S527

An Act requiring the State Treasurer to develop and integrate certain zero-based budgeting practices and procedures in the preparation and submission of the Governor’s annual budget message, supplementing chapter 18A of Title 52 of the Revised Statutes and amending P.L.1944, c.112.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. (New section) This act shall be known and may be cited as the “Zero-Based Budget Act.”

2. (New section) The Legislature finds that there is public need to reform the State budget process. Economic uncertainty combined with declines in the amount of resources available to deliver critical goods and services has compelled the State to reassess what is essential and to reevaluate the way in which public tax dollars are proposed and allocated for State spending.

Under the current budget process a reassessment and reevaluation of this size and scope is impractical if not impossible. Requests for appropriations and permissions to spend are evaluated based on spending requests above and beyond amounts allocated during the previous fiscal year. The base of past spending is not fully vetted, and the efficiency and effectiveness of current programs and activities is not scrutinized with the detail adequate to prioritize the needs of one department or agency over the needs of another.

The development and integration of zero-based budgeting within the existing budgetary framework would provide the Executive, the Legislature, and ultimately the people of the State of New Jersey with the capacity to evaluate, scrutinize, and prioritize annual State appropriations. Moreover, it would allow the State to construct an annual budget from the ground up, justifying the need for and use of each tax dollar allocated for appropriation. The Legislature, declares, therefore, that it is in the public interest to require the State Treasurer to design and develop a State budget process that utilizes the practices of zero-based budgeting, and to ensure that these procedures are integrated in the preparation and submission of the Governor’s annual budget message.

3. (New section) For purposes of this act, the following terms shall have the following meanings:

“Director of the Division of Budget and Accounting” or “director” means the Director of the Division of Budget and Accounting in the Department of the Treasury.

“Spending agency” means those entities deemed a “spending agency” as that term is used in subsection a. of section 5 of article 3 of P.L.1944, c.112 (C.52:27B-14).

“State agency” means any of the principal departments in the Executive Branch of State Government, and any division, board, bureau, office, commission, or other instrumentality within or created by such principal department; the Legislature of the State and any office, board, bureau, or commission within or created by the Legislative Branch of State Government; the Judiciary of the State and any office, board, bureau, or commission within or created by the Judicial Branch of State Government; and any independent State authority, commission, instrumentality, or agency.

“Zero-based budget” means an approach to developing and evaluating requests for appropriations or permissions to spend based on the cost-effective achievement of the tasks, goals, and objectives of a particular spending agency without regard to prior appropriations or spending permissions, adjusted for inflation or otherwise.

“Zero-based budget process” means a process of budgeting in which a spending agency’s request for appropriation or permission to spend is evaluated and justified, in whole or in part, based upon the cost-effective achievement of the tasks, goals, and objectives of a particular spending agency without regard to prior appropriations or spending permissions, adjusted for inflation or otherwise.

4. (New section) a. The State Treasurer, in consultation with the Director of the Division of Budget and Accounting, shall, on or before July 1, 2011, design and develop, or cause to be designed and developed, a State budget process for State fiscal years commencing on and after July 1, 2012, which requires each spending agency required to file a request for appropriation or permission to spend, in accordance with section 5 of article 3 of P.L.1944, c.112 (C.52:27B-14), to justify their request, in whole or in part, utilizing the practices and procedures of a zero-based budget.

b. At a minimum, the zero-based budget process developed in accordance with subsection a. of this section shall require spending agencies to justify their request, in whole or in part, by submitting:

(1) a statement outlining the goals and objectives intended to be accomplished as a result of the spending agency’s request;

(2) a statement delineating each of the various activities, programs, and services to be performed as a result of the request;

(3) a compilation enumerating the statutory and regulatory provisions which comprise the spending agency’s legal authority, if any, to perform each activity, program, or service;

(4) a description of the methodology and approach used to carry out each activity, program, or service;

(5) an itemized estimate of spending required to maintain each activity, program, or service at its current level of performance, together with an evaluation of the quality and quantity of services provided;

(6) a projected estimate of spending required to maintain each activity, program, or service at the minimum level of service required by statutory or regulatory authority, together with an evaluation of the quality and quantity of services required at that level;

(7) a statement identifying each group, stakeholder, or community affected or intended to be affected by each activity, program, or service, and a quantitative estimate of any potential consequences that may result if the spending agency’s activities, programs, and services are eliminated;

(9) a statement prioritizing by numerical ranking, the activities, programs, or services carried-out by a spending agency with respect to each activity’s, program’s, or service’s capacity to fulfill the spending agency’s stated goals and objectives during the current and ensuing fiscal years; and

(10) any additional data or information deemed necessary or appropriate by the State Treasurer or the Director of the Division of Budget and Accounting to justify a spending agency’s request for appropriation or permission to spend.

