Chapter 7 Business Planning And Short-term Budgetary System Answer Key

[Mahmod Ohner]

NorthCarolina Constitution empowers the Governor to "prepare and recommend to the General Assembly a comprehensive budget of anticipated revenues and proposed expenditures of the State for the ensuing fiscal period. The Constitution of North Carolina also provides that the budget as enacted by the General Assembly shall be administered by the Governor."

The State Budget Act provides that the Governor is Director of the Budget. As such, the Director has responsibility to prepare and recommend the state budget, and the Director's powers extend to all agencies, institutions, departments, bureaus, boards, and commissions of the State of North Carolina. The Governor may -- and does -- delegate certain powers and authorities of the Governor as Director of the Budget to the Office of State Budget and Management (OSBM) (G.S. 143C-2-1(a)).

OSBM prepares the Budget Manual for the State of North Carolina for use by agencies in the preparation and administration of their budgets. The Manual is a guide to agencies in discharging their duties under the State Budget Act and other applicable laws and regulations. It is the responsibility of department heads and their staffs to acquaint themselves with the Manual.

Any exceptions to the policies stated in the Manual, if not expressly delegated, must be approved by OSBM. These policies may be superseded by OSBM directives or agency policies as long as they conform to the basic principles of the Manual.

North Carolina operates under a biennial (two-year) budget, beginning on July 1 of each odd-numbered year, with annual updates to the second year of the enacted budget. The sessions of the General Assembly in odd-numbered years are known as long sessions. The sessions in even-numbered years are known as short sessions, when the General Assembly meets to adjust the biennial budget enacted during the previous long session.

North Carolina Constitution Article III, Sec.5(3) empowers the Governor to "prepare and recommend to the General Assembly a comprehensive budget of anticipated revenues and proposed expenditures of the State for the ensuing fiscal period." The Constitution of North Carolina also provides "that the budget as enacted by the General Assembly shall be administered by the Governor."

North Carolina General Statute 143C-2-1 provides that the Governor is Director of the Budget. As such, the Director has responsibility to prepare and recommend the state budget, and the Director's powers extend to all agencies, universities, departments, bureaus, boards, and commissions of the State of North Carolina. The Governor may -- and does -- delegate certain powers and authorities of the Governor as Director of the Budget to Office of State Budget Management (OSBM) (G.S. 143C-2-1(a)).

The University of North Carolina Board of Governors is required to submit to the Governor a unified budget request for all universities (G.S. 143C-3-3(b)). This request includes requests for repairs and renovations funds, capital funds, and information technology. The unified request shall be divided by budget code and may be submitted separately from the remainder of the request, at the direction of the Board of Governors.

Non-state entities requesting state funds are required to submit budget requests to the Director or a designated agency, pursuant to G.S. 143C-3-4. If an agency is designated to receive such requests, the agency must evaluate the request and forward its evaluation to the Director in accordance with procedures established by the Director.

The base budget is the part of the State budget necessary to continue current service levels, including adjustments for mandated rate increases such as Social Security, program annualization, operation of new facilities, salary annualization, and automatic rate increases for existing facility leases. The base budget should also reflect the removal of nonrecurring items from the previous fiscal biennium and the correct level of receipt-supported activities. Agencies submit base budget changes to OSBM through the Integrated Budget Information System (IBIS). See Section 2.8 for more on IBIS.

The base budget is prepared jointly by OSBM budget execution analysts and appropriate agency personnel. The base budget development process begins with agencies reviewing the Worksheet I report in IBIS. The Worksheet I report includes prior year actual expenditures, current year certified and authorized budgets, and recommended base budget adjustments for the biennium under request. The budget is constructed in line-item detail using the NCFS Chart of Accounts. Agencies adjust the Worksheet I report through budget revisions and Worksheet I forms in IBIS. OSBM budget execution analysts review and approve any necessary and authorized changes to the Worksheet I report. The final approved Worksheet I report becomes the base budget for the following biennium.

