Annual Versus Biennial Budgeting

Users of the C2ER Economic Development Program Expenditures Database may notice differences in how frequently the budget for each state is released. This is because states have the choice of using either annual or biennial budgets, meaning budgets released every two years. Therefore, some states will not release their proposed budget for an extra year, or will not release actual budget numbers for more than two years. A number of factors go into why a state decides to use an annual or biennial budget.

As state budgets have grown larger over time and state legislatures gain more influence, states have gradually moved from biennial budgets to annual budgets. It can be difficult for states to accurately forecast revenue from year-to-year, leading to time-consuming revisions. Further, the National Conference of State Legislatures (NCSL) notes that “state budgets grew larger and more complicated and as federal grant-in-aid programs to state and local governments became increasingly prominent in the 1960s and 1970s.”[1]

However, some states have moved in the opposite direction, changing from annual to biennial budgets. Connecticut, Kansas, and Arizona have moved to a biennial budget over the last twenty years. Four states have both a biennial session and a biennial budget: Montana, North Dakota, Texas, and Nevada. In addition, a further 15 states have a biennial budget with an annual session. Most states do not use a “true” biennial budget, which means that the state develops a single budget for a two year cycle. Instead, two separate budgets are enacted by the state at once. Only two states enact a true biennial budget: North Dakota and Wyoming.

Congressional leaders, including House Budget Committee Chairman Paul Ryan (R-WI), have proposed moving the federal budget from annual to biennial. They assert that this would lead to more reasoned deliberation and would allow for increased congressional oversight. However, budget experts are skeptical that the advantages would outweigh the disadvantages. For example, the Center for Budget and Policy Priorities claims that “biennial budgeting may protect the status quo” and that “biennial budgets would have to be revised frequently.”[2]

The aforementioned report from the NCSL concludes that “(t)here is little evidence that either annual or biennial state budgets hold clear advantages over the other.” Ultimately, state decisions on whether to use an annual or biennial budget come down to a collection of factors, from legislative politics to the budget situation to other historical factors, which differ from state to state.

[1] Ron Snell, “State Experiences With Annual and Biennial Budgeting” National Conference of State Legislatures, April 2011, http://www.ncsl.org/research/fiscal-policy/state-experiences-with-annual-and-biennial-budgeti.aspx

[2] Richard Kogan, Robert Greenstein and James R. Horney, “Biennial Budgeting: Do the Drawbacks Outweigh the Advantages?” Center for Budget and Policy Priorities, January 20, 2012, http://www.cbpp.org/research/biennial-budgeting-do-the-drawbacks-outweigh-the-advantages?fa=view&id=3657