5. (New section) a. The State Treasurer, in consultation with the Director of the Division of Budget and Accounting, shall, on or after July 1, 2011 but before July 1, 2012, implement the zero-based budget process designed and developed in accordance with section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill), and shall, for State fiscal years commencing on or after July 1, 2012, require each spending agency required to file a request for appropriation or permission to spend in accordance with section 5 of article 3 of P.L.1944, c.112 (C.52:27B-14), to file their request utilizing the practices and procedures of the zero-based budget designed and developed in accordance with section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. The State Treasurer shall take such anticipatory steps as may be appropriate to integrate the zero-based budget process within the existing budgetary framework, and shall adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations necessary to effectuate the purposes of this act.

c. Spending agencies are directed to cooperate with the State Treasurer and the Director of the Division of Budget and Accounting in compiling data and information necessary to implement and integrate the zero-based budget process designed and developed in accordance with section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

d. The State Treasurer and the Director of the Division of Budget and Accounting shall be entitled to call to their assistance, and avail themselves of the services of, the employees of any State agency as may be required and as may be available to design and develop, implement and integrate the zero-based budget process in accordance with this act.

6. (New section) The State Treasurer shall, on or before December 1, 2012 and on or before that date each year thereafter, prepare and transmit to the Governor and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), to the Legislature, a report: outlining the steps undertaken to comply with section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill); describing any shortcomings associated with the implementation or integration of the zero-based budget process as required pursuant to section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill); and recommending additional steps or modifications to improve or expand upon the zero-based budget process.

7. Section 1 of Article 1 of P.L.1944, c.112 (C.52:27B-1) is amended to read as follows:

1. As used in this act, unless the context clearly indicates otherwise:

"Department" means the [State] Department of [Taxation and Finance herein established] the Treasury.

"Commissioner" means the [commissioner and head of the] State [Department of Taxation and Finance] Treasurer.

"Director" means the director of an indicated division[, herein established,] in the [State] Department of [Taxation and Finance] the Treasury.

"Request Officer" means the principal officer of a department or board in the Executive Branch of the State Government.

(cf: P.L.1944, c.112, art.1, s.1)

8. Section 5 of Article 3 of P.L.1944, c.112 (C.52:27B-14) is amended to read as follows:

5. a. For State fiscal years commencing on or before July 1, 2011, [On] on or before October first in each year each department of the State Government, board, commission, officer or other State agency, hereinafter in this article called "spending agency," shall file with the [commissioner] State Treasurer a request for appropriation or permission to spend[, as the case may be], which shall specify all expenditures proposed to be made by such spending agency during the next ensuing fiscal year.

b. For the State fiscal year commencing on July 1, 2012 and for each State fiscal year commencing thereafter, on or before October first in each year each spending agency shall file with the State Treasurer a request for appropriation or permission to spend, which shall specify all expenditures proposed to be made by a spending agency during the next ensuing fiscal year utilizing the zero-based budget process developed in accordance with section 4 of P.L. c. (C. ) (pending before the Legislature as this bill).

(cf: P.L.1944, c.112, art.3, s.5)

9. Section 6 of Article 3 of P.L.1944, c.112 (C.52:27B-15) is amended to read as follows:

6. A request provided in subsection a. or b. of section [five] 5 of article 3 of P.L.1944, c.112 (C.52:27B-14) shall be made by the request officer. In the case of the Supreme and Superior Courts, the request officer shall be the administrative director of the courts under the direction of the Chief Justice of the Supreme Court and, in the case of the Legislature, the request officer shall be the [secretary of the Senate and the clerk of the General Assembly, respectively] Executive Director of the Senate Majority Office, the Executive Director of the Assembly Majority Office, and the Executive Director of the Office of Legislative Services.