The change budget includes establishing new and/or pilot programs, expanding existing programs, reducing or eliminating existing programs, and changes to salaries and/or benefits for teachers and state employees. Throughout the change budget phase of budget development, agencies may make recommendations and/or the Governor may explore options to realign funding, identify efficiencies, and/or eliminate funding for certain programs, resulting in budget decreases or reductions.

Agencies submit change budget requests to OSBM on the Worksheet II form, which is available in IBIS. Within the Worksheet II form, agencies should develop a business case for their requests using data and evidence where possible, which OSBM analysts will use to evaluate these requests.

In addition to providing information in change budget requests, pursuant to G.S. 143C-3-3(e), agencies other than the General Assembly and the Administrative Office of the Courts requesting significant state resources for the purpose of acquiring or maintaining information technology must provide the following:

Capital improvements are defined as real property acquisitions, new construction, rehabilitation of existing facilities, and repairs and renovations (G.S. 143C-1-1). These types of expenditures are accounted for in the capital budget code(s) of an agency or university.

Establishing a capital improvement project requires approval of the General Assembly regardless of funding source. Requests to establish capital projects must be submitted through the biennial capital budget process.

Capital improvement needs estimates are requested in two parts: Repair and Renovations and New Capital Projects. New Capital Projects include new construction, land acquisitions, and major rehabilitation of existing facilities. (G.S. 143C-3-3).

After OSBM review and executive approval of the capital improvement budget requests, the Director of the Budget recommends the Capital Improvement Budget to the General Assembly. Capital projects recommended in the first year of the six-year Capital Improvement Plan are known as the Recommended Capital Improvement Budget and require additional supporting information in a Budget Support Document (G.S. 143C-8-6).

Required information for Repairs and Renovation requests and New Capital Projects requests includes:

The six-year Capital Improvement Plan is updated after the long session of the General Assembly to reflect actual capital authorizations. Agencies are invited to submit Worksheet IIIs for capital needs that have emerged since developing the capital plan. These Worksheet IIIs and the capital plan developed for the long session are used to develop the Recommended Capital Improvement Budget for the following short session of the General Assembly.

North Carolina operates under a biennial (two-year) budget, with annual updates to the second year of the enacted budget. According to the NC Constitution, total state expenditures for the fiscal period covered by the budget shall not exceed the total of receipts during that fiscal period and the surplus remaining in the State Treasury at the beginning of the period. Thus, the budget enacted by the General Assembly must be balanced and must include two fiscal years beginning on July 1 of each odd-numbered year (G.S. 143C-4-1).

NC's Constitution (Article II, Sec. 11(1)) requires a session of the General Assembly in odd-numbered years, which have become to be known as long sessions. In 1973 the General Assembly began having annual sessions, meeting in short (reconvened) sessions in even-numbered years, known as short sessions, to adjust the biennial budget enacted during the previous long session.

In the fall of even-numbered years, OSBM develops and issues budget instructions to state agencies and universities for making budget requests for the upcoming biennium. The instructions lay out procedures for preparing base, change, and capital budgets for that biennium. These state budget concepts or components are discussed in Section 2.4. In late fall/early winter of odd-numbered years, OSBM also develops and issues short session change budget instructions to state agencies and universities for making updates and changes to the biennial budget.

As an initial step in the budget process, agencies develop strategic plans to provide the context for long-term policy formation and budgetary decision-making. Agencies submit their strategic plans in the spring of odd-numbered years with the option to submit an updated plan in the spring of even-numbered years.

Agencies are encouraged to have each division or unit prepare the initial division-level budget for the programs that they operate. Agencies are also encouraged to conduct their own internal budget meetings to refine and prioritize budget requests. This prioritization should be informed by their strategic plan.

OSBM budget analysts work with agency and university campus budget officers regarding acceptable levels for base budgets as well as providing technical assistance and guidance in developing change budget requests. Budget analysts can also assist agencies experiencing unusual growth that will affect their budgets or in areas related to meeting mandates within budgetary limits.

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