[The Relationship Between Federal and State Budget Cycles]

In a speech before an association of State budget officers, GAO noted that it has long recognized that State Governments could better use Federal money if they had definitive information on what the Federal program requirements and funding levels would be when they formulated their own budgets. Prior GAO studies have recommended that the Federal Government authorize and appropriate assistance a year in advance of each fiscal year to allow for more effective grant programs. Because these recommendations have not been widely adopted, the timing of most Federal budget decisions prohibits State budget officers from having Federal program information during the 6-month period before the start of a State's fiscal year. As a result of this timing problem, States are forced to plan and allocate uncertain levels of Federal resources. Additionally, States have encountered difficulty in planning, coordinating, and executing programs. To minimize these adverse effects, most States estimate the Federal funding level and include it in their budgets. GAO has identified six alternatives that would either make definitive information available for State decisionmaking processes or help offset the lack of this information. Of these, GAO believes that guaranteed program levels, later State spending, and advance congressional budgeting all provide the potential for more effective programs. While guaranteed program levels help States to contend with Federal funding uncertainty, Federal flexibility and budgetary control are almost totally sacrificed. Later State spending and advance budgeting can have the same advantages from the State perspective. GAO believes that the most logical way to allow for definitive Federal information is through wider use of advance budgeting. Even though this option would result in a limited loss of short-term Federal budgetary control and could result in a one-time increase in budgetary authority, GAO believes that intergovernmental assistance should be converted to some form of advance budgeting.