Michael O. Leavitt Center for Politics & Public Service

Project Prologue

The Budget Process

Introduction Lynn Ward was the assistant director in the Division of Finance, and Charlie Johnson was Governor Bangerter’s budget director the last year and a half of his term. After the 1992 election, there were some rumors floating around that Charlie was going to be GOPB director and chief of staff. Lynn thought that sounded crazy, as those both very heavy duty jobs. Lynn knew Charlie just from being in meetings with him. After the election, around Christmas time, GOPB director was one of the final positions that was named, and the rumor about Charlie persisted. Charlie called Lynn asked if she would meet with him.  He asked Lynn two questions: Did she like supervising people, to which she responded, “No,” and the other was whether she felt she could manage a lot of detail, to which she responded, “I am good at that.” Lynn called her boss, Gordon Crabtree, Division of Finance director and said, “Why is Charlie calling me?” Gordon gave Lynn the news, so when Charlie asked Lynn to meet Mike Leavitt, she was prepared. The first thing Mike Leavitt said to Lynn was “sit down and tell me about yourself.” She started telling the Governor about college and her professional career, and he said, “no, go back to kindergarten.” Lynn was offered the job and stayed in the position until after Governor Leavitt left for Washington DC. Governor’s Philosophy and Priorities According to Lynn, the budget reflects a Governor’s philosophy and priorities because where the Governor puts resources is what s/he thinks is important. Lynn stated, “So, I viewed this not as just numbers, but as a value statement. When tax revenue is spent, there are so many federal mandates or money that is already been committed you that there really limited choice on how to spend or recommend expenditure of new tax dollars. There is still, however, some discretion on the Governor’s part; so to me, the budget was a policy document, not just a bunch of numbers.” Lynn would sit down with the Governor and review transmittal letters—pretty vanilla. They would then get into a broad overview talking about revenue forecasts. Lynn and Governor’s Office of Budget and Management would put the forecasts into a chart indicating how much money was already spent, and how much there was to spend. To further explain, the recommendations represent the current fiscal year because a re-estimation of the revenues for the current year based on current data would be provided at a later date. When the re-estimation comes in, it is usually an increase over what was predicted, so that money is considered “one-time money” because it would not necessarily be around the next year. The revenues expected for the following fiscal year, the increase over the base, are called on-going money. When somebody says there’s 400 million dollars to spend, it is really important to know how much is one-time and how much is on-going because you want to commit all the money to on-going projects or programs with the part of the money will not necessarily be recurring. Early on in Governor Leavitt’s administration, Charlie Johnson came up with this term called the boom buffer. This term denoted a switch to describe the amount of on-going money that would be set aside and not automatically poured into on-going programs, so if the economic boom ever busts then there would still be on-going money to use. This way cuts could be avoided. Lynn believes that the Governor’s approach to the budget was healthy and could be characterized as fiscally conservative with a sense of realism. Realism meaning there are places you have to spend state funds and there is a purpose for state government to spend the tax payer money where it could help your citizens. Those things can include helping economic development and helping companies prosper; educating children and the public so the state has an educated work force; and helping people who cannot help themselves. Otherwise, the Governor felt like the best thing state government could do was to leave as much money in the pockets of taxpayers as possible. https://spcoll.li.suu.edu/eadfiles/Xe1kcH8BnM5_0W5sJ69V/ms122NW19921217.pdf http://www.ontheissues.org/Cabinet/Mike_Leavitt_Budget_+_Economy.htm The Start of the Process The GOPB would put the budget guidelines together in April or May. There were guidelines to the state departments as to what you could or could not ask for. The departments could not ask for anything except for the mandates—federal mandates, state mandates and state law.  We would send those out guidelines before the fiscal year ended on June 30.  Then in September the state division of finance, the state’s accounting office, would have the books closed out or almost closed out. They would tell the Budget Office how much revenue is left over from the prior year because agencies did not spend all the money and would return it, or maybe revenues came in a little higher or lower than anticipated. The governor tried not to budget to spend every penny to leave a reasonable surplus at the end of the year, so that would be considered one-time money. The economists within the Governor’s Office of Planning and Budget would work with a group of other economists that are a designated team, and they would begin monitoring the economic factors throughout the year: job growth, unemployment rate, construction permits, residential and non-residential. GOPB would take the lead, but there were economists from the tax commission, workforce services, natural resources, and some of the downtown economists