THE BUDGET PROCESS

The State budget is the shared responsibility of the Legislature and the Governor and is as much a process as it is a product.  The starting point is the Governor’s biennial budget document, which is transformed through the work of the Joint Standing Committee on Appropriations and Financial Affairs (generally referred to as the “Appropriations Committee”) with input from the various policy committees into an enacted biennial budget bill.  But it is more than the biennial budget bill since the biennial budget is usually altered via supplemental budgets; sometimes by necessity (changes in revenue, federal support, economic conditions etc.) and sometimes by desire (changes in priorities, technology, opportunities etc.).  But it is even more than the sum of the budget bills since there are numerous other bills put before the Legislature that may affect state revenues or expenditures. It is the aggregate of all these bills that make up the State budget. 

The state fiscal year runs from July 1st through June 30th and is usually identified by the years it covers, e.g., Fiscal Year 2013-14 runs from July 1, 2013 through June 30, 2014.  A two-year budget (the biennial budget) for state government is adopted during the first regular session of the Legislature and covers two fiscal years beginning on July 1st in the first year of the legislative biennium and ending on June 30th during the first year of the following legislative biennium.  That means the 126th Legislature will consider adoption of the 2014-2015 biennial budget (July 1, 2015 through June 30, 2015) during its first regular session.

The biennial state budget bill is developed in two steps:  formulation of the budget request by the executive branch and legislative approval.  Many groups are involved in the formulation and approval of the state budgets, including the Governor, departments and agencies of the State, the Legislature, public interest groups and the public.

I. Formulation of the Biennial Budget Request

On or before September 1st of even-numbered years, the judicial branch, the legislative branch and each executive branch department or agency prepares a budget request for the next two fiscal years.  The requests identify individual programs within each department and their respective proposed spending levels for each of the next two fiscal years.  The executive branch and judicial branch budget requests are submitted via the Department of Administrative and Financial Services to the Governor for review and possible revision.  The requests are then compiled into the state budget document by the Department of Administrative and Financial Services.  A sitting Governor must submit the budget document to the Legislature by the Friday following the first Monday in January of the first regular legislative session (for the 126th Legislature, that date is January 11th).  The deadline for a Governor-elect elected to a first term of office sitting Governor is the Friday following the first Monday in February of the first regular legislative session.

The state budget document is a four-year financial plan for State Government for each fiscal year of next two biennia. The form and content of the budget document are outlined in 5 MRSA § 1664.  At a minimum it must contain:  a budget message by the Governor; a budget summary and supporting details and documentation; a financial plan for the following biennium; estimated and anticipated revenue losses (past, current and next two fiscal years) caused by tax expenditures provided in Maine statutes; prioritized public improvement estimates; statements of bonded indebtedness of the State Government; other statements relative to the financial plan deemed desirable by the Governor or required by the Legislature; and the long-range plan for State Government, which includes the Governor’s vision for the upcoming biennium and the two succeeding biennia, and how the proposed budget moves the State Government toward this vision.

Programs with Highway Fund allocations and other non-General Fund programs of the Department of Transportation are addressed in a separate budget request and referred to the Joint Standing Committee on Transportation for consideration.  The process described in this overview would apply to the Highway Fund budget unless otherwise noted.

 

A. Restrictions and Constraints

In developing the budget document the Governor is bound by various constitutional and statutory restrictions though he or she may propose statutory changes as part of the bill.  In passing a budget, the Legislature is bound by the constitutional restrictions but may amend the statutes. 

The Budget Must Be Balanced

The most important restriction on the Legislature in enacting a budget is the Maine Constitution’s prohibition on deficit financing which guarantees that the State’s budget will be balanced in each fiscal year of the biennium.  There are two sections in the State Constitution that address the issue.  Article IX Section 14 prohibits the State from incurring long-term debt of more than $2,000,000 without the vote of the people, except for temporary loans to be paid out of money raised by taxation during the fiscal year in which they are made and certain specified emergencies.  In addition, Article V, Part Third, Section 5 prohibits the use of proceeds from the sale of bonds for current expenditures. 

The Governor must facilitate the balanced budget requirement by submitting a proposed budget that not only sets forth all proposed expenditures for the administration, departments and agencies of the government but also the anticipated revenues of the State Government and any other additional means of financing the budget  (5 M.R.S.A. § 1663).  The required format of the budget document includes a summary that shows “the balanced relationship between the total proposed expenditures and the total anticipated revenues together with the other means of financing the budget for each fiscal year” (5 M.R.S.A. § 1664).  It is the responsibility of the Governor to propose a balanced budget and the responsibility of the Legislature to ensure that the enacted budget bill in conjunction with all other spending bills produces a balanced budget in each fiscal year. The joint responsibility of the Executive and Legislative branches to ensure that actual spending does not exceed actual available resources is covered under Budget Monitoring and Adjustments.

 

Some Items Must Be Funded

There are many ways that Legislative funding can be required for a program or activity.  The State Constitution imposes several funding requirements that bind the Legislature and there are statutes requiring expenditures that derive from a citizen’s initiative or referendum.  The actions of the voters may not have the absolute authority of the Constitution but they weigh heavily in budget proposals, deliberations and implementation.  There are also federal mandates, court orders and consent decrees which, though very real and often significant, are not covered in this handbook.  Some of the funding requirements include: