# Presentation: 541010

## FEDERAL BUDGET PROCESSYes, It’s a Mess, But . . .

- Carl L. Moravitz
*August 28, 2001*

## Yesterday’s Rules Create Today’s Management

***What are the changes in  Federal budget process affecting funding and oversight.***
***What have been the changing profiles of Federal expenditures and policy implications.***
***How do you fit into Appropriations Process in Congress -- Do you have to manage different?***

## Evolution of Federal Budget Management

***1921-1974:******	******Establishing the “Tool Kit”***
***1974-1985:******	******Process Management***
***1985-1990:******	******Deficit Management***
***1991-Present:******	******Spending Management***

## Background -- Budget Process

- Before 1870, no organized budget process
- Agencies could write contracts and obligate gov’t to payments not approved by Congress
- Legally, contracts were binding, but, constitutionally, no payments could be made w/ appropriations from Congress.
- Anti-Deficiency Act in 1870
- No obligations in excess of Appropriations
- Practical Effect:  Required Agencies to submit budgets to Congress for annual approval

## Background -- Budget Process

- 1870 - 1921:
- Agencies submitted annual budgets . . .
- Basic and with little information included
- Failed to reflect full cost of long-term plans
- Led to conflicts between President/Congress

## Background -- Budget Process

- Roosevelt -- Great White Fleet
- When Teddy was President, Congress refused to appropriate funds to send Navy on around-the-world cruise to impress foreign nations
- [Great White Fleet]
- So, Roosevelt then used limited funds available to send fleet halfway around the globe.
- Then, he sent Congress a request for enough funds to bring them home.

## Background -- Budget Process

- 1921 -- Passage of Budget & Accounting Act
- Congress added teeth to the accountability of Gov’t operations
- Established President’s Budget Office (BOB/OMB)
- Established the General Accounting Office
- Established formal President’s Budget submission agreed following review of Agency requests
- Put in place operational guidelines for expenditure and reporting of government operations

## Understanding the Resource Environment

## Federal Fund Receipts 

## Interest Payments (as % of  Federal Receipts)

## Where the Gov’t Gets its Money  (2000)

***Taxes on citizens’ cash flow***
***	******(income & other taxes)******	******	******49%***
***Taxes on citizens’ payrolls***
***	******(social sec. & medicare taxes)******	******34%***
***Taxes on business oprs. (profits,***
***	******(excise, customs,other taxes)******	******17%***
***Borrowing (new debt)******	******          0%******	***
***Surplus (4.4%)***

## What are Entitlements?

***Items like...***
*Social Security*
*Medicare/Medicaid*
*Welfare Payments (no cost to administer)*
*Unemployment Compensation*
*Retirement for Federal Employees*

## Where does $2.0 Trillion in Taxes/Receipts Go for 2002?

*Social Security**	**	**	**	**$  452*
*Medicare/Medicaid Entitle-*
*    **ments/Welfare/Veteran’s*
*	** **Benefits**	**	**	**	**	**    628*
*Defense**	**	**	**	**	**    296*
*Interest on Public Debt**	**	**    188*
*Other Gov’t Agencies**	**	**	**   *_* 397*_
*	**	**	**	**	**	**       **$ 1,961*

## Federal Budget Shares 

**(% of Total Government Spending)**

**52%**

**26%**

**8%**

**14%**

**16%**

**54%**

**15%**

**15%**

## Spending for Discretionary andEntitlement Programs

- <footer>

***Spending for Discretionary and******Entitlement Programs***

***($ in billions)***
***	******	******	******	******    ***_***1991***_***	******          ***_***2000***_***	******     ***_***2004***_
***ENTITLEMENTS/INTEREST******	******    ****$791**	**         $1,193**	**  $1,337*
*	**% of Total Spending**	**     59.7%           67.3% **	**      68.5%*
***DISCRETIONARY*******	******      ****533**	**            579**	**       615*
***	****% of Total Spending****	******     40.3%           32.7% ******	******      31.5%***
*TOTAL SPENDING**	**	** $1,324**	**        $1,772**	**   $1,952*

## THE FEDERAL 

**BUDGET IS...**

-  Representation of government activities in
-   monetary terms.
-  Coordinated effort between President, Congress,
-   Departments, and Agencies.
-  Comprehensive statement of policy.
-  Blueprint of projected plan over period of time.

## THE FEDERAL 

**BUDGET IS...**

-  Pattern for control over future operations.
-  Estimate of future costs.
-  Plan for allocating resources between
-   competing demands.