that made up the team. They would all get together and agree upon a set of economic indicators. Then they would come up with revenue estimates along with actual collections coming in—those reported by the tax commission. The head of GOPB would get preliminary estimates in about October. The GOPB could start getting a feel for how much money there would be to spend. The Governor had all his ideas about initiatives, and they usually cost money. At this point, the Governor’s office could start prioritizing and matching up revenues with projects. Lynn Ward would give feedback and general parameters: 100 million or 50 million, the amount of one-time versus on-going, etc. Then the agencies were required to send the GOPB preliminary budget requests by the second week in September. Those requests gave the GOPB a feel for how much money was committed for the must-haves or the mandates. The next tier included things the state ought to do. And lastly, the GOPB looked at the things Governor Leavitt wanted to do. Unfortunately, these numbers always added up to more than the revenue estimates. After that, prioritizing the funding was the hard part. There was no real formula. It was all based on moving through the process and making hard choices. Those decisions were made by committee, depending on the issues involve. The department heads would come in for their budget hearings at the end of October or the first part of November. That also included public education, which was usually represented by the State Superintendent, the school board chairman, and maybe a couple of school board members. The courts would be represented by the Court Administrator and the Supreme Court Justice. They were an equal branch of the government and they did not have to come in, but we always extended the invitation and gave them a lot of deference. Higher education would be represented by usually the Commissioner and a few staff members. In each budget hearing, the GOPB analyst, the Governor would be present. The Chief of Staff and the Lt Governor were also invited. The other senior staff members were made aware of the calendar so that if they wanted to sit in on a particular budget hearing, they could. Governor Leavitt kept the hearings closed. Rod Decker was not happy about that. These meetings were policy discussions, and the point was to obtain full information from the attendees and have a good discussion. Those meetings are not really tailored for a public setting. The hearings and evaluations of requests extended through November. More often than not, more information was requested from the agencies. In the case of new initiatives, Lynn Ward recalls asking the Governor, “please, if you are thinking about some new program, let me know as soon as possible because then we can start vetting the information, getting information from the relevant parties, trying to figure out all the costing.” Lynn would have to sift through every little teeny detail with new initiatives to determine what an actual cost would be and then figure out we whether the State could afford the initiative, or whether cost-cutting modifications could be considered. Once all the costing information is gathered, then Lynn had to figure what the size or scope of the initiative would be. The same thing was true on the revenue side; if the Governor was talking about tax cuts, Lynn would have to figure out how big the Governor wanted the tax cut to be and then provide recommendations. Lynn would also have to consider the type of tax whether it was it a cut on sales tax, income tax, corporate franchise tax, property tax, and how much the cut would be. Throughout the month of November, Lynn would present the Governor with choices and scenarios, and the Governor would ultimately have to select an alternative considering the appropriate mix of taxes to cut, the ramifications of such cuts, and the constituents that the cut would benefit—or not. Lynn had regular meetings with the Governor to get his decisions. Lynn recalls going into a mode hyper activity the week of Thanksgiving. That week she would get the final revenue estimate. All the decisions were pending at that point, and over the next few weeks those decisions would need to be sorted out. Lynn remembers that she learned in the first or second year (the hard way) to pencil out the spending recommendations because the estimates came in just a little bit lower than anticipated. Going back and trying to figure out where do to take cut 50 thousand or a half a million was a nightmare. Lynn stated frankly, “I am so glad I’m out. I’d be at work 10:00, 12:00, 2:00 in the morning for 2 months or 3 months. Then it would start over during the legislative session.” As time went on, Lynn and the Governor built efficiencies into the process. For example, a sheet was used during the budget hearings that would rate the request. The sheet would show the agency’s request, item by item, and next to it would be a column of the Governor’s recommendations. Rather than agencies making requests item-by-item, if GOPB made the recommendation in general agreement with request, the agencies were asked to simply address the discrepancies or the policy issue differences between their request and the Governor’s recommendation. Some of the department heads had a really hard time shifting gears to be more high level in their requests and could not resist asking for a truck or office chairs and giving their justifications. Governor Leavitt was not interested in micromanaging these requests, so he required the agencies to work through the discrepancies and policy differences before