What Is a Biennial Budget?

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Budgeting for an organization of any size can be an arduous and lengthy process, especially in the politically charged world of state and local governments. To help make the budgeting process more manageable, some states and municipalities operate under a biennial budget. A biennial budget is one that lasts for two years, so any funding initiated by this budget is covered for a two-year period. This is very different from the annual budgeting done by other governments, including the federal government and most organizations.

Traditional Biennial Budget

  • Traditional biennial budgeting works on an odd-even system. Lawmakers submit and approve a budget that includes 24-month appropriations on an odd year and focuses on budget oversight in even years. During this oversight period, lawmakers can observe how program money is spent, what results are achieved in the program and determine what changes need to be made to the program appropriations in the following budget. Congressional lawmakers have recommended or sponsored legislation adopting a federal budget using a traditional biennial system numerous times.

Other Types

  • Other types of biennial budgeting include biennial financial planning and rolling biennial budgeting. A biennial financial plan consists of annual spending tied to a non-binding, two-year spending plan. Rolling biennial budgeting is a spending plan that covers two years but is paid out in two set annual appropriations that are subject to review and adjustment.

Pros

  • Proponents argue that with annual budgeting, governments spend up to eight months of the year on budgetary issues. They claim this is an inefficient use of the government's time and attention, as well as a waste of taxpayer money due to staffing costs. They also argue that a year is not a significant amount of time to fully see and measure the results of program funding. It also promotes a longer-term view on the part of legislators concerning spending issues and revenue projections.

Cons

  • Opponents point out that instead of allowing for greater budget oversight, biennial budgeting can actually reduce it by decreasing the amount of time appropriations committees spend on budgetary issues. By removing the purse strings for a year, you also make oversight less effective by removing the method by which government can monitor a program. In addition, biennial budgets do not allow for quick change in legislative agenda. The fact that the biennial budget would have to be changed or adjusted frequently to encompass immediate or emergency issues, such as natural disasters or unforeseen economic challenges, means the whole budgetary process can be rendered moot.

Popularity

  • The National Conference of State Legislatures reports that, as of 2010, only 20 states use biennial budgeting. Since 1940, 24 out of 44 states have abandoned biennial budgeting in favor of annual budgeting. States, such as Arkansas, have cited the difficulty of accurately projecting revenue, which makes a biennial budget unworkable. Local governments that have a more direct relationship with oversight and revenue seem to have an easier job of dealing with the difficulties of biennial budgeting and have been embracing the idea of biennial budgeting. In 2000, the city of Auburn, Alabama established biennial budgeting and chose to keep it in 2002 after its first rotation.

References

  • Photo Credit funds running low image by Andrei Filonov from Fotolia.com
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