Budget Planning, Implementation and Monitoring Last Step: Budget Implementation and Monitoring – Government Approach

Chris DroussiotisSeptember 2011

Lecture Series #4

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Table of Contents

Distinguish Mandatory Spending Vs Discretionary Discipline on Discretionary – The IRR/Payback approach Implement and Revaluate – Set up Performance Ratios Moody’s Rating Approach

These slides could be obtain via the Instructor’s Web page at www.celeritymoment.com

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Spending Drives Revenues

Can the U.S. outgrow the problem?

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Spending Drives Revenues

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Spending Drives Revenues

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Revenue Discretion

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The 2011 U.S Budget – Case Study - Lessons Learned

2011 Budget of the United States federal government Submitted February 1, 2010 by Barack Obama to the Congress Congress Passed Public Law 112-10 Total revenue $2.17 trillion (estimated) Total expenditures $3.82 trillion (estimated) Deficit $1.65 trillion (estimated)

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The 2011 U.S Budget – Case Study - Lessons Learned

President Barack Obama proposed his 2011 budget during February 2010. – He has indicated that jobs, health care, clean energy, education, and infrastructure will be priorities.

Obama's Initial Plan (2/2010)

Congress Initial Plan (4/2010)

Obama's Revised Plan (2/2011)

New Projections4/2011

2011 2011 2011 2011Request Spending 3.83 3.71 3.82 Projected Revenue 2.56 2.21 2.17 Budget Deficit 1.27 1.50 1.65

Debt 15.10 15.10 15.10 15.10 Revenue / Debt Ratio 5.90x 6.84x 6.95x

GDP 15.31 15.31 15.31 13.51 Deficit % of GDP 8.3% 9.8% 10.7%Debt % of GDP 98.7% 98.7% 98.7% 111.7%

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The 2011 U.S Budget – Case Study - Lessons Learned

It was widely anticipated that a government shutdown on April 8, 2011 was possible if a budget resolution or a seventh continuing resolution was not passed by the expiration of the sixth continuing resolution on April 8, 2011, which would have caused the furlough of 800,000 out of 2 million civilian federal employees.

However, a deal was reached with just hours remaining before the deadline, averting the shutdown. The deal included $38.5 billion in cuts from what had been budgeted for 2010, in addition to another $10 billion

in cuts that had been imposed in some of the continuing resolution. However, the April 13 Congressional Budget Office estimate showed that, compared with then-current spending

rates, the spending bill would cut federal outlays from non-war accounts by just $352 million through Sept. 30. About $8 billion in immediate cuts to domestic programs and foreign aid were offset by nearly equal increases in defense spending

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The 2011 U.S Budget – Case Study - Lessons Learned

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The 2011 U.S Budget – Case Study - Lessons Learned

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The Moody’s Rating Approach

Moody’s general obligation bond ratings are forward-looking assessments of an entity’s relative credit strength, and reflect our analysis of four rating factors – Economic Condition and Outlook, Financial Position and Performance, Debt Profile, and Management – as measured against a combination of qualitative and quantitative criteria.

The rating outcome reflects a weighting of these assessments according to the

following weighting system:

Economic Strength 40% Financial Strength 30% Management and Governance 20% Debt Profile 10%