they came to a hearing. This made the agencies work harder to prioritize and decide for themselves the best way to spend taxpayer dollars. Announcing the Budget Governor Leavitt wanted to educate the public about the budget, particularly in good times because he could gain political capital that way. At one point the Governor decided, instead of having one press release on the budget, he wanted to have a press release on each of the budget topics. So for several years Lynn and the Governor would coordinate six press conferences within a 10 to 12 day period. At the same time, Lynn was creating the Budget Book containing the budget details that included the Governor’s plans for adult corrections, youth corrections, higher education, public education, economic development, and the overall budget roads. Lynn planned the Press Conference using “stunt babies,” or people from the community supporting the issue. Lynn remembers getting the Budget Book ready, sending out the press releases, developing handouts, charts, or other visual aids for one press conference, and then turning around and having to think about the next press conferences coming up. There was much advance planning because everything that would be used in press conferences would need to be published in the Budget Book. All of this excitement took place within the first week and a half in December. Unfortunately, the meetings of the National Governor’s Association were usually held right before the budget announcements were made or during the same time. Lynn was required to prepare for the press conferences by communicating with the Governor by e-mail or phone. Lynn recalls, “One year for Transportation, the Centennial Highway Fund, this one was all day. We started out at 7 o’clock in the morning up in Weber County in the middle of an off ramp. It was freezing cold, and we had these charts. I was at work until 2:00 am the previous morning getting the handouts finished and copied. Another year, we had an economic development release on the Friday after Thanksgiving, so Thanksgiving Day I was working on the handouts all day. Later that day he left on a trip to Israel with Presidential hopeful George Bush, so what a year that was. We had one up at University of Utah because we were featuring Human Services issues that year. Richard Paul Evans, the author, had offered to put some money in or to build these Christmas box houses for foster kids. It was my idea to invite him to come up and be part of the press conference. Somebody contacted him, he was there and the story was that he and his dad came up and on the way up to the press conference his dad disclosed to him how much the financial commitment was, which was a total surprise! It was way beyond what Richard Paul Evans was thinking.” Also, some of the most interesting press conferences made use of some very creative props. Lynn Ward recalls that Governor Leavitt loved using props, so her office was not just the budget office, it was the Jay Leno prop department. One of her favorite props Lynn came up with was colored sugar in a huge jar. Colored sugar was stacked in layers in the jar to represent the different budgetary allocations. Lynn remembers that she had an assistant who tried it with Jello, laying colors of Jello on top of one another. The office also tried clear plastic, but it would not stay in place. Stacked paper looked cheesy. So, the office ended up with a colored sugar prop. Visual aids were particularly helpful when explaining the budget. When the colored sugar jar was used, the Governor was trying to demonstrate to people how little they paid compared to subsidies when paying the water bill. Some of the state sales tax, for example, when you pay for a candy bar, is helping pay for the water coming out of your tap. Federal money and some property tax also subsidize water. One other funny story was that Governor was keen on was Medicaid reform, and he was ahead of the curve on that. Our health analyst, Christine, went back to Washington DC with the Governor during the time Contract With America was in full swing and Newt Gingrich and others were working on reform scenarios.  Christine went with the Governor to the White House, took the lap top and it got zapped as it went through the x-ray machine. We could not recover any thread of information on it. I think we were at the GOPB Christmas party at the state fair, and she called and just in a panic, “Everything’s gone!” It took some work to recreate the information. Doing the announcements separately was very effective according to Lynn Ward. It drew much more attention to each topic, which in a 4 – 8 billion dollar budget is just not easy. Plus, the Governor had the ability to say what he thought was important in each category and draw attention to it. It drove the legislature nuts because it got him a lot of press attention, and they felt backed into a corner if they did not do what he had recommended. The Press Lynn remembers that making separate budget announcements “would drive the press crazy because we’d say Higher Education, Governor’s recommending 80 million dollars new money for them. Well, they’d want to know the context, which is not out of reason for them wanting to know; is [80 million] good or bad? But we would never tell them and that would make them nuts, and sometimes they felt a little used….” “One year we played this joke on Dan Harrie. At the time he was the Tribune capitol beat reporter. State Printing downstairs in the Capitol would [print and bind the Budget Recommendations book] for us because it was very quick… It could be done over night.

