Perspectives on Budgeting for State and Local Needs and Biennial Budgeting

The Comptroller General presented testimony on the work of GAO in the areas of advance budgeting of Federal assistance to State and local governments and State biennial budgeting experiences. A study is underway to determine what problems are caused by the different budget cycles and whether those cycles can be better coordinated. GAO found a basic timing conflict between Federal, State, and local budgeting processes. Most Federal decisions, from the point of view of State and local governments, are made at least 9 months too late. This timing problem could be relieved by having the Federal Government budget for State and local programs in advance. However, from the Government's standpoint, this approach might reduce the opportunity to alter the budget. GAO has also been conducting a study of the feasibility and advisability of lengthening the Federal budget cycle to a 2-year period. GAO has found that a 2-year budget cycle would need a mechanism for making budget changes, especially during the off-budget year. GAO examined State budgeting trends, and found that States have been switching from biennial to annual budget cycles to enable a more rapid response to changing conditions. GAO analyzed four biennial budgeting bills introduced in the 98th Congress. If Congress switches to a biennial budget process, GAO suggested that it concentrate budget actions in the first year of each new Congress, conduct oversight in the second, and adopt a fiscal period beginning on January 1 of even-numbered years. However, the Comptroller General stated that, if a shift to biennial budgeting is accomplished, without needed improvements in the rest of the financial management structure, the results might be disappointing.