The budgeting process of any given state is an arduous task since it involves a number of active processes. A budget of a country is reviewed annually in order to determine the expenditures within that fiscal financial year.
The California budget process is a dynamic process which requires regular reviews in forms and procedures, law, descriptions and instructions among other factors. The process involves the combination of the country’s assembly phases which includes the executive, legislature and the governor’s. These assembly phases (executive, legislature, and governor) work integrally and are directly coordinated with the public input, the economy, federal and local governments, initiatives and legislation, legal issues and the natural events.
By embracing literature review, this case study will look at the California budget, how it works, how and where they get their money, the problems the system face. Besides, the paper will address the available alternatives ways of solving these problems. Consequently, the paper will point out the recommendations available to these problems.
Background of the study
This case study identifies the California’s budget process and how its budget process works to effectively manage the expenditures of California’s annual fiscal year. The analysis will focus on the stages involved from the initial design process to the final implementation process of the budget process of the California state.
The study will also focus on the financiers of the budgeting process and the different criteria employed by the government of the California state to facilitate the smooth funding operations of the budget process to ensure efficiency. The study will also analyze the various challenges or problems faced by the California state with the budget process.
The study will identify these problems and elaborate on them and look at the causes of these problems. The study will determine the possible solutions to the present problems and draw up recommendations to be taken.
California budget process
According to Department of Finance (2011), The California budget process is formulated by the assembly that draws out a simultaneous budget resolution annually. The house lays out a long-term plan (usually five years) of the California state deficit targets, revenues and the overall total expenditures. The president’s signature and the influence of law are omitted by the congress during the process of the budget resolution, hence, neither the president nor the force of law possess the right to reject the proposed budget resolution by the congress.
The initial process in the budget resolution involves the formulation of a strategy to allocate the gross total expenditures among the key departments of the government such as health, transportation, defense among others. The way the money should be spent is determined by the senate and the house committees to the appropriate individual congressional committees and their subcommittees (Department of Finance, 2011).
The independent congressional committee then carefully analyses the budget for consistency with the aggregate targets, properly analyzing program by program and check on the consistency of the details of the budget (Anagnoson, 48). The overall and the concluding debate on the budget resolution focus on the budgets of the individual programs and their implications.
The congress committee seeks technical advices on matters pertaining to the budget in a non- partisan way through the Congressional Budget Office (CBO). The house and senate committees ensure that all the bills which pass through, its structure are attached with a CBO cost estimate. The purpose of the attached CBO cost appraisal document is to establish consistency between the proposed spending and the budget resolution’s targets.
According to Edmund G. Brown (2011), the governor appoints the director of finance who also serves as the chief financial policy advisor. The director of finance apart from being the senior staff, he is also a member of the Governor’s cabinet.
The financial process is very dynamic since new laws are enacted regularly, available resources increases or decreases continuously, priorities change regularly. Administration changes constantly and new regulations are adopted regularly. The government Code Section 13070 grants the general authority to the department of finance. This section also grants the Department of Finance the mandate to oversee all business and financial policies of the state.
The director of finance is responsible for various state activities which include saving of the state funds through pooling money under the investment board, overseeing the capital expenditure projects for the public works board, investment of the state teacher’s retirement funds, hearing and deciding on the state mandate commission and distributes school construction funds through the state allocation board.
The legislature liaises with the Department of Finance through a number of reporting requirements such as testifying and analyzing on the legislation which appears before the legislature, defending the governor’s budget and presenting the governor’s budget (Anagnoson, 97).
Other state departments are constantly interacting and communicating with the Department of Finance through various activities such as establishing of the accounting systems, communicating the governor’s fiscal policy, reviewing of the fiscal proposals, administering and enacting of the budget process, analyzing legislation and auditing department expenditures.
According to Ana (2011), the California budget process is a dynamic process which involves the combination of three phases which are, the executive budgets, the legislature’s budget and the governors’ budget, with the influences of the public, the economy, legal issues, political interactions, initiatives and legislation, and the correlation between the local and the federal governments. The complexity and the size of the California state results to in variances in maintaining and establishing an orderly process.
The budget development stage initializes with the submission of the budget to the legislation by the governor. The budget is generally supposed to be submitted by January 10 of every year (Anagnoson, 125). In cases of the proposed expenditures exceeding the estimated revenues, the governor is expected to endorse the possible sources for the additional funding.
The governor’s chief financial advisor who is also the director of finance oversees the preparation of the governor’s budget, by issuing directives to be enacted in the preparation approach to his subordinates primarily the departments and agencies. The current basic strategy utilized by the California state is incremental budgeting, but previously the state adopted approaches such as the total quality management, management by objectives and the zero- based budgeting (Edmund G. Brown, 2011).
The increment plan of the budget method employs the use of Budget Change Plan (BCP), a deed which proposes variations from the existing budget. The finance unit then evaluates and assesses the BCPs. Contrary, the finance department heads, handles the proposals of the non-agency departments. In cases of unresolved issues which the finance staff and departments are unable to resolve, they are handed over to the director of finance for further and detail discussions.
The governor is the only person with the mandate to handle the very sensitive issues. The finance unit harmonizes the publication of various reports consisting, the package of the governor’s budget and upon accomplishment of all departmental major decisions.
Besides, the governor’s budget, salaries and wages supplement, governor’s forecast summary and the governor’s budget highlights also included in the publication. The final ratification of unveiling the budget lies on the governor who does so at an official press meeting. Among the governor’s, key speeches are the general arrangement for management’s budget priorities and policies.
