OFM and the Legislature generally choose to allocate the cost of services only if they meet the following criteria:
- The service is established and mature (costs are predictable enough to model and set)
- The service is used by most state agencies or benefits the state as a whole rather than specific clients
- The service is foundational to the enterprise of the State’s business.
To create an allocation, OFM and the Legislature determine the total cost of the service or expense. Then, they identify an appropriate allocation factor to spread the cost in the most fair way. Common allocation factors are number of full time equivalent (FTE) employees budgeted in each agency, rentable square feet in Thurston county, or expected use of the service. (The expected use charge applies primarily to the Office of the Attorney General, Office of Administrative Hearings, and Office of the State Auditor, all of which charge clients an hourly rate for their services.). In some cases, the allocation methodology includes multiple factors. Then, the total cost is divided among agencies using the allocation methodology selected.
Each client agency’s expenditure authority is adjusted to reflect their allocated share of the total cost. Agencies generally get expenditure authority from the funds the otherwise use to pay their operating costs, and have the opportunity to request that OFM change their fund source (called their fund split) with their annual budget request to OFM.
The cumulative impacts of all the central service allocations are collected in a tool called the Central Services Model. Though the Central Services Model is not a predictive tool, it is a convenient way to collect all the information in once place in order to upload the net impacts into OFM and the Legislature’s budget systems, and report the impacts to client and provider agencies.
When Are Allocations Established or Adjusted?
Each year as part of the regular budgetary process:
- Agencies may request to change their fund splits each fall. These requests should be submitted with agency budget requests per the OFM budget instructions.
- OFM and the Legislature can establish, modify, or eliminate an allocation in any biennial or supplemental budget. Generally allocations are created or eliminated in biennial budgets and minimally adjusted in supplemental budget years, but significant changes can happen in a supplemental year at the discretion of OFM and the Legislature.
- OFM generally updates allocation data for all allocations in the biennial budget. This includes updating the number of FTEs in each agency, number of rentable square feet each agency occupies, and amount of the service agencies are expected to use. Allocation data is only updated in supplemental budgets if there is a convincing reason to do so.
- If the Legislature funds a decision package for an allocation service, the cost of that decision package gets added to the allocation. All client agencies will see an increase in their bill to reflect their share of the total cost of the decision package. Similarly, if the Legislature reduces the budgeted expenditures for an allocated service, or if the service has accumulated too much revenue, rebates can be issued to client agencies by reducing the allocation and all client agencies will see a decrease in their bill.
- Upon completion of the Governor’s budget, OFM publishes the expected central service allocation totals to match the Governor’s budget for each service, by agency. An updated version of this data is also published upon final passage of the enacted budget with allotment instructions on the OFM website. This example shows adjustments made due to the enactment of the FY2016 Supplemental Budget.