## MAJOR PHASES OF THE 

**FEDERAL BUDGET PROCESS**

## PHASES OF THE

**PHASES OF THE**
**BUDGET PROCESS**

- 10/99      1/00       4/00      7/00      10/00      1/01      4/01      7/01      10/01      2/02

- 2000 BUDGET

- 2001 BUDGET

- 2002 BUDGET

- 2003 BUDGET

## BUDGET PROCESS in Congress . . .

## BUDGET PROCESS IN Congress . . .?

**BUDGET  RESOLUTION**

**House/Senate**
**Presidential Signature**

**House/Senate**
**Presidential Signature**

## Current Federal Budget Decision Framework (1990/1993/1997)

**Total Budget = $1.8 Trillion**

**o  Statutorily defined in law,**
**     ****adjusted for:**
**     ****--Disaster Spending**
**     ****--Inflation Impacts**
**     ****-- Special 1990 Rules ***(Expired)*
**o  Non-entitlement spending**
**    ****for all Federal agencies**
**o  $560 billion in 2000 Outlay**
**        ****Authority**

**o  Legislation/Executive **
**    ****actions must be revenue**
**    ****neutral (pay-as-you-go)**
**o  Economic impacts **
**    ****across economy **
**    ****automatic**

**o  Legislation/Executive**
**    ****actions must be revenue**
**    ****neutral**
**o  Demographic adjust-**
**    ****ments (age, economic**
**    ****status, etc) automatic**

## Federal Budget Decision Framework

***Federal Budget Decision Framework***

## Federal Budget Decision Framework

***Federal Budget Decision Framework***

## Bottom Line:  Current Process in Congress . . .

*Not a deficit reduction process, *_*but*_* it managed the deficit*
*Discretionary spending managed by monitoring of “Cap” Limitations*
*Taxes & Entitlements managed thru “Pay As You Go” Rules*

## Roles and Expectations

## Budget Roles . . .

- Lots of opportunities & challenges
- One of managing budget alongside elaborate decision maze
- No process ever the same . . . No contact or decision yield same result when repeated
- Job of Managing Resources is never-ending

## Budget Roles . . .

- Any connection to the Budget Process requires us to:
*Facilitate*
*Negotiate (Sometimes Compromise)*
- Also requires us to:
*Get to know programs*
*Engage and Know Agency’s Policies & Priorities*
*Analyze Data for trends & concerns*
*Ensure consistency w/approved Policy/Priorities*

## Budget Roles . . .

- Performance/Results now major piece of budgeting . . . Brings together:
*Manager*
*Worker*
*Stakeholder*
- Has begun to fundamentally change focus on Federal Management & Accountability

## Budget Roles . . .

- Decision-makers rely on us to inform them of stakeholder concerns
- We try to empower ourselves as much as possible . . . *Makes those above more effective*

## Budget Roles . . .

- Staying Current on all issues is most important . . . *Today’s complexities make that a challenge*
- _Roles Extend to_:
- Articulating Policy and Establishing Communication Links
- Knowing _when_ to Engage officials so they can be effective in timely manner w/ expertise & influence

## Budget Roles . . .

- Roles (cont’d)
- Managing Communication for who are not familiar w/ broader perspectives of budget game
- You become the lightening road on the effort to maintain a unified voice
- Knowing when to engage and when to back off is important part of job

## Budget Professional . . .

- Our jobs involve:
*Weighing decisions*
*Seizing opportunities when they come*
- Our expertise can make the difference between:
*Saying no, or*
*Finding creative ways to show others that the normally *_*complex*_* process can work for them*

## Budget Roles . . .

- All funding is resolved as part of a legislative agenda
- Success is dependent on your partnership with those who develop and work that agenda

## Linking Budget to Performance:  The Performance Logic Model

## Opening Remarks:  A Perspective

- Performance management is the future
- Budget is the engine of performance management
- Executives are increasingly engaged
- Executives not experienced in subtleties of budget/performance management
- Staff support/advise inadequate
- Oversight doesn’t know how to use performance management in decision-making

## Performance Management

- Dominant management tool of the organization – the prism through which all major issues are viewed
- _Integrated processes_
- Strategic Planning
- Strategic budgeting
- Program Planning
- Internal Resource Allocation
- Performance Monitoring
- Program Evaluation
- Reflects the critical thinking of all agency components

## Performance ManagementMaturity Model

**Going through motions**

**Constructive engagement**

**Critical mass**

**Sustainment**

**Maturity**

**Level 5**
**Level 4**
**Level 3**
**Level 2**
**Level 1**

## Operations Drive Everything

## Resource Strategy

**Provides strategic rationale for resource utilization**
**Prioritized movement over time**
**Identifies organizational resource vulnerability**
**Presents alternate courses of action**
**Forms the parameter for the Strategic Planning Process**

