Budget Preparation Process
Executive Budget Office Responsibilities
The of the Finance Department is by statute responsible for preparing the initial information concerning the State's budget and its execution, revenue estimates, review of appropriation acts, and fiscal analysis. The EBO also assists the Director of Finance and the Governor in duties relating to the formulation of the budget; correlating and revising the estimates of revenues and requests for appropriations of all budgeted agencies; and investigating, supervising and coordinating the expenditures and other fiscal operations of such agencies.
The EBO operates under the following laws:
- Code of Alabama 1975, Sections 41-4-80 through 41-4-96, also known as the Fletcher Budget Act, which embodies the original budget authority;
- Code of Alabama 1975, Sections 41-19-1 through 41-19-12, also known as the which expands the scope of the budget authority and financial management and requires the EBO to assist the Governor and agencies in the preparation of program and financial plans, develop form and content of budget submission packages, review operations plans of the state agencies, and report quarterly to the Governor and Legislature on agency operations;
- Constitutional Amendment 26, which prohibits deficit spending;
- Constitutional Amendment 448, which requires the Governor to submit the executive budget proposal to the Legislature on or before the second legislative day.
Budget Requests by State Agencies
Budget formulation begins with estimated expenditures for the next fiscal year being prepared by the administrative head of each budgeted agency and institution and submitted to the EBO by an established deadline, usually in the month of November. Expenditure requirements must be classified by programs, program elements or reporting units, and major objects of expenditure in accordance with a standard plan of classification. Requested changes in programmatic expenditures from the prior fiscal year must be explained, and proposed capital expenditures must be described and justified. Personnel information and a detailed statement showing actual agency revenue for the preceding year, budgeted revenue for the current year, and estimated revenue for the next fiscal year must also be submitted by each agency.
If any agency of the state fails to submit budget estimates within the time specified, the Governor shall cause reasonable and proper estimates to be prepared. Any agency failing to submit its budget request to the EBO by the specified date, unless an extension has been granted, runs the risk of being excluded from the Governor's Executive Budget.
Several forms are included in the budget request packages submitted by the agencies to the EBO. "Three-year period" refers to the fiscal year ended just prior to current fiscal year, the current fiscal year, and the upcoming fiscal year for which funds are being requested.
EBO Form 1 - Estimated Condition of Funds--Summary of all agency receipts (including state funds, federal and local funds, departmental receipts, and any other funds or revenue sources), transfers, reversions, and balance unencumbered for the three-year period.
EBO Form 2 - Summary of Appropriation Unit or Activity--To be used as a summary for agencies that have more than one appropriation unit, activity or fund. Requires expenditure information for the three-year period by program, major object of expenditure, and source of funds. Also includes total number of employees.
EBO Form 3 - Capital Expenditures--This form is used to describe, justify, and plan for financing all proposed capital expenditures for the upcoming fiscal year. Categories included are capital outlay, transportation equipment purchases, and other equipment purchases.
EBO Form 5 - Summary of appropriation Unit or Activity--Agencies prepare one Form 5 for each fund within an activity; for each activity including all funds; and for each appropriation unit including all activities and funds. Requires expenditure information for the three-year period by major object of expenditure and source of funds. Also includes total number of employees.
EBO Form 6 - Personnel Classification--A summary of personnel, showing number of employees and salaries for major personnel classifications budgeted for the three-year period, as well as other information such as number of raises, new positions, and vacant positions filled.
Budget Requests by Postsecondary Institutions
The process and deadlines for submitting budget requests by postsecondary institutions is similar to that of state agencies. However, the information requested is more in line with the way data is gathered for institutions of higher education:
- Revenues including but not limited to state, federal, and local funds and tuition and fees.
- Expenditures by these eight functions: Instruction, Research, Public Service, Academic Support, Student Services, Institutional Support, Operations and Maintenance of Physical Plant, and Scholarships and Fellowships.
- Educational and General (E&G) Transfers, mandatory and nonmandatory
- Educational and General Balances, beginning and ending
- Auxiliary Enterprises, revenue, expenditures, transfers, and beginning and ending balances
EBO Form 14 - Financial Summary--Financial Summary to include Revenues, Expenditures, E&G Transfers, E&G Balances, and Auxiliary Enterprises.
