Policymakers have an obligation to taxpayers to ensure that all government programs produce the maximum results for the taxpayer funds received. But how do they accomplish that when they start off with holes in their knowledge of the agencies they are funding and of the budget process?
Lawmakers should have a thorough process in hand as they review agency budget requests so that agency and program budgets never run on autopilot. One way to do that is to develop a checklist, such as the Questions for Appropriators document that Mackinac Center for Public Policy recently published.
{mosads}By using such a guide, legislators can collect basic information about each program’s origin, purpose, performance, legal authority, funding history and federal connections. Doing this will help them as they consider possible funding or staffing levels, performance measures and legislative reforms. As a result, lawmakers will be more likely to agree on how to efficiently and effectively apply taxpayer resources to best meet the needs of their constituents.
One category of questions that lawmakers should consider deals with the origins of a program. Generally, legislators should fund programs or functions specified in the Constitution first, and then programs authorized in statute. Any program that exists without one of those authorities should either receive a statute to authorize it, or be reconsidered.
Lawmakers also should explore the implications of federal funds. On average, one-third of state governments’ general fund revenues come from the federal government. These funds almost always have strings attached: either a matching percentage or a “maintenance of effort” requirement, plus the certain laws or rules that federal officials want states to follow. These are especially important to consider, given that the economy periodically weakens; both can limit legislators’ options for addressing a state budget deficit or shortfall.
Further, because states do not have identical demographic profiles or economies, some federal programs let them seek waivers, which offer them some flexibility in designing and running programs. Some federal agencies — and administrations — are more lenient than others when it comes to waivers. Appropriators need to be acutely aware of waiver opportunities, insist that state agency officials pursue maximum flexibility when beneficial, and be willing to decline federal funds for activities that they would not undertake absent those federal dollars.
Lawmakers also should consider what they want out of a program. For each one, legislators should back all the way out and ask themselves, “What would ultimate success look like?” The goals should be ambitious but not naive.
With this understanding, appropriators then should assess not only how well the program is performing, but also whether the agency is tracking the right information. Legislators must never confuse inputs with outcomes. Results, not activities, are what count.
Legislators should look at long-term funding trends for a particular program or function. Occasionally, state revenues go bust, and it is valuable to know which programs have disproportionately benefited from the boom years so they can take their haircut first. This look at long-term spending patterns should include an adjustment based on the Consumer Price Index, the inflation that affects taxpayers; alternative metrics supposedly based on items that government agencies buy have the net effect of justifying higher government spending.
There are a few other things lawmakers should consider.
- Legislators should ensure that agencies prominently feature a check registry on their website. Having financial transactions posted publicly puts additional experienced and attentive eyes on government spending, which also creates a deterrent for government employees who might be wasteful or fraudulent with taxpayer dollars.
- Whenever multiple entities are engaged in a similar activity, appropriators should consider whether consolidation into a single program or agency might produce better performance at a lower cost. They should also consider whether private sector or charitable entities should serve as contractors or partners in programs.
- Appropriators should ensure that all agencies’ financial statements undergo an independent audit and conform to generally accepted accounting principles. When an operational performance audit reveals negative findings, legislators should press the agency for the steps that have been taken to resolve the defects.
Asking the appropriate questions can help legislators, in any state, fulfill their duty to craft fiscally responsible budgets on behalf of their constituents.
David Guenthner is senior strategist for state affairs at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Follow on Twitter @MackinacCenter.