Unallotment – missing a step?

It’s July 1st, and the “final” numbers are out on the unallotment plan for the biennium that starts today.  I’m still not sold on the idea that an executive tool to deal with the shortfalls at the end of a budget year can be used to shape the budget at the outset of the year.  I think I’ve put my finger on why:

Subd. 4.Reduction.

(a) If the commissioner determines that probable receipts for the general fund will be less than anticipated, and that the amount available for the remainder of the biennium will be less than needed, the commissioner shall, with the approval of the governor, and after consulting the Legislative Advisory Commission, reduce the amount in the budget reserve account as needed to balance expenditures with revenue.

(b) An additional deficit shall, with the approval of the governor, and after consulting the legislative advisory commission, be made up by reducing unexpended allotments of any prior appropriation or transfer. Notwithstanding any other law to the contrary, the commissioner is empowered to defer or suspend prior statutorily created obligations which would prevent effecting such reductions.

(c) If the commissioner determines that probable receipts for any other fund, appropriation, or item will be less than anticipated, and that the amount available for the remainder of the term of the appropriation or for any allotment period will be less than needed, the commissioner shall notify the agency concerned and then reduce the amount allotted or to be allotted so as to prevent a deficit.

The text is from Minn. Stat. 16A.152, with emphasis on what seems to trigger the unallotment process.  Now, the Commissioner of Finance has sent the Governor a message stating that “probable receipts for the general fund will be less than anticipated, and that the amount available for the remainder of the [2010-2011] biennium will be less than needed.”  This is clearly a cut-and-paste from the statute, right down to the brackets to cram in “2010-2011.”  This begs the question: receipts will be less than anticipated when?  The MMB’s actual estimates that would seem to be in play pre-date the Legislature’s last actions.  In other words, the Legislature “anticipated” the amounts of revenue depicted in those forecasts and updates – which is presumably why they passed additional revenues to support the spending bills.  The Commissioner’s letter giving the Governor the green light compares the November 2008 and Feburary 2009 forecasts, revenue performance in March, April and May of this year, and general pessimism to support his determination that 2010 and 2011 revenue will be “less than anticipated.”  (Note, though, that the year-end rollup from MMB projects 2010-2011 revenues as better than expected in the February forecast).  Of course, this is all data that was available when the Legislature passed the budget – which should set the baseline for our “expectations” of revenue.  Not that much changed between May 22 and June 4 to say otherwise.

Putting cynicism aside, here’s the real structural question: how is even the best analysis on or before June 30, 2009 of “less than anticipated” revenues, a credible “determination of probable receipts” over the entire biennium?  The Governor is proposing cuts and shifts to both 2010 and 2011 budget allocations.   Almost by definition, any forecasting done during budgeting, or even projections done now at the outset of the biennium, is “anticipation” of future revenue.  How can today’s numbers logically support a “determination” of shortfall in March 2010?  March 2011?  The records on the last round of unallotment show it to be a dynamic process highly related to the actual reality of incoming revenue.  Now matter how hard anyone tries, there’s no way to make a credible statement about the reality of revenue performance until a significant amount of the data is in and real revenue can be compared against estimates.

Unallotment, as a budget tool, is intended for adjustments to fiscal reality at the end of a fiscal year.    Without even getting into the separation-of-powers concerns raised, it seems pretty evident that it is not a tool to “fix” the budget at the start of a biennium.  Now the question is, who wants to do anything about it?

Advertisements

One Response to “Unallotment – missing a step?”

  1. Buhglold Says:

    Hmm. Is it true? 🙂


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: