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HB 300
SHORT TITLE Biennial Budget Pilot Project
ANALYST Hadwiger
APPROPRIATION (dollars in thousands)
or Non-Rec
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates SB199.
LFC Files
“Annual and Biennial Budgeting: The Experience of State Governments” (NCSL, October
“Moving New Mexico Forward: FURTHER ALONG,” Office of the Governor, August 2004
Department of Finance and Administration
Synopsis of Bill
House Bill 300 would create a four-year (two-cycle) biennial budget pilot project. In this pilot
project, state agencies with annual budgets under $5 million would operate under biennial budg-
ets; all other state agencies would continue to operate under annual budgets. The bill modifies
existing statutory language to allow the biennial budget pilot project.
The bill provides for a joint biennial budget pilot project staff evaluation team (two staff mem-
bers from the Department of Finance and Administration State Budget Division and two from the
Legislative Finance Committee) to monitor the biennial budget process including:
determining base-line data for each participating agency’s costs and staff time consumed
to produce and attend hearings on the annual budget requests as well as agency perform-
ance data and the need for budget adjustment requests and supplemental/deficiency re-
compare base-line data with comparable data during the pilot project;
if funding is available, contract for an external evaluation of the pilot project;
regularly report and consult with a LFC subcommittee appointed to oversee the pilot pro-
ject; and
House Bill 300 – Page
provide an annual report to the New Mexico Legislative Council, Legislative Finance
Committee and Governor by August 1 of each year, as well as provide a final report in
August 2010 with recommendations with regard to continuation of biennial budgeting in
New Mexico.
The evaluation team could exempt agencies from participation in the pilot project.
The pilot project would begin in FY08 and end in FY11.
The biennial budget for small agencies would be approved, implemented and modified according
to the schedule below:
By January 10
Governor submits biennial budget request to legislature.
Legislature adopts biennial budget
By May 1
Each agency submits operating budget to the Department of
Finance and Administration (DFA) to implement the approved
budget for the ensuing two years.
By June 15
DFA sends supplemental budget forms to be submitted by
state agencies that plan to request a deficiency or supplemen-
tal appropriation.
June 30
Close of biennium; unexpended general fund appropriations
revert to the general fund.
By September 1
Agencies submit requests for supplemental and deficiency
By January 5
Governor submits supplemental and deficiency budget to leg-
By June 15
DFA sends biennial budget request forms to agencies
By September 1
Agencies submit performance-based biennial budget requests
to DFA and the LFC
House Bill 300 – Page
Significant Issues
Currently, executive and legislative agencies devote considerable time and expense to prepare,
approve and implement annual budgets for small state departments that might be reduced
through a biennial budget process. Small agencies, many of which have five employees or
fewer, are currently required to produce an annual budget request volume, submit it to the De-
partment of Finance and Administration (DFA) and to the Legislative Finance Committee (LFC),
attend up to three legislative hearings and one executive meeting on the request, reply to ques-
tions about the request from DFA and LFC analysts, and submit annual operating budgets to the
Department of Finance and Administration to implement the adopted budget. Additionally, staff
in both DFA and LFC review the annual requests in detail, prepare and edit text and budget rec-
ommendations, and prepare and edit appropriation amounts for the General Appropriation Act.
This is a labor-intensive process that yields little benefit for many agencies whose budgets do not
change substantially from year to year or for which changes could be handled more efficiently
through supplemental budget requests midway in a biennium.
A biennial budget process should not result in inflexible budgets for small agencies. During ses-
sion in the middle of a biennium, they might still receive appropriations for across-the-board pay
increases or for other across-the-board increases provided in the General Appropriations Act, as
well as be allowed to submit requests for supplemental appropriations if contingencies arise that
were not anticipated when the biennial budget was prepared.
There are several possible advantages of biennial budgeting:
The Legislature and Executive could devote more time to consideration of major policy
issues confronting the state by reducing time devoted to crunching the numbers and
holding hearings on small agency annual budgets.
Reduction of time devoted to number crunching could free up resources for oversight of
all agencies by the LFC and DFA.
Biennial budgeting may reduce government spending by reducing the need to process
volumes of paper for annual budget requests and the need for overtime, per diem, sup-
plies and other costs related to annual budget preparation.
Biennial budgets would increase predictability for state agencies by providing long-term
commitments to programs and policies.
According to DFA, the current annual budgeting process has been seen as time-consuming for
state agencies; biennial budgeting would 'free up' time for those involved in the process to man-
age for outcomes because agencies would only have to build a budget every two years and sup-
plement the appropriated budget with requests for a deficiency and/or supplemental during the
interim year.
Prior to 1940, 44 states used biennial budgets. According to a study by the National Conference
of State Legislatures (NCSL), the number of states with biennial budgets declined through the
1970s, primarily because legislatures shifted from biennial sessions to annual sessions and ad-
justed their budget cycles accordingly. In the last decade, this trend has reversed somewhat.
Connecticut returned to biennial budgeting in 1991; Arizona enacted a biennial budget in 1999,
now limited to smaller state agencies. In all, today 21 states adopt budgets biennially. Both
President Bill Clinton and President George W. Bush recommended biennial budgeting at the
federal level in their FY2001 and FY2002 budget submissions to Congress.
House Bill 300 – Page
In Moving New Mexico Forward: Further Along, Governor Bill Richardson’s administration
recommended adoption of a biennial budget model similar to that in this bill, affecting 34 agen-
cies with budgets under $5 million.
The primary challenge to successful implementation of a biennial budgeting system is accurate
identification of agency needs two years out. It is possible that the supplemental appropriation
process will provide a mechanism to address unanticipated needs.
In comments on a similar bill last year, DFA noted that the biennial budget process would assist
the smaller agencies by only requiring the time consuming budget development process on alter-
nate years. The agency would have more time to manage, implement and measure their per-
formance goals. DFA and LFC would not need to review every state agency's budget annually,
but would review requests for supplemental and deficiency appropriations which could be sig-
nificant for some agencies. The process would allow for more time for the management and
oversight of budgets.
Biennial budgeting should result in savings from reduced paperwork and staff time devoted to
preparation, review, and implementation of annual budgets. To the extent that DFA and LFC
staff devote greater time to performance and policy review, these savings may be partially offset.
In comments on a similar bill last year, DFA indicated that expenditures will decrease in budget
preparation time and resources for state agencies as well as the State Budget Division, and LFC
every other year. Decreases may be seen in overtime, comp time, office supplies, and per diem
rates in years without a budget request. However, funds could be then reallocated for training,
site visits and other activities related to management and oversight.
DFA anticipated that additional staff time would be required to implement the biennial budget
pilot project. To hold down this cost, DFA suggested that the pilot project be limited to ten
DFA noted that the administration of biennial budgeting will occur at the agency level, State
Budget Division and the Legislature. Currently, both the State Budget Division and LFC have
responsibilities during the request, appropriation and operating aspects of the budget process.
These aspects include the statutory deadlines for the budget submissions and performance meas-
ures development and release of budget recommendations, and the hearings that the LFC sched-
ules with each agency. DFA indicated that each agency involved in the budgeting process has
sufficient staff and resources to carry out the legislation. The resources and staff would have to
reallocate the work hours and associated costs for the tasks associated with each year of the bi-
ennial budget.