(cf: P.L.1953, c.49, s.51)

10. Section 7 of Article 3 of P.L.1944, c.112 (C.52:27B-16) is amended to read as follows:

7. a. [Said] A request filed pursuant to subsection a. or b. of section 5 of article 3 of P.L.1944, c.112 (C.52:27B-14) shall be made on forms [to be] furnished by the [commissioner] State Treasurer and subject to such rules and regulations as [he] the State Treasurer shall prescribe [from time to time] and shall show in detail:

[a.] (1) A statement exhibiting for the next ensuing fiscal year all estimated revenues; the estimate of revenues for the current fiscal year and the actual revenues for the past completed fiscal year;

[b.] (2) A statement identifying and providing justification for each of [The] the several purposes and itemized amounts for which appropriations or permissions to spend are requested, without deductions for estimated revenues allocated to such spending agency; provided however, that a request filed pursuant to subsection b. of section 5 of article 3 of P.L.1944, c.112 shall provide justification for a spending agency’s request for appropriation or permission to spend utilizing data and information collected and submitted as required by the State Treasurer to comply with the zero-based budget process developed in accordance with section 4 of P.L. c. (C. )(pending before the Legislature as this bill);

[c.] (3) A statement exhibiting for the last preceding fiscal year the amounts of the annual and supplemental appropriations, transfers of appropriations, allotments from the emergency fund, dedicated receipts, if any, and of all expenditures made thereunder and the unexpended balance, if any, and the extent to which the same is obligated or encumbered; and

[d.] (4) A statement indicating how much of the requested appropriation will be spent in each quarter of the fiscal year.

b. In case an appropriation is requested, pursuant to subsection a. or b. of section 5 of article 3 of P.L.1944, c.112, for a project which cannot be completed within the next ensuing fiscal year, the request shall set forth in detail a complete description of the whole project and the estimated and detailed cost thereof, and shall show separately the part of the project which has been completed, if any, and the actual cost thereof; the part remaining to be completed and the estimated cost thereof, and the part proposed to be completed within the ensuing fiscal year and the estimated cost thereof.

(cf: P.L.1944, c.112, art.3, s.7)

11. Section 11 of Article 3 of P.L.1944, c.112 (c.52:27B-20) is amended to read as follows:

11. The Governor shall examine and consider all requests for appropriations, together with the findings and recommendations of the Director of the Division of Budget and Accounting in the Department of the Treasury, and shall formulate the Governor's budget recommendations, which shall be presented as a budget message by the Governor during an appearance before a joint session of the Legislature which shall be convened at 12 noon on a date on or before the fourth Tuesday in February in each year.

The budget message shall include the proposed complete financial program of the State Government for the next ensuing fiscal year, and shall set forth in columnar, graphic, or narrative form, as the case may be, detailed as to each source of anticipated revenue and the several purposes and itemized amounts to which the recommended appropriations and permissions to spend shall apply for each spending agency in substantially the following form:

A. Revenues for the General Fund, other budgeted State revenues, all other dedicated funds, Federal aid funds, and trust funds:

(1) An estimate of all balances to be on hand on the first of July next ensuing which are to be available for appropriations, supported by the calculations used in arriving at the estimated figures; and

(2) An estimate of the anticipated revenues from all sources applicable to the budget period, together with the actual amount earned from each source during the last completed fiscal year, and the estimate of revenues expected to be earned from each source for the current fiscal year.

B. (Deleted by amendment, P.L.2003, c.275).

C. Appropriations. The total of the appropriations recommended for the ensuing fiscal year in substantially the following form:

Detailed Budget:

(1) An itemized statement of all appropriation requests and requests for permission to spend from the General State Fund, other budgeted State revenues, other dedicated funds and Federal aid and trust funds;

(2) An itemized statement of the amounts recommended by the Governor with respect to item "1" above;

(3) An itemized statement of all amounts appropriated and permissions granted for the current fiscal year with respect to item "1" above;

(4) An itemized statement of all amounts appropriated and permissions granted for the last preceding fiscal year with respect to item "1" above detailed as to annual and supplemental appropriations, transfers of appropriations, State Emergency Fund allotments, and permission to spend, as the case may be, and showing also total expenditures, reserves, lapses and unencumbered balances;

(5) For State fiscal years commencing on July 1, 2012 and for each State fiscal year commencing thereafter, a statement exhibiting all data and information, submitted in accordance with paragraph (2) of subsection a. of section 7 of article 3 of P.L.1944, c.112 (C.52:27B-16), used to justify each spending agency’s request for appropriation or permission to spend in accordance with the zero-based budget process developed pursuant to section 4 of P.L. c. (C. )(pending before the Legislature as this bill); and

[(5)] (6) In addition, such other statistical information as may [more fully] be appropriate to show comparisons and costs of the several departments.

