away, Hillyard said.
But Bigelow, now on the other side of the coin, says what’s happening in the 2011 Legislature was not what was designed six years ago. “It’s one thing to hold some money aside” in the early budget process, he says. It’s another to go into programs either before lawmakers convene or soon after and demand heavy cuts when there is growing tax revenue.
“You are making the (budget) policy decisions up front. And I agree with the governor that the current process needs to change. And we’ve both ask (GOP leaders) to review the current process.”
Hillyard says as Utah’s economy grows over the next few years -- and as tax revenues grow along with it -- the base budget process will allow legislators to keep money aside early in the session to be considered for tax cuts, new programs or construction needs while keeping state government lean and cost conscious. “I think it still works,” said Hillyard.