The constitution requires that the budget bill must accompany the governor’s budget listing recommendations for the new expenditures to be debated upon (Ana, 2011). The committees involved in the budget bill is varied, but mainly composed of; the congress budget team, the financial evaluation team and the senate budget team.
These committees role includes allocation of the budget bills to various subcommittees which responsible for the budget hearings, which normally takes place in late February after the issuance of the ‘analysis of the budget bill’. The common statutory budget team employs the legislative specialists together with other departmental personnel’s so as to provide a clear and precise to approvals at sub-committee stage, however, their recommendation can necessitate adjustment in the governor’s budget scheme, if a need arises.
The public and lobby groups are also open to express their views at the hearings. In cases of any occurring adjustments, the department of finance proposes through the documents commonly known as the ‘finance letters’. By April 1, the legislature should be in possession of all proposed documents, such as the May Revision and the Capital Outlay.
By May 14, the traditional May Revision adjustments are appropriate whereas, the Capital Outlay adjustments are due by May 1. The final budget decisions on major programs such as Human Services, Health, Corrections and Education can only be made after the May Revision has been updated (Ana, 2011).
A subcommittee relays its findings to the entire committee members, upon completion of its activities. After adopting the budget by the relevant committee, recommendations are outlined which forms a basis for the voting procedure. The ability of the bill to be passed depends on the majority vote system which is the two-thirds vote. Consequently, the passing of the budget bill allows the Assembly and Senate version of the bill to be analyzed and adjusted during the budget conference committee in readiness for approval in the house.
In case, a consensus in not reached within the conference committee, the unresolved issues are dealt with by the Big 5 who includes the President, the Governor, Pro Tempore, minority leaders of both houses and the Speaker of the National Assembly (Ana, 2011). Receivership of a two-thirds vote of each house validates the passage of the budget bill to the governor, who may reduce an item of appropriation.
Once the budget bill has been enacted, the department of finance publishes these three documents: final change book, final budget summary and the California state budget highlights.
In cases of changes in the budget which may be proposed by the legislature or the governor, separate bills (trailer bills) are launched to promote the changes and are heard simultaneously with the budget bill. February 1 is the date when all proposed constitutional changes which facilitates the implementation of the budget bill due (Edmund G. Brown, 2011).
The primary source for any misuse is the budget act and the expense authority is also provided by the special legislation and the constant constitutional appropriations. Departments and state agencies must work within the stipulated budget plans and must also comply with the preset standards of the legislature.
The legislature has established some flexibility measures in the budget expenditure to cope with unexpected emergencies such as natural disasters. Also, there are provisions in the legislature for budget adjustments in the budget act, which requires the consent of the Director of Finance.
Provisions which necessitate adjustment involve; variations in compensation, deficiencies, modifications to federal funding stages, and intra-item handovers. Executive orders, budget revisions and letters, are the medium through which budget changes is approved by the Department of Finance (Ana, 2011). The changes are then sent to the state controller’s office to include in its records for accounting. The governor can adjust the spending plan in-cases of emergencies but not to alter appropriations.
California state financier
The government is responsible for promoting the resources needed to facilitate the orderly process of the budget process. The government funds the budget process through the use of the state’s annual financial reservoirs. The government allocates the funds from the pooled money investment board with a key mandate of investing in the state funds.
The state allocation board is responsible for the allocation of funds for schools developments and constructions (Edmund G. Brown, 2011). The state teacher’s retirement system is mandated to infuse the system’s fund and the provision of the surveillance capital outlay projects are facilitated by the public works board.
California’s problems with the budget
According to Yeh (2010), the increase in the critical domestic economic crisis has led to major unprecedented budget, shortfall in the state of California. Each and every department and area of the California state has been crashed by this financial crisis. The increase in the deepening effect of the global recession has greatly attributed to the deteriorating state of the California economy, increasing the deficit set to high figures above $ 26 billion (Yeh, 2010).
Recommendations for solutions to California’s budget problems
The legislature was submitted by the department a set of savings scheme which targeted, to deliver $334 million in General Fund savings in the financial year 2009-2010. Among the key areas that the savings plan would affect includes the following ten areas among numerous others (Yeh, 2010):
Federal funding, the federal funding system, will have to be expanded to increase the money received by the California state. The anticipated funding estimate is $78.8 million, and the department will be in partnership with the Medicaid services, federal centers for Medicare, and Medicaid services and the department of health care services (Department of Finance, 2011).
Adding of regional center operations, the overall operations of the regional center can be reduced by reducing one time regional centers, elimination of triennial quality assurance review and the elimination of the eligibility criteria for early start children.
Merging of the quality assurance studies, an improved unified quality assurance system will be enacted. The quality assurance consolidation estimates to $2.0 million.
Elimination of early start programs, an alternate program, will be established to swap for services and eligibility for early start programs.
Introduction of new services for seniors, new services which cater for, the needs of the aging consumers should be designed. Consumers who fall over the 50 age group mark to select preferred option (Department of Finance, 2011).
Reforms in the transportation sector, the regional centers to come up with alternatives to cheaper transportation solutions that are affordable to the consumers.
Ana, J Matosantos. Department of Finance. 2008. Web. 2nd June 2011
Anagnoson, J Theodore, Bonetto, Gerald, Buck, Vincent J, Deleon, Richard, E & Emrey, Jolly. Governing California in the Twenty First Century: The Political Dynamics of the Golden State, New York: W.W. & Company, 2009
Brown, G Edmund, Governor’s Budget Summary, 2011. Web. 2nd 2011
Department of Finance, California Budget Process, 2011, Web. 2nd 2011
Yeh, Becky. California Dealing with Budget Problems, 2010. Web. 2nd 2011