A Guide to the Office of Financial Management Washington State STATE OF WASHINGTON Budget Process July 2019 Biennial budget cycle This guide contains information on: Washington enacts budgets on a two- Biennial budget cycle year cycle, beginning July 1 of each odd- Roles and responsibilities in the budget process numbered year. The budget approved for –21 biennium remains in effect Budget development approach the 2019 from July 1, 2019, through June 30, 2021. Budget and accounting structure By law, the Governor must propose a Source of state revenue biennial budget in December, the month Size and distribution of the state budget before the Legislature convenes in regular General Fund-State operating budget session. The biennial budget enacted by State staffing levels the Legislature can be modified in any legislative session through changes to the Budget drivers original appropriations. Since the inception State spending limit of annual legislative sessions in 1979, it has Debt limit become common for the Legislature to Budget Stabilization Account enact annual revisions to the state’s biennial Glossary of budget-related terms budget. These revisions are referred to as supplemental budgets. Ongoing June 2020 September 2020 Fall 2020 December 2020 Agency OFM issues Agencies OFM review Governor strategic budget submit and proposes planning instructions budget Governor’s budget to requests decisions Legislature January 2021 April/May 2021 May/June 2021 July 1, 2021 Ongoing Legislature Legislature Governor Biennial Performance convenes passes signs budget takes measure 2nd Monday budget budget effect tracking of January 1 Roles and responsibilities in the budget process State agencies are responsible for developing in the Senate and 98 members in the House budget estimates and submitting budget of Representatives. Specific fiscal committees proposals to the Governor. Once the budget is have primary responsibility for preparation enacted by the Legislature and approved by the of the legislative budget. These include Governor, agencies implement approved policies the Appropriations, Capital Budget and and programs within the budgetary limits Transportation committees in the House; imposed by legislation. Under Washington’s and the Ways & Means and Transportation budget and accounting statutes, individual committees in the Senate. agency directors are accountable for carrying out the legal intent of appropriations. The House and Senate employ staff analysts to review and evaluate the state budget and The Governor recommends a budget to the to prepare appropriation bills. As with other Legislature consistent with executive policy legislation, if the two houses cannot agree on a priorities. Appropriation bills, like other budget or revenue proposal to implement the legislation, are subject to gubernatorial veto budget, a conference committee of legislators authority and may be rejected in part or in their may be convened to reconcile the differences. entirety within a defined number of days after legislative passage. After a budget is enacted, the Beginning with the 2013–15 biennium, the Governor’s general administrative duties include Legislature must enact a budget that leaves a monitoring agency expenditures and helping to positive ending fund balance in the General implement legislative policy directives. Fund-State (GF-S) and related funds. The Economic and Revenue Forecast Council Office of Financial Management The (OFM) (ERFC) is composed of representatives from coordinates the submittal of agency budget both the legislative and executive branches. Each requests and prepares the Governor’s budget fiscal quarter, the council adopts an official recommendation to the Legislature. Budget staff forecast of GF-S revenues for the current and from OFM work closely with state agencies (at some point) the ensuing biennia. These to explain and justify planned expenditures. forecasts, together with any reserves left over Analysts evaluate all budget requests for from previous biennia, determine the financial consistency with executive policy priorities and resources available to support estimated to ensure that proposed expenditures match expenditures. fiscal constraints. OFM is also responsible for maintaining the state’s central accounting Beginning in 2012, the ERFC also became system and developing certain population and responsible for overseeing preparation of demographic forecasts. GF-S expenditure outlooks for future biennia. With the technical assistance of a State Budget Washington Through appropriations bills, the Outlook Work Group composed of legislative State Legislature mandates the amount of and executive staff, expenditure outlooks money each state agency can spend and, in are published in November, January (for the varying degrees of detail, directs agencies Governor’s budget proposal) and within 30 days where and how to spend it. Washington’s of enactment of the operating budget. bicameral Legislature consists of 49 members 2 The Caseload Forecast Council was created The State Expenditure Limit Committee, by the 1997 Legislature and began operations composed of legislators and representatives in the 1997–99 biennium. The council consists of the Governor and Attorney General, was of two members appointed by the Governor established in 2000 to determine the state and four appointed by the legislative political General Fund expenditure limit created by caucuses. The council prepares official caseload Initiative 601. forecasts for state entitlement programs, including public schools, long-term care, medical assistance, foster care, adoption support, adult and juvenile offender institutions and others. Budget development approach In general, Washington state’s budget process In working with the Governor to develop his cannot be characterized by any single budget 2019-21 biennial budget, OFM used Results decision model. Elements of program, Washington goals, outcome measures and action target and traditional line item budgeting plans — along with agency strategic plans and associated with objects of expenditure (e.g., performance measures — to prioritize spending salaries, equipment) are all used, along with a within and across agency budgets. Improving performance budgeting approach in decision- efficiency and streamlining the operations of making. state government is an expectation Governor Inslee has of all agencies. In 2017, meeting the state’s constitutional duty to fully fund K-12 education was an enormous challenge and the top budget priority. Agencies were directed to limit their requests for new funding and to focus on the highest priority services that deliver significant performance improvements and outcomes for the people of Washington. While agencies are always expected to strive to reduce costs and find new ways to save resources, these efforts will be especially important over at least the next two biennia. 3 Budget and accounting structure State government is organized among 119 The state’s budget and accounting system agencies, boards and commissions representing includes more than 730 discrete accounts, a wide range of services. While many state which operate much like individual bank agencies report directly to the Governor, others accounts with specific sources of revenue. are managed by statewide elected officials or The largest single account is the GF-S. State independent boards appointed by the Governor. collections of retail sales, business, property, Most agencies receive their expenditure and other taxes are deposited in this account. authority from legislative appropriations that Expenditures from the GF-S can be made impose a legal limit on operating and capital for any authorized state activity, subject to expenditures. Appropriations are authorized for legislative appropriation limits. a single account, although individual agencies frequently receive appropriations from more Other accounts are less flexible. Certain than one account. revenues (for example, the motor vehicle fuel tax or hunting license fees) are deposited A few agencies are “nonappropriated,” meaning in accounts that can be spent only for the that they operate from an account that is legally purpose established in state law. In budget exempt from appropriation. Expenditures by terms, these are referred to as “dedicated these agencies are usually monitored through a accounts.” biennial allotment plan. There is no dollar limit as long as expenditures remain within available revenues and are consistent with the statutory purpose of the agency. Sources of state revenue Washington receives most of its revenue from taxes, licenses, permits and fees, and federal grants. Each individual revenue source is designated by law for deposit in specific accounts to support state operating or capital expenditures. Licenses, permits, fees 3.4% Sources of State Revenues – All Governmental Funds 2019–21 Biennium Estimates Category $$ in millions Federal grants Taxes $55,047 24.4% Charges/misc. revenues 27,426 Taxes 48.2% Federal grants 27,834 Charges & Licenses, permits, fees 3,818 miscellaneous revenues 24.0% Total $114,125 Source: 2019–21 OFM budget database Office of Financial Management 4 The chart below displays the major revenue sources for GF-S expenditures in the current biennium. The Department of Revenue collects most of these revenues. Sources of General Fund–State Revenue 2019–21 Biennium Estimates Real estate Category $$ in millions exise tax 3.9% Other* Retail sales & use tax $25,120 11% Business & occupation tax 9,560 Property