So they had put one together with the cover and just blank pages inside just to see that the binding would work. So I showed this to [Governor Leavitt], and spontaneously he says ‘let’s give this to Dan Harry.’ On the way to the Bangerter Highway ribbon cutting, in the car were Governor Leavitt, Charlie Johnson, Vicki Varela, and me, and as we were leaving the press event, we were still on Bangerter Highway and Dan Harry was walking away to his car and they rolled down the window and Vicki yelled out to him, ‘Dan, come here!’ So he came over, and she just lifts the Budget book up and he sees it through the window. His eyes lit up and he’s like, you’re going to give that to me? It was the look on his face. The Governor just handed it to him, and he hurried and stuffed it under his coat and walked off gleefully. It’s all we could do to hold our laughter until the window was rolled up. And Charlie was saying, ‘you people are crazy, you’re playing a joke on this reporter? He’s going to nail us.’ Dan Harry waited until he got back to his office to look at the book thinking he had really scored, and when he got back, he opened it up [and understood the prank]. Of course, he called Vickie and railed on us, but he was good about it.” Interim Day Announcement The legislature used to have an interim day in December, and Governor Leavitt would issue his recommendation on Interim Day. He would give a speech to the legislature turning over his recommendations for the legislature to grapple with. On that day, the Governor would schedule an entire day’s agenda starting with an editorial board breakfast held at the Mansion. All the chief editorial writers of all the newspapers and TV stations were invited. He would go through the highlights and basically stick to the overview published in the report. That served two purposes: (1) it was a practice for him for the rest of the day; and (2) it was a way to educate the media. Afterward the Governor would hold a cabinet meeting in the Mansion on the ballroom level to make the cabinet feel special. The cabinet would get their report and the Governor would present a preview of the budget again as another way for him to practice. Then the Governor would have a meeting with someone from the Republican leadership and then someone from the Democratic leadership. Usually NCSL (National Council on State Legislatures, It’s the legislature’s national association.) was held around this time frame, so sometimes it was just over the phone. In terms of protocol, the Republican leader would meet with the Governor before the Democrats. The second year the Governor was releasing the budget on Interim Day, he address both bodies—the House and the Senate—with his budget recommendations. The night before was the cabinet and senior staff Christmas party at the Mansion. That next morning, the Governor had the editorial board in the formal dining room and he ran through his spiel. He returned to the office and ran through his notes, looking at the budget book, getting his head ready for the rest of the day. Lynn Ward was standing at Elaine Peterson’s desk, Alan Workman approached and said, “The Mansion’s on fire.” Lynn and Elaine were stunned and Elaine said, “Is Mrs. Leavitt out?” Alan replied that she was. Elaine and Alan agreed they would not tell the Governor until they had more information. The Governor was sitting in his office without a clue of what was happening because he was still reading this budget. Shortly thereafter, they ran in and told him and whisked him down to the Mansion. All through the day the Governor and staff were getting little pieces of information about what was going on at the Mansion. Rumors were started, and at one point, the rumor was that the floor caved in. That rumor spreads through the whole Capital. Lynn remembers having communication with the legislature throughout the day pushing back the time of the speech. Finally at about 4:00 or 4:30, he addressed the legislature and said something like, “I’ve had a few things going on today.” Lynn recalls, “It was right after the crisis was over and everybody was safe, and you start thinking about how scared you were because the Christmas tree light cord would have been simmering the night before when 150 people were in the ballroom. And the fire experts said that if