(cf: P.L.2003, c.275, s.1)

12. Section 13 of Article 3 of P.L.1944, c.112 (C.52:27B-22) is amended to read as follows:

13. All applications for supplemental appropriations not included in the budget message shall be [made] filed, in the first instance, [to] with the [commissioner] State Treasurer in [substantially] the same form as is required, pursuant to subsection a. or b. of section 5 of article 3 of P.L.1944, c.112, for regular requests, setting forth how much of the amount requested will be expended in each quarter of the fiscal year. The [commissioner] State Treasurer shall certify and transmit forthwith such application to the Governor, together with his findings, comments and recommendations thereon. The Governor shall transmit to the [chairman of the joint appropriations committee] chairperson of the Joint Budget Oversight Committee or its successor such applications as he shall approve in whole or in part with his recommendations thereon, but the Governor shall not approve and recommend any appropriation in excess of the total anticipated funds available for disbursement during the fiscal year to which such recommendations are applicable.

(cf: P.L.1944, c.112, art.3, s.13)

13. Section 21 of Article 3 of P.L.1944, c.112 (C.52:27B-30) is amended to read as follows:

21. [In order effectually to discharge and execute his duties in relation to the quarterly allotment system, the commissioner] The State Treasurer, or a member of the department designated by [him] the State Treasurer, shall make continuous studies of all departmental requirements including personnel and shall, for State fiscal years commencing on July 1, 2012 and for each State fiscal year commencing thereafter, make continuous studies of the zero-based budget process developed in accordance with section 4 of P.L. c. (C. )(pending before the Legislature as this bill). All requests for additional personnel made by request officers to the civil service agency in the State Government shall first be approved by the [commissioner] State Treasurer.

(cf: P.L.1944, c.112, art.3, s.21)

14. This act shall take effect immediately.

STATEMENT

The “Zero-Based Budget Act” requires the State Treasurer to develop and integrate certain zero-based budgeting practices and procedures in the preparation and submission of the Governor’s annual budget message.

Under the provisions of the bill, the State Treasurer, in consultation with the Director of the Division of Budget and Accounting, is required to design and develop a zero-based budget process on or before July 1, 2011 for State fiscal years commencing on and after July 1, 2012. While the bill grants the Treasurer considerable latitude in creating a budget process tailored to meet the individual needs of various departments and divisions, bureaus and agencies within each branch of State government, the budget process developed in accordance with this bill requires State spending agencies to justify their request for appropriation or permission to spend, in whole or in part, utilizing the practices and procedures of a zero-based budget.

As defined by the bill, a zero based-budget process is a process of budgeting in which a spending agency’s request for appropriation or permission to spend is evaluated and justified, in whole or in part, based upon the cost-effective achievement of the tasks, goals, and objectives of a particular spending agency without regard to prior appropriations or spending permissions, adjusted for inflation or otherwise.

To facilitate the evaluation and justification of each spending request, the bill stipulates that, at a minimum, State spending agencies must submit to the State Treasurer and the Director of the Division of Budget and Accounting: (1) a statement outlining the goals and objectives intended to be accomplished as a result of the spending agency’s request; (2) a statement delineating each of the various activities, programs, and services to be performed as a result of the request; (3) a compilation of the statutory and regulatory provisions which comprise the spending agency’s legal authority, if any, to perform each activity, program, or service; (4) a description of the methodology and approach used to carry out each activity, program, or service; (5) an itemized estimate of spending required to maintain each activity, program, or service at its current level of performance, together with an evaluation of the quality and quantity of services provided; (6) a projected estimate of spending required to maintain each activity, program, or service at the minimum level of service required by statutory or regulatory authority, together with an evaluation of the quality and quantity of services required at that level; (7) a statement identifying each group, stakeholder, or community affected or intended to be affected by each activity, program, or service, and a quantitative estimate of any potential consequences that may result if the spending agency’s activities, programs, and services are eliminated;

(8) a statement detailing any other State, federal, or local units of government which administer a similar activity, program, or service and an outline describing the interaction, if any, among such departments and agencies; (9) a statement prioritizing by numerical ranking, the activities, programs, or services carried-out by a spending agency with respect to each activity’s, program’s, or service’s capacity to fulfill the spending agency’s stated goals and objectives during the current and ensuing fiscal years; and (10) any additional data or information deemed necessary or appropriate by the State Treasurer or the Director of the Division of Budget and Accounting to justify a spending agency’s request for appropriation or permission to spend.

Under the bill, any zero-based budget data and information submitted as part of a spending agency’s request for appropriations or permissions to spend is required to be incorporated into the final request transmitted to the Governor and submitted to the Legislature as part of the Governor annual budget message. As part of the budget message, the zero-based budget data and information would become part of the public document and would be available to assist the Legislature and ultimately the residents of the State of New Jersey in reviewing and scrutinizing the Governor’s spending plan for the ensuing fiscal year.