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Don’t Mess with Virginia’s Biennial Budget System

Two members of the Virginia House of Delegates, Democrat Albert Pollard, Jr. and Republican Chris Saxman, have introduced H.B. 2092, legislation which would end the practice of adopting a two-year state budget in favor of an annual budget. The General Assembly should reject their proposal.

Let’s begin with an undisputed fact: Virginia has been recognized as the best-managed state in the United States, a distinction not earned overnight. It was due in large part to its enviable budgeting system.

The Commonwealth was recognized as the leader among states in budget reform when the General Assembly enacted legislation in 1918, which required the governor to submit his proposed biennial budget to the General Assembly in the fall of every odd-numbered year. The biennial executive budget system that Virginia has employed for the past ninety years has contributed significantly to its excellence in management. The case to abandon that biennial budget system should be a very compelling one. That case has not been made.

The patrons of the legislation argued in a recently published op-ed commentary that the biennial budget is a throwback to Virginia’s first 200 years during which it held regular legislative sessions every other year. That is an inaccurate account of Virginia history. The Constitution of 1776 provided that the General Assembly meet “once, or oftener, every year.” Annual sessions were abandoned when the Constitution of 1851 provided for biennial sessions. In 1870, the Constitution was amended to require annual sessions. Six years later, biennial sessions were restored and continued until the Constitution of 1970 was ratified.

The proponents of annual budgets ignore that one of the principal reasons for the 1918 legislation was to make the governor the chief budget officer of the Commonwealth. Until 1918, all budget requests had been submitted directly to the General Assembly and were not coordinated in advance by the governor. The General Assembly specifically rejected the legislative budget system when it enacted legislation in 1976 to strengthen the biennial executive budget system.

The 1976 legislation was proposed by the Commission on State Governmental Management, which had been established by the General Assembly in 1973 to undertake a thorough study of the structure and processes of state government. By a vote of 14 to 1, the Commission rejected the proposal to abandon the biennial budget process. One of the Commission’s findings was that “[t]he budget formulation process has been compacted into too short a time period in the past resulting in an inability of executive branch management to undertake the in-depth analysis necessary to focus on alternative solutions to the problems facing the state.”

Moving to annual budgets would weaken the executive budget system, lead to more pork barrel spending and generate unnecessary busy work. Preparing, submitting and justifying agency budgets every year instead of every two years would involve a great deal of repetitive effort for executive branch officials and employees, while depriving them of the time needed for in-depth policy, budget and program analyses.

Approximately one and a half years before the governor submits his proposed biennial budget, he begins the budget preparation process by setting targets for each state agency. The proper budget and program analysis by state agencies cannot be carried out adequately in less than a year. Significant modifications in the state budget reflecting enhanced performance standards or innovations which would yield efficiencies will be exceedingly difficult if every agency must prepare its budget submission on an annual basis.

Reviewing and enacting a state budget every year is also unnecessarily time-consuming for legislators. The present system is far more efficient and yet it allows for adjustments in the biennial budget when warranted by new developments.

Delegates Pollard and Saxman argue that the biennial budget system should be scrapped because it muddies the Commonwealth’s true financial picture. Actually, the biennial approach provides a more realistic picture, while the annual budget system discourages longer range thinking. If state officials and the public at large are confused when a politician or an agency refers to a $500 million cut in spending because they are not certain whether it means an annual or biennial cut, the appropriate response is not to abandon biennial budgets. The way to correct that problem is simply to insist on greater precision in language. Legislators can determine whether a particular proposal to cut or add spending is intended to be on an annual, biennial or some other basis by merely asking.

The patrons contend incorrectly that “[a]gencies (including the Department of Planning and Budget) do much of their planning on an annual basis, but the budget is not annualized.” State law requires agencies to prepare biennial and six year spending plans, as well as an annual budget for each of the two ensuing years, which are presented together in the biennial budget. Agencies plan on a biennial basis (and even for longer periods), but they budget on an annual basis.

If moving money from one budget year to another is indeed a problem, as Pollard and Saxman insist, that can be addressed through tighter language in the Appropriations Act. The same problem would continue under an annual budget system without such tight language.

Abandoning the biennial budget system is not the answer.

Annual budgets will not lead to greater discipline. The practice of vote trading that concerns the annual budget proponents can occur whether budgets are adopted on an annual or biennial basis. The appropriation of billions of dollars in state revenues cannot be completely insulated from politics; nevertheless, it can be disciplined by methods, such as the executive budget process, that are calculated to impose rationality on what would otherwise be a political free-for-all.

No system or process established by humans is perfect. The present biennial budget process may have imperfections, but enactment of H.B. 2092 will not be an improvement. It will instead weaken state management.

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