Capital Budgeting in the States

Source: Michael Streepey, National Association of State Budget Officers, Spring 2014

From the summary:
State governments play a central role in building and maintaining the nation’s infrastructure. Financial decisions for infrastructure, or capital projects, impact public assets such as roads, bridges, university buildings, prisons, water resources and more. Investments in infrastructure are complex and require significant resource commitments and organizational planning. The additional considerations inherent to capital goods require different budgetary plans, concepts and practices, from those used to prioritize spending on day-to-day expenses. This report delivers state-by-state comparative information on the ways budget officers develop and implement capital spending plans.

After several years of slow recovery, states have shifted some of their focus from immediate budgetary pressures to long-term structural challenges like infrastructure. This report delivers information such as:
– how states make decisions to invest in new facilities or maintain old ones;
– ways states distinguish infrastructure spending from day to day operating expenses;
– criteria for project financing strategies and options for funding infrastructure;
– efforts to mitigate fiscal risks from debt issuance, and more.

Examples of Report Findings
– Transportation is not included in the capital budget: 19 states.
– The definition of infrastructure is being broadened to include technology: 29 states include information technology in the capital budget;
– Many states are still directly investing in university infrastructure: 26 states fund higher education capital projects with general fund dollars;
– Citizen involvement in capital infrastructure can vary: In 19 states, only voters can approve general obligation debt issuance.
– Projects are required to have an estimate of fiscal impact on future operating budgets: 43 states.

As states continue to face budgetary constraints, capital budgeting and prioritization of capital needs will continue to remain important for future infrastructure investments.