Ideas, Inheritances, and the Dynamics of Budgetary Change

Long the lifeblood of public administration, budgeting in the United States acquired a new importance during the 1980s and 1990s because of the fiscalization of the policy debate. But how much has American national budgeting really changed? This article examines the evolution of federal budgeting over the past half-century, exploring such developments as the massive growth of entitlements, congressional budget reform, and the protracted battle over the budget deficit. It finds that year-to-year changes in budget results have been relatively small even while budgetary rules and procedures have experienced sweeping change. At the same time, the composition of federal spending has undergone a quiet revolution. The traditional concept of budgetary incrementalism offers an incomplete explanation for these dynamics. To make sense of them, the article focuses on two key factors: the impact of policy inheritances, and the role of actors' causal and normative beliefs. These factors shape the ideational and material context within which boundedly rational actors negotiate decisions. The tension between changes in ideas and entrenched budgetary commitments has often served to stimulate institutional reform.     

The contractual nature of budgeting: A transaction cost perspective on the design of budgeting institutions

Viewing budgets as contracts, transaction cost theory focuses on the costs of negotiating and enforcing the myriad political agreements by which policymakers allocate the government's resources. This essay provides an overview of transaction cost theory and its implications for the design of budgeting institutions. It contrasts the behavioral premises (bounded rationality and opportunism) of the transaction cost approach with those of more traditional budgetary theories, and examines whether commitment and agency costs have structured budget actors' institutional choices. Investigation of the usage of key budget instruments- entitlements, multi-year appropriations, and tax expenditures - suggests that Congress has been more discriminating in its institutional choices than is commonly supposed. Sensitivity to the importance of transaction costs would increase the effectiveness of budget reforms.     

Budgeting for Accountability: A Comparative Study of Budget Reforms in the United States during the Progressive Era and in Contemporary China

Budgeting is an important mechanism for ensuring public accountability. How do budget reforms in the United States during the Progressive Era compare to those in contemporary China? Are administrative and legislative budget controls essential to an effective, efficient government? Though the two countries differ in many respects, significant parallels between their budget reforms are evident. In the United States, electoral accountability alone does not guarantee overall government accountability if proper budgetary institutions are absent. China's recent budget reform reveals that it is possible to develop accountability, absent open elections, but with limitations and constraints. Lessons on budgeting and accountability for other developing and transitional countries are drawn from this comparative study.     

The Role of the European Union Budget in View of EU Enlargement

What is the role of the European Union (EU) budget in the upcoming EU enlargement? This article attempts to answer this question by focusing on the EU budgetary system before and after the enlargement. The analysis of the EU budget helps us understand the political and economic philosophy as well as the practical achievements of the European construction. The upcoming enlargement urges the elaboration of a new vision of Europe, its missions and democratic institutions, and the power sharing between the EU and its member states, with a consequent major reform of EU fiscal and budgetary discipline.     

Budgeting in Slovenia During the Democratic Transition

Slovenia represents an interesting and important case in the study of comparative budgeting in post-socialist countries during democratization and economic reform. Compared to Hungary and other nations in the region, Slovenia has had more budget stability and has maintained fiscal balances through shared political norms and strong ministerial guardianship. Political culture, institutional capacity, and the nature of governing coalitions all affected budget outcomes. In general, Slovenia has moved more quickly to reform its budgetary institutions and processes but still faces a range of difficult budget issues and choices.     

Regulating digital broadcasting in Europe: The limits of policy convergence

In 1996–67 France, Germany and Britain overhauled their broadcasting legislation, at least in part in response to the impact of digital technology. The fact that these countries felt it necessary to reform their broadcasting systems at the same time, that they were all facing the common challenge of digital broadcasting, and that they had all recently liberalised their telecommunications industries in the face of technological change and EU policy leadership, led to the expectation that their broadcasting policies might also converge in a similar direction; an expectation supported by much of the literature on policy convergence. This article examines the broadcasting reforms that were undertaken and finds that there was very little evidence of policy convergence and attributes this largely to the strong, national institutional structures and intense politicisation that characterise the broadcasting sector.     