the fire had broken out the night before, 2/3 of us would have come out in body bags because there would not have been a way for all of us to have gotten out. . . That’s just a year to remember.” The Legislative Session Next the Legislative session would begin and it become an effort to hold your departments together so they would not try to work outside the Governor’s recommendations. Departments were told they could not become mavericks and cowboys and ask for money that was not recommended by the book. Sometimes they would try that, but the Governor would hear about it and call them out on the carpet. A GOPB analyst was assigned to attend each subcommittee hearing. Lynn remembers, “After a couple of years, I wanted to know what the legislature was doing along the way. So we would put together these budget briefs. The appropriations subcommittees would meet Monday-Wednesday-Friday, so before the analyst would go home, he or she would put together this brief, this one-page sheet that would show a detailed list of what the Governor had recommended and where the subcommittee was, because they used to take votes as they would go along. When we would get towards the end of the session, right around Valentine’s Day, all the economists would get together and do the new revenue estimates. These new estimates were based upon the Christmas sales, the new national economic data, the President’s budget recommendations, and other federal economic data would have come out. Then we would go into this mode of trying to get a fix on where the legislature was, and then develop this list called ‘Hot Spots.’ It would identify all the areas where we thought needed more funding. Every year was a little bit different, but typically I’d meet with the 2 appropriation chairs—or some years they would just say, ‘Lynn, you hammer it out with the fiscal analyst and come up with figures describing the money left on the table.” This process was always a struggle for Lynn because the Governor wanted more spending than the legislature was willing to give, or the priorities would be different. The legislature wanted to put more money into roads than the Governor usually did. Or, the Legislature wanted to spend more money on roads and build buildings with cash, and the Governor would say, “No, those are capital projects and you can bond for them.” The cash was needed for more pressing issues. Lynn recalls that the Governor “was painted as being too liberal because he wanted to spend money on helping sick and poor people.” “Leavitt’s budget is Right for Demos” During the session, the Governor would hold Friday afternoon press briefing each week. Usually, there would be a couple messages he wanted to get out, and then he would open it up as open forum for the reporters to ask him questions. In most cases it was budget related, so Lynn prepped him in advance. Lynn recalls, “The Governor would use that as a bully pulpit to pressure the legislature in the court of public opinion, which they hated.

They would come out with their appropriations bills and he’d have the 20 days in which to act upon a bill. During that period of time the GOPB would analyze all bills that would have a fiscal impact, revenue side, expenditure side. In some case, we would try to get a bill killed, get it modified to be more acceptable. Some bills would carry their appropriation, especially those that were for new programs. So that bill would definitely have to be tracked. We’d hold all appropriations bills for signature or veto until towards that 20-day period to make sure that when you added all this up, it was in balance and correct. Early on it seemed like every year there would be duplications. Like this 2 million dollars would be funded over in the main bill, but then it would also be funded in the appropriations portion of it, so we’d have to tell the Governor to line item veto just to clean up the whole budget.” Usually the legislature would hold the spending bills until the very end, until they knew that they had money. But, there is so much going on, and with billions of dollars, things can get overlooked or missed. After that period, the GOPB would go into budget summary mode and pull together the books listing all the things the legislature funded.

Michael O. Leavitt Center for Politics and Public Service