## Resource Strategy: Requirements

**Resource Strategy: Requirements**

**Historical assessment**
**Identification of **_***essential***_***  *****funding requirements**
**Identification of logical spending categories**
**Identification of “acceptable limits”**

## Requirements, continued

**Requirements, continued**

**Development of full range of options; personnel, systems, space, contracts, equipment – all should be assessed against priority spending categories**
**Clear linkage of resources to outcomes, not activities **
**Decision and sustained commitment from management**
**Priority on Strategic Planning Agenda**

## Elements of Resource Strategy

**Elements of Resource Strategy**

**1) Identify strategic imperatives **
**2) Prioritize, fence spending  based on results-oriented criteria**
**3) Determine optimal levels of funding**
**4) Identify alternative strategies; eliminate the use of the term -- “mandatory” **
**5) Determine “movement over time”**

## Resource Strategy:  Benefits

**Resource Strategy:  Benefits**

**Provides long-view for agency financial managers**
**Provides agency managers with difficult, but real choices **
**“****Grounds” strategic planning exercises**

## Benefits, continued

**Benefits, continued**

**Facilitates organizational reengineering**
**Provides better understanding to stakeholders, customers, and employees**

## Bottom Line:  “Pay As You Go” Manages Taxes & Entitlements

*Prevented Legislated*
*Increases in Entitlement Spending*
_***AND***_
*Prevented Losses in Revenues Gains*

## Planning/Performance Measurement Relationship

## I.  Performance Logic Model

- Relates all performance measures to program priorities
- Specifically relates key planning elements to performance measurement levels
- Provides for clear and consistent thinking
- Provides vehicle for program management and oversight

***Major benefit of strategic thinking is***
***taking time to THINK about your mission!***

## Logic Models for Operational Programs

- Situational Assessment
- Strategic Direction/Vision
- Strategic Goals/Anticipated Outcomes
- Strategy
- Critical Success Factors
- operational programs .... support programs
- Priority Activities
- Resource Issues
***Strategic Performance Measures***

## Logic Model for Support Programs

- Operational Priorities/Assumptions
- Strategic Objectives
- Strategy
- Critical Success Factors
- Priority Activities
- Resource Issues
***Strategic Performance Measures***

## Impact: Contributing Factors

## What Is Being Measured?

- Activities
- number of files reviewed
- Outputs
- number of reports issued
- Outcomes
- number of jobs created
- Impact
- number of lives saved

## What Isn’t Being Measured

- The extent to which...
- 	...program outputs are causing program outcomes that are associated with program impact
**The Logic Model addresses causality or association**

## Level of Certainty

- Imprecise measures of the right thing are of more value to the organization than precise measurement of irrelevant activities.

- Measure                                 Level of Certainty

- Activity
- Output
- Outcome
- Impact

- Reliable
- Reliable
- Arguably Valid
- Plausible

## Managing Logic Model

- Develop performance theory
- Identify key linkages among activities, outputs, and outcomes
- Project the impact of each level on performance
- Set achievable targets
- Periodic assessment, corrective action

## Strategic Activities

- Performance Target

- What must happen to achieve the target

- Activity 1/level of performance

- Activity 3/level of performance

- Activity 2/level of performance

- Activity 4/level of performance

## Impact 

_**Impact **_
- Dismantlement of Cartels
- Reduced drug availability

_**Outcomes**_
- Dismantlement of priority targets
- Reduction of criminal enterprise
- Disruption of trafficking

_**Output**_
-  Targeted financial assets seized
-  Targeted leaders arrested
-  Disruption of targeted organizations

_**Activities**_
- Intelligence; national targets; redirected investigations

##   Uses

- Operational/Field Offices
- Program Manager
- Budget Office
- Department Oversight
- OMB
- Congress

## Carl L. Moravitz

- M.S. in Economics from Virginia Tech
- Departmental Budget Director, Treasury
- Over 25 Years of Budget Experience – *Budget & Policy Leader at Both Agency & Departmental Levels*
- Visiting Professor, Virginia Tech & Central Michigan  –  *Budget Planning, Operations, & Federal Policy Landscape*
- Specialized Experience in:  *Congressional Budgeting, Appropriations Law, “Scorekeeping,” Financial Mgmt*
- Knowledge of Funding Challenges in Broader Context of Gov’t-wide Budget Stewardship