We’ve dodged another shutdown. The two-month reprieve via a continuing resolution is now seen as a major victory. But as the glow fades, is there a better way? Several recent studies offer an optimistic path.
A recent report by the Partnership for Public Service paints a grim picture of what it sees as dysfunctions in the relationship between the executive and legislative branches, observing: “Polarization, acrimony and intense partisanship regarding matters both routine and critical to the country’s well-being have become the way of life in Congress and throughout Washington.”
For the past four decades, there has been a formalized set of budget and appropriation processes, often called “regular order.” These broke down toward the end of the George W. Bush administration, leaving incoming President Obama responsible for completing that year’s budget, in addition to having to develop his own budget for the coming year. Since then, there has not been a return to regular order. With 47 percent of House members, and 42 percent of senators, serving six or fewer years, the Partnership expresses concern that there is no strong institutional commitment to the pre-existing budget and appropriations processes.
The Partnership observes: “FY 1997 was the last year that all 12 regular appropriations bills to fund the government were completed by the Oct. 1 deadline . . . In addition, Congress has failed to agree on a budget nine times since the Congressional Budget Act was passed some four decades ago, including the previous five fiscal years preceding the most recent fiscal 2016 budget.”
The Government Accountability Office and others have documented the cost and disruption created by the uncertainty created by this process. In fact, University of Maryland professor Phil Joyce offers coping mechanisms for executive agencies on ways to manage under a continuing resolution, noting that it is no longer an exception to the rule, but rather the new standard for operating.
Near-Term Reforms: Traditional Proposals. Many budget reform proposals tend to focus on the congressional role – which is important. The Partnership’s report highlights many of these, including the creation of biennial budgets, increasing the use of joint oversight hearings between appropriations and authorizing committees, and having appropriation committee members belong to the authorizing committees for agencies under their jurisdiction.
Even if Congress was to return to “regular order,” the dynamics of how government works have changed in the past couple of decades, and there are some fundamental problems with the current budget process that are unaccounted for by traditional budget reform proposals.
A recent working paper by the National Budgeting Roundtable hosted by George Mason University looks beyond the current dysfunctions and focuses on a longer-term vision for budget process fixes. The paper highlights some problems that go beyond the more recent congressional dynamics, to the underlying substance of decision-making in the budget process:
- The budget is organized around and led by departments and other agencies.
- Responsibility for the achievement of major policy objectives typically is shared by multiple agencies.
- Most of the Office of Management and Budget’s attention is given to spending programs, not other policy mechanisms, such as regulatory actions or tax expenditures.
- Primary attention is given to setting spending and policy for the budget year, with less attention to the medium- or long-term implications.
The working paper concludes: “The way decisions are presented in today’s federal budget process is not well-suited to addressing wickedly complex problems that cut across jurisdictional boundaries . . . It focuses great attention on details of some expenditures, especially those for administrative costs and grants-in-aid, while giving far less regular or consistent attention to some of the largest elements of the budget, including tax expenditures and entitlements.”
The bottom line is: “Choice structures must be simplified,” and “today’s budget process directs too much time and energy to marginal and ameliorative policy adjustments rather than to bigger choices that could achieve breakthrough gains.” In other advanced countries, the paper notes: “the goal for reforms of budgeting policy levers has been to move away from the underlying incrementalism.”
Interestingly, the paper observes that the biggest changes will need to be made in the executive branch, not Congress, in order to improve the budget decision-making process.
Longer-Term Reforms: Portfolio Budgeting. The authors of the working paper, Steve Redburn and Paul Posner, write: “An alternative, goal-focused ‘portfolio budgeting’ approach would group together and thus look broadly across sets of closely related programs, tax provisions, and regulatory policies affecting common policy goals . . . this approach would use policymakers’ time more efficiently by helping them focus on the biggest opportunities to adjust policies and resources to accelerate the achievement of major national goals and identifying breakthrough gains in productive use of resources.”
Changing the unit of analysis and the focus of the decision process from programs to strategic outcomes would require reorganizing the policy subsystems that provide information support for decision-makers. This shift in the budget development process would focus around selected portfolios of programs. Interestingly, the recent move by OMB to require agencies to conduct annual strategic reviews is a move in that direction.
A portfolio-oriented budget process would start with organizing budget choices and trade-offs around national goals for a population (e.g., reducing homelessness) or a policy outcome (e.g., increasing homeownership). As a result, “the focus therefore should be not primarily on individual programs or activities but on their relationships and interactions.”
How Would Portfolio Budgeting Work? Redburn and Posner say: “For a selected policy objective, budgeting would begin by identifying the set of federal policies, spending programs, regulations, tax preferences, and other activities that constitutes the relevant policy portfolio for analysis and budgeting. The relevant portfolio would cut across agency boundaries and congressional committee jurisdictions.”
Housing is a good example of how portfolio budgeting might work. The Housing and Urban Development Department’s budget is largely for low-income housing assistance, totaling about $57 billion. However this does not include about $210 billion in other programmatic areas that subsidize housing for homeowners through the tax code and a state-administered federal tax credit.
HUD’s budget could be arrayed alongside programs of other agencies that focus on the same policy goals and/or serve the same target populations. The working paper concludes: “A cross-cutting strategic review of the budget centered on the goal of promoting homeownership” would highlight the differences in the share of federal support going to affluent, older homeowners vs. younger or less-affluent families. This approach would also address a perennial congressional concern about duplicative and overlapping programs, which GAO has been reporting on annually.
What Are the Building Blocks for This Approach? While the portfolio budgeting concept isn’t new, the building blocks for making it real are largely in place. The congressionally mandated strategic planning process in use by agencies has resulted in department-level quadrennial strategic plans and reviews that involve in-depth analysis of alternative scenarios in order to develop broad strategic guidance.
These strategic plans have resulted in about 350 “strategic objectives” across government, and the working paper observes: “A large proportion of strategic objectives seem to call for building a cross-program, cross-agency network to plan and execute a coordinated strategy.”
The working paper concludes with three recommendations:
- OMB should encourage agencies to integrate their strategic reviews with their annual budget development processes – and encourage joint planning and budget development across agency boundaries where agencies share responsibility for a common policy goal.
- Congress could institutionalize parallel portfolio reviews within the budget resolution for selected policy goals.
- Congress could include multiyear performance targets within their annual budget resolution, along with spending and revenue targets for each major policy objective.
As noted earlier, the executive branch is taking steps in this direction. Meanwhile, the clock is ticking on raising the debt ceiling, which is projected to be reached by Nov. 3, according to the latest estimates. The next budget-related crisis is days away. Longer-term budget reforms may need to wait for another day.