The Joy of Budgeting

Nearly one in three Americans prepare a detailed household budget -- a majority do not. Americans are also more likely to use an online program than an accountant or financial planner to manage their money.  Jan and I hired a financial planner to help me make some retirement decisions in 2008. Well, help US make them. How much I chose to be paid monthly was critically important. Essentially I could have gotten the max payment, with nothing to Janet when I died or something less, with a percentage going to Jan when I did go. We chose a 75% option, so Jan would get 75% of my pension when I passed away. It decreased my monthly check, but only by some few hundred dollars, and gave her piece of mind.

Hiring the financial planner at $1,000 was a good decision. We've increased our IRAs and investments substantially for two middle-classers like us. But the point is, budgeting and financial planning go hand in hand.

There's a division of NJ state government in the Treasury Department named the Office of Management and Budget. The Feds have the same office, which you're probably more familiar with. NJ OMB is an internal organization, controlling and monitoring funds spent by state agencies for everything they buy. OMB records all income/revenue gathered by agencies like the Div. of Revenue, the states funds and fees collector, and OMB approves all expenditures at various levels, some standard, which are done perfunctorily electronically, others only with high-level director approvals, like the over $300k Supplemental Budget Transfers. OMB also works with the 350-500 state agencies (divisions and departments) to craft the initial state budget for the Governors review. Important jobs.

If you ever look at New Jersey's State Budget every year, and you should, OMB's name is on the front page as its producer. It may be the only time the public sees their name, but as an agency manager of the Statewide Contract Consolidation Unit, I was in charge of millions every year, especially buying new software for our Data Center mainframe computers, so I was very familiar with OMB. And their progenitor, the Bureau of Budget & Accounting, which is how they have  organized themselves. My brother-in-law John is a supervisor on the accounting side, managing the state's NJ Comprehensive Financial System (NJCFS), and its electronic interfaces to the hundreds of state agencies.

A budget is a simple thing. Two things actually -- revenue (income) vs. expenditures (expenses). Everyone has a budget whether they know it or not. As individuals we can also use credit cards, get loans for new autos, or home mortgages etc. The state does the same, but differently. Publicly. We can't borrow $ unless we sell government bonds to raise the cash needed. That's usually call for a referendum on the November ballot, like for more Open Green Spaces.  

I on the other hand, just have to reply "Yes" to one or more of the dozens of credit card offers I receive by mail every week to get a loan. NJ can't do that because we have to have a balanced budget by law. What a difference it would make if individuals had to have a balanced budget! If the wife was the breadwinner, would the husband have line-item veto power as the Governor does?

The head of OMB is the Comptroller/Director, an appointed position. For a decade it seemed as if Rich Keevey was the head. I walked to his office many times to get signatures on our purchases. Then it was Charlene Holzbaur for years, to name a few. Bottom line, it was the agency directors who would call Rich or Charlene, and go over their assigned OMB analyst's head, when they had a big purchase and beg the Director to approve it. If you go on the OMB website nnow, they don't list any names of directors or staff at all, which is not transparent at all. I would recommend all directors and managers in state government be named, and their areas of control.

A funny thing about government, everywhere. We bureaucrats exist to keep the wheels of government moving. We are inclined 1) to trust agency heads, and 2) to want to please them. Even myself, in a position of recommendation and approval, worked with agencies to make their requests for expenditures conform to our stringent requirements. We just didn't say "No" and leave them to themselves and that was it. In fact, there weren't any requests that I said "No" to outright. No matter how poorly constructed, we helped the agency conform and get their request thru the system. 

This principle of helping each other guided every level of state government, in my opinion, from the lowly clerk position, all the way up to the State Treasurer. Our unit was extra lucky, because we could coerce the agencies to comply with our rules thru an OMB/DPP Circular Letter (containing regulations).

And budgets were the road map, however, they were exceeded often. Many times I worked on preparing a supplemental budget request, required if $300k or more was needed out of reserve, to go to OMB to spend money. (We tried hard to keep them under the limit so we wouldn't be hassled.) But every one that I worked on was approved. Yes, they had to be justified, but sometimes a few well-crafted sentences was enough. When it was really important and I didn't have the clout, I would go to my Director, and sometimes they would go to a deputy state treasurer or the Treasurer him or herself, to help push the procurement along. We always found money in the budget from somewhere to do what we wanted. The vast majority of other departments did also, from my knowledge.

Not always so easy as an individual, to get $, especially if the credit card was maxed out, or you had a bad credit rating, which has become so very important these days. Jan and mine is now near the 800 level because we just don't have the expenses we did when we had children, and their clothing, food, and sundries, then college and cars. In government we were okay unless we had an extraordinary expense, or the rainy day fund was depleted. That's why as individuals a rainy day fund is also encouraged to have by Suze Orman and all the other pundits. 

Our division budget every year, just like all the other divisions, consisted of two line items of expenditures: salaries, and materials and supplies. Materials and supplies could mean a $3 million software package, or buying copy paper. There was absolutely no distinction - both were expenditures and we had rules and regs guiding their purchase. I got to be an expert at those rules and regs over thirty years, and at writing the language necessary for their approval. I even taught classes to all state CIO's on how to write requests for Waivers of Advertising, and to our purchasing folks on using Delegated Purchase Authority. 

For example, here's typical language I used every year to get approval to spend $25-36 million: "To provide  required Information Technology maintenance and software support services to agencies, and payment to sole source and technical services vendor providers, as mandated by Circular Letter  06-16-DPP/OIT. These services provide technical expertise at high levels to operate equipment and software properly. These services are needed July 1." Those three sentences got me approval to spend $33.4 million in Fiscal Year 2007. My name was on these requests as the "agency contact." I also helped craft the regulation itself. It's since been superceded by 11-16-DPP/OIT, but it's the same language.

So we had to know our rules and regs, but it was the same rules that allowed us to justify massive expenditures. Every year was a challenge to write the same justification in a slightly different way. 

It should be so easy for me personally to ask for outright cash from my bank, don't you think?And, to tell the truth, it is. Another benefit of having a good job and a good personal money manager like Janet.

By Rodney Richards, NJ