Thursday, October 14, 2010

Better Never than Late

Punctuality is important to me. I can even get a little OCD about it. If I’m on time then all is right with the world, and I usually don’t get too wound up if somebody else is late – just so long as I’m on time. While I’d like to think it’s all about ME, tardiness should be a yellow warning light.

Caution or concern didn’t exist for California lawmakers – finally approving this week a budget 100 days past the Constitutional requirement. The Federal Government didn’t even try this year. October 1st started the new fiscal year for the U.S. Government and not one Appropriation bill was passed authorizing the Government to spend money. Congress did quickly pass “Continuing Resolutions” to allow spending to continue, so even though there’s no budget funds can continue to be spent.

For more than twenty years I’ve developed and implemented budgets for organizations as small as $1,000 and larger enterprises of $250 million and everything in between. The figures are dramatically different, and many of the choices and priorities are likewise dependent on the sums of money being used along with the organizations priorities and strategic goals. The fundamentals of budgeting are the same: project what money you have coming in and estimate what you need to spend it on. And if you have to spend more than you’re bringing in you can: (a) bring in more money (b) cut expenses or (c) borrow. It’s really not much more complicated than that. Unless you represent the People.

It’s a neat trick. Spending continues based on prior year levels without income attached to it or any changes to how funds are spent. There is good reason to have Continuing Resolutions at the Federal level and for the State to have its version by just continuing to pay salaries of many, including emergency workers. Short term political gamesmanship shouldn’t, in theory, crumble critical efforts where lives are at stake (such as the military, fire, police, etc.). This has gotten out of hand to where nearly everything continues on as if a budget doesn’t matter. 100 Days into the budget year is about 1/3rd of the year. Any budget adjustments then must be spread over 2/3rds of the year instead of the entire year, making the impact all the greater. At the Federal level there’s no cap to the “income” side thanks to nearly unlimited borrowing potential or if that fails, printing new money by the Fed. (Nearly $1.5 trillion has been “printed” by the Fed since 2008).

I can’t print money so my credit card company shut me off. They did so after I have gone nearly two years without an income so I exceeded the credit line and I haven’t made even the minimum payments for many months. I intended to pay them back as I made every purchase and am grateful that I had over the course of a lifetime built a significant credit line. During that period I operated much like the Government does – spending without identified income. Should my bank have shut me off earlier? No question. With all of their sophisticated analyses that would generate fraud warning calls if I used a gas station 10 miles outside of my “normal” spending pattern – I would think that after 20 years of making 100% payments that after a few months of minimum payments that they might have called to check on whether something had changed…as a basic effort to monitor my credit worthiness. I would have been pissed, no doubt. They would have limited their risk, which as a loan entity they really have an obligation to do. I would have made changes that I should have done long ago. Regardless of what the bank should have done, I have an obligation to fulfill on my promises or face the consequences. I’m now facing them.

In business in the same situation your creditors likewise cut you off, you have to reassess your business and respond to market forces. You sell, you close, you merge…you do what you have to.

The lack of consequence with Government budgets is significant. Sure there’s a lot of blather about “Tea Party” and candidates ranting about how dysfunctional this or that Government entity is. There are kernels of truth in the blathersphere, but what is most telling to me is that the majority of people aren’t impacted by Government budgeting. It’s extraordinary. California went without a budget for 100 days? How did it impact most people? It didn’t. Do most people even know that the U.S. Government won’t have a budget until January or February 2011 when a new Congress is seated? Doubtful. What impact does it have? Negligible. Social Security checks still come, Unemployment checks still come. Many Americans receive some form of Government check or subsidy – and so long as those keep coming why complain? There’s a disconnect between budget and actual spending which is the essence of the problem.

If John and Jane Q. Public aren’t directly impacted the stalemates have little importance. The lack of relevance is why the idea of Smaller Government resonates. Out of the 2009 Stimulus $5 million has been spent on signs pointing out that that a project is part of the American Recovery Act.  It’s true this is a very small percentage the total cost, but the fact that signs are needed underscore the need for Government to justify what it does. To make itself relevant.

There is a role for effective, efficient Government in our lives, in the world. We have strayed very far from that role right now. Based on California & the U.S. Government’s budgeting process we apparently don’t even need a roadmap.

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