THE AVENUE JANUARY 12, 2011
Fiscal trainwrecks that state lawmakers and local governments have to clean up are everywhere this year, especially out West. However, one state that does not contend with massive budget problems is Utah--and Western neighbors in search of a sounder fiscal footing would be wise to study why.
Utah faces only modest cyclical deficits currently and had no structural one either until a round of tax reductions took effect in FY 2008 and 2009, according to estimates produced for our recent report, Structurally Unbalanced. Why is this? One reason is that the state was relatively less invested in the housing boom that paved the way for the real estate crash and associated budget disasters of the Great Recession. But another influence on the state’s enviable condition has been its strong embrace of quality budget information and sound budget processes.
In Utah, planning and budgeting are undertaken as a collaborative process and are well-informed by good data and sound processes to such an extent that in 2008 the state garnered “A” grades on both fronts from the Pew Government Performance Project, which named the Beehive State the best managed state in the union. Epitomized by the Performance Elevated initiative instituted in 2004 by then-incoming Gov. Jon Huntsman Jr., and continued by current Gov. Gary Herbert, the Utah approach centers on the aggressive use of common data and the proactive alignment of year-to-year expenditures with the long-term strategic direction of the state.
The result is all agencies and both branches of state government use the same data, adopt agreed-upon targets, and align budgetary priorities in a strategic collaborative process built on the collection, interpretation, and dissemination of quality information. Budget requests are tied to agency performance measures as well as the state’s strategic plan. Annual reviews ensure that budgets remain lean by flagging ineffective programs and unanticipated operational expenses. And for its part the legislative branch utilizes the same financial system and the same measures as the executive, allowing decisions by both branches to be based on the same data. Across all the public’s access to fiscal and process information is unfettered.
Such practices--with their attention to both good data and good processes--have seemed to work. In dealing with immediate issues, the availability of fine-grained, timely information about state activities and finances enabled the governor and legislature to act swiftly as the state entered the downturn in 2008 to slash expenditures surgically and strategically rather than bluntly to close the $272 million, 5 percent projected budget gap for FY 2009, according to Pew. Regarding the bigger picture, the state’s processes also seem to be helping it manage long-term issues fairly well: As Pew notes, the state is managing its long-term pension liability well and carries relatively little debt. In sum, routine, evidence- and process-driven review has enabled one Mountain West state to catch an incipient structural deficit early and act intentionally to rectify it before it becomes entrenched.