OFM to agencies: Take 2015-17 budget requests off auto-pilot

June 26, 2014

For many Washingtonians, summer is the time to wind down and enjoy much needed R&R. Not so for budget writers at state agencies and the Office of Financial Management (OFM). This is the time of year that the framework for the Governor's 2015-17 budget proposal is put into place. To facilitate these efforts OFM sent agencies budget instructions which lay out several directives that agencies are to follow when submitting their budget requests.

One of those directives is to explicitly link a proposed activity to an expected performance outcome:

RCW 43.88.090 now requires each major activity in the agency’s Activity Inventory to have at least one performance measure. If the agency and OFM agree that it is not possible to identify an appropriate quantitative performance measure for an activity, the agency must at least provide a narrative description of the intended outcome for the activity in the 'expected results' text box provided in the system. The agency will not be able to submit its budget to OFM unless each activity is linked to at least one performance measure or has an expected results statement. The performance measure and expected results information will be printed on the Activity Inventory report that the agency must include in its budget submittal.

While this is an important directive for agencies to follow, another requirement for agencies to re-base their spending proposals is also worth exploring in more detail. Undoubtedly you've heard that the Governor is asking state agencies to identify potential budget cuts despite nearly $3 billion in projected revenue growth for 2015-17. What agencies are actually being asked to do, however, is take their budget requests off auto-pilot and reprioritize some of their existing spending and requests for increased spending.

From the OFM budget instructions:

For the 2015-17 biennial budget, OFM is asking agencies to re-base state program budgets to a level below the Maintenance Level budget request for programs not protected from reduction by either state constitutional provisions or by federal law. Agencies with protected programs and activities should continuously evaluate these services for improvements that can be achieved within current funding. But OFM is asking all agencies to identify, describe and prioritize budget reductions equal to 15 percent of unprotected Near-General Fund Maintenance Level budgets. Decision packages describing these reductions are the first step in a two-step agency budget process.

OFM is also requiring prioritized budget reduction packages from central service provider agencies and from agencies whose dedicated revenue is derived from, subsidized from, affects or interacts with the General Fund. Budget reductions identified in the first step of the agency reduction process will result in a re-based Near-GF-S budget, below the levels necessary to sustain currently authorized services and programs as they are currently delivered. Agencies are then asked to submit budget requests for funding building off of this lower budget base. Decision packages requesting incremental funding above the new base budget level must be submitted in ranked priority order, including both proposals to restore identified reductions necessary to achieve the lower base budget, as well as any new funding requests for services or enhancements not currently provided.

This tool of re-basing the maintenance level budget and prioritizing spending requests should be used every time the budget is built. There should not be the assumption of auto-pilot budgeting. While a lower re-base of 5-10% might be more appropriate on a standard basis, if agencies actually follow the OFM instructions and don’t use “Washington Monument ploys,” this could provide insight into how they rank their activities and what they believe to be low versus high priorities. The Governor, lawmakers and the public will then be able to see if they agree with the agency rankings and potential tradeoffs. 

According to OFM, agency budget submittals will be posted online when received. Agencies have until September to get their 2015-17 spending requests to OFM.

Requiring agencies to re-base their existing spending and temper their new requests on a prioritized basis should be standard operating procedure when building the state's budget. Taxpayers would much rather hear "This is your captain speaking" than "the plane is currently on auto-pilot" when the budget is being built to adapt to changing economic conditions and priorities.

Now if we could just do something about the current ban on the air traffic control tower (public/media/lawmakers) from being able to hear what is going on in the cockpit (secret negotiations on state employee compensation). Here are thoughts from former Attorney General and open government advocate Rob McKenna on that last point: Open government negotiations: why not?