EBO Form 14A - Hospital Financial Summary--To be used by those institutions that have hospitals associated with their operations. Financial Summary to include Revenues; Expenditures by Administrative Services, Nursing and Professional Services, and Operations and Maintenance of Physical Plant; Transfers, mandatory and nonmandatory; Balances; Accounts Receivable; and Personnel.
EBO Form 17 - Personnel--Reports FTE personnel for E&G by function; E&G personnel by occupational activity; and Auxiliary Enterprises personnel by occupational activity. One EBO Form 17 must be completed for each reporting unit; to summarize unrestricted funds (except for hospitals); for restricted funds reporting unit; and to combine unrestricted and restricted funds.
EBO Form 18 - Capital Assets Requests--A list of capital assets being requested by the institution for the upcoming fiscal year. Information to be provided includes description, amount, funding source, reporting unit(s) affected, and justification. Form 1A of the Facilities Master Plan may be submitted in lieu of EBO Form 18.
Budget Requests by Non-State Agencies
Certain private entities that provide services to Alabama citizens in areas such as education, health, the arts, programs for children and elderly, and economic development submit requests to receive funding from the State General Fund and/or Education Trust Fund. Such agencies are required to complete EBO Forms 1 and 5.
EBO staff members, upon receipt of such agency reports, prepare a tentative budget not later than the first day of the second month preceding each regular session of the Legislature. During the process, the Executive Budget Office utilizes revenue estimates prepared by EBO staff with the advice of an economist with the Center for Government and Public Affairs at Auburn University at Montgomery, and input from the agencies responsible for the collection of the revenues. The tentative budget is transmitted to the Governor.
Executive budget hearings are conducted to allow agency heads the opportunity to discuss their budget requests and answer any questions the Governor and/or Finance Director may have. (The Legislature also conducts extensive budget hearings.)
When the Governor begins the task of formulating the proposed budget, consideration is given to the estimates of revenue, the estimates of expenditure requirements submitted by the agencies, the tentative budget recommendations prepared by the EBO, and the testimony elicited at the budget hearings. However, the final budget proposal represents the Governor's judgment and recommendations for meeting the revenue and expenditure needs of state government as well as taking into consideration the needs of the citizens, court orders, and statutory mandates.
The Executive Budget
The is transmitted to the Legislature on the opening day or second day of the Regular Session and consists of three parts.
--Summary of Recommended Appropriations
--Estimated State Revenues
Part II--Detailed requested appropriations for each agency and institution by standard classifications of expenses, such as personnel costs, operating expenses, grants and benefits, capital outlay, equipment purchases, and transportation costs and recommended appropriations for each agency.
Part III--Appropriation bills and revenue bills which implement the recommendations made in Parts I and II. Such appropriation bills indicate the programmatic appropriation to each agency and institution and the source of funds from which each appropriation is to be paid. Appropriation recommendations are subject to alteration by the Legislature.
During the legislative process, the appropriation bills usually undergo changes from what was introduced in the Governor's package of legislation. The EBO tracks the Governor's package as well as other bills introduced by legislators and keeps the Finance Director and the Governor informed as to the status of the bills and their impact, individually and as a whole, on state government finances.
Once the Legislature has passed the various appropriation bills and they are signed by the Governor, or otherwise become law, the of the budget process are set into motion.
A Typical Budget Calendar
The following is an example of a budget preparation calendar typical of the second and third years of a legislative quadrennium. During the first and fourth years, the Legislature comes into session in March and January, respectively; therefore, time frames are somewhat different for those two years.
|August 31||Budget instructions and forms mailed|
|October 15 - December 20||Executive budget hearings|
|November 1||Budget requests due|
|December 1||Preliminary budget information to Governor|
|December 8||Revenue projections finalized|
|January 8||Governor's budget recommendations finalized|
|January 21-31||Appropriations bills prepared and printed|
|February 4||Governor presents budgets to Legislature|
|February 4 - May 18||Regular Session of the Legislature|