Certain terms show up on a recurring basis in discussions about the state budget. Here’s a simple, plain English explanation.
Appropriation: Legislature approval for an agency to spend money (expenditure).
Budget: A plan for receiving and spending funds
Capital Outlay versus Operating Budget: A capital outlay budget handles large infrastructure projects like roads and buildings. Normally this called House Bill 2. An operating budget handles the normal annual functions of government. Louisiana’s operating budget is actually several legislative bills:
Fiscal Year: Instead of a calendar year that starts with January 1, the state budget runs on a fiscal year that starts July 1 and ends June 30 of the next year. For example fiscal year 2018-19, or FY19, starts July 1, 2018, and ends June 30, 2019.
Means of Finance: The source of funding for an expenditure. There are 5 basic groups of funding in Louisiana budgeting:
Existing Operating Budget (EOB): Since budgets can be adjusted throughout the year, it is often useful to take a snapshot in time. The EOB is either the most recent version of budget or the budget as of a certain date for comparative purposes.
Continuation Budget: This concept is a theoretical budget that refers to the funding level necessary to carry on all existing programs at their current level of service next fiscal year, including any adjustments necessary to account for inflation and increases in workload requirements resulting from demographic changes or higher demands for services.
Standstill Budget: A budget that holds expenditures flat from the previous year. Similar to a continuation budget in that is a concept. A related idea is a “nondiscretionary standstill budget”, which would allow mandated expenses to increase, while other expenditures are kept flat.
Fiscal Note: An official estimate of a proposed bill’s associated expenditure or revenue change. Fiscal notes are prepared by the Legislative Fiscal Office (see below). For example, a proposal to double the Earned Income Tax Credit would have decreased State General Fund revenue by $47 million over 5 years.
Revenue Estimating Conference (REC): The REC is a four-member panel that reviews economists’ estimates of the state’s future revenues and then sets the official revenue forecast for the state. The official revenue forecast determines the upper limit of the state budget. It is comprised of the governor, usually represented by the commissioner of administration, and the President of the Senate and the Speaker of the House, or their designees. The fourth person is a faculty member of a college in Louisiana with expertise in forecasting revenues. The REC’s decisions must be unanimous to be adopted. Otherwise, the state budget operates under the most recently approved forecast estimate.
Several agencies provide fiscal information to the public. Below are some of the most frequently used.
The Division of Administration (DOA) is the governor’s agency responsible for most of the administrative functions (accounting, payroll, information technology, etc.) for the executive branch. Within the division, the Office of Planning and Budget (OPB) prepares the governor’s executive budget. OPB publishes online the executive budget and the supporting documents that contain additional detail. Keep in mind that the executive budget is the proposed spending plan, not the final outcome. The DOA also maintains LaTrac, the state’s online transparency portal. Among a wealth of fiscal information, LaTrac lists the state’s consulting contracts.
The House Fiscal Division and Senate Fiscal Services have a number of archived reports and presentations. The Legislative Fiscal Office (LFO) is analogous to the Congressional Budget Office in the nation’s capital, but at the state level. The LFO prepares fiscal notes for bills well as a number of other reports. The LFO produces Focus on the Fisc, a frequent publication that features particular fiscal issues or problems. The LFO has information on state revenue, including the most recent REC forecast.
The Louisiana Legislative Auditor is responsible for conducting or reviewing audits of state and local government agencies. Most of its work concerns accounting integrity, but the Auditor also evaluates performance, practices and compliance with state laws.