Emergency Criteria

How Five States Budget for Uncertainty Gao ID: AIMD-99-156R April 20, 1999

Pursuant to a congressional request, GAO provided information on how five states budget for uncertainty, focusing on: (1) state criteria designed to control the use of reserve emergency funds; (2) how state criteria compared with criteria being proposed at the federal level; (3) how states determined whether the criteria have been met; (4) whether state criteria contain any escape clauses; and (5) whether states' criteria are useful in controlling costs.

GAO noted that: (1) the five states use reserves as a way to anticipate and plan for uncertainty in their budgets; (2) these states worry about budget uncertainty related to revenue shortfalls and significant increases in program spending and are less concerned with natural-disaster emergencies due to the assistance they expect to receive from the federal government; (3) the federal government does not have clear criteria for what constitutes emergency spending; (4) in 1991, the Office of Management and Budget (OMB) proposed a set of conditions for emergency spending which had been included in proposed legislation; (5) under the OMB proposal, any emergency spending would have to meet all of the following 5 conditions to qualify for the emergency designation: (a) the expenditures are necessary; (b) the situation requiring the emergency appropriation was sudden; (c) the situation was unforseen; (d) the need for emergency appropriations was urgent; and (e) the situation is not permanent; (6) GAO found that some states have similar conditions for use of emergency reserves with the added requirement that emergency spending be for certain types of events; (7) the states in GAO's study have both formal and informal practices to ensure that emergency criteria are met; (8) codified procedures can provide transparency and a degree of scrutiny by requiring a formal written explanation of how the emergency criteria are met; (9) these procedures apply to state agencies requesting emergency funds or to the governor after declaring an emergency and wishing to use funds not yet appropriated by the legislature; (10) in cases of funds for which there are specific criteria, GAO did not find alternative ways or explicit escape clauses to access those funds; (11) officials in GAO's study said emergency reserve criteria are useful in limiting emergency spending to the established criteria; and (12) in cases where specific emergency criteria were established in statute and the executive branch or a controlling board had the authority to release reserve funds, emergency spending was generally limited to conditions and events defined within the reserve criteria.

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