Budget Management Capacity of State Governments: Issues and Challenges

Source: Katherine G. Willoughby
Public Performance & Management Review
Volume 31, Number 3 / March 2008

Dramatic events early in the new millennium offer an especially interesting period for consideration of how state governments in the United States have coped. In the years since the September 11 terrorist attack, states have been beset with economic recession, a federal focus on homeland security, and the war in Iraq, as well as debilitating natural disasters. How well have states managed through these fiscal, political, economic, natural, and international storms? This research examines state government budget management capacity as measured by a 50-state survey to understand the challenges faced by states, the advancements made to support best practices in budgeting, and the problems that remain. Findings tease out bright spots–states have worked hard to reach and maintain a long-term budgeting perspective, particularly by improving the accuracy of revenue and expenditure estimates. Also, many states have improved budgeting transparency by increasing citizen access to budget information, documents, and budget discussions. On the other hand, state budget management progress suffers from the politics of budgeting: More states are having difficulty passing the budget on time, antiquated tax structures are intransigent, and political expediency takes precedence over principles of good budget management. In the end, the political discipline necessary to reach compromise regarding the budget, and to work toward budget balance, will suppress state budget management progress.

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