The Evolution of Budgetary Institutions in Estonia: A Path Full of Puzzles?

This article examines the evolution of budgetary institutions in Estonia between 1993 and 2008, with a main focus on rules governing the preparation, adoption, and implementation of the state budget. It discusses the initial choice of budgetary institutions in 1993 and subsequent developments in the light of theoretical propositions put forth by the fiscal governance literature. The case of Estonia poses a number of puzzles, and the article seeks to explain the institutional choices in Estonia: Why did the coalition government opt for a delegation mode of fiscal governance in 1993? Why has the preparation phase of the budget process evolved toward a contracts approach from 1994 onward, while the adoption phase has moved closer to a delegation mode? The article demonstrates that alongside government type, institutional choices can be influenced by lesson‐drawing from history, examples of other countries, and negative experiences gained in legislative budget process.     

Multi-Year Budgeting: A Review of International Practices and Lessons for Developing and Transitional Economies

In recent years, many developed countries have moved to develop their annual budget process in a strategic multi-year framework. While a common feature of multi-year budgeting approaches is the inclusion of revenue forecasts and expenditures estimates for two or three years beyond the current year, multi-year budget practices vary substantially between countries. This article reviews multi-year budgeting practices in six developed countries (Australia, Austria, Germany, New Zealand, Great Britain, and the United States) and attempts to draw lessons from these experiences for the potential application of multi-year budget techniques by developing and transitional countries. We draw five lessons from the multi-year budget practices of developed countries that are relevant for developing and transitional economies: (1) a multi-year dimension could be a valuable fiscal policy and management tool for developing and transitional countries; (2) the approach chosen in each developing or transitional economy should reflect the country's policy objectives, unique budget institutions and traditions, and administrative capabilities; (3) the introduction of a multi-year budget dimension is a gradual process; (4) the multi-year budget should be used to encourage the constructive involvement of line ministries in the budget process; and (5) the usefulness of the multi-year budget approach will crucially depend on the reliability and accuracy of the medium-term budget estimates.     

State Budgetary Processes and Reforms: The California Story

This paper analyzes state budgetary processes and reforms to inform California budgetary policy. We consider key institutional provisions, including budget periodicity, tax and expenditure limitations, balanced budget and reserve requirements, and supermajority vote requirements, and analyze the extent to which changes are likely to advance procedural norms. Our analysis suggests that empirically unproven assumptions and poorly articulated linkages between budgetary processes and outcomes have undermined the state's ability to understand the budgetary problem and identify effective reforms. We recommend a focus on procedural norms and related reforms that promote effective budgeting processes as a less partisan framework for reform.     

Portfolio Budgeting in the Australian Portfolios-Principles and Practice

In the mid-eighties Australia implemented a budgeting system that is similar in its principles to the U.S. PAYGO rule and the now defunct Policy and Expenditure Management System of Canada. Termed as portfolio budgeting, it seeks to encourage greater ministerial participation (a ministry comprising a number of related departments) in the portfolio budget process. It obligates portfolio ministers to offer offsetting savings for funding new policies. Ministers have to thereby set new policy priorities so that only the most deserving new policies obtain funding through the savings identified. Additionally, portfolio budgeting requires ministers to prioritize their ongoing programs so that budget allocation to these programs reflects ministerial priorities. The article examines the practice of portfolio budgeting in the Australian portfolios in light of these objectives. The article suggests that portfolio budgeting has caused greater ministerial involvement in budgetary management. However, there has been little significant change in budget decision making at the portfolio level. The state of play of portfolio budgeting at the national budget process (cabinet and the Department of Finance) offered little incentive to portfolios to provide offsetting savings for new policy proposals. And, the appropriation structure and the organizational and political dynamics impeded ministers from allocating and reallocating their budgets (operating expenditure or running costs) for ongoing programs along ministerial priorities.     

Budget institutions and taxation

While a number of different studies have explored the effects of budgetary procedures and the centralization of the budget process on government debt, deficits and spending, few of them have explored whether such fiscal institutions matter for public revenue. This article argues that centralizing the budget process raises the levels of taxation by limiting the ability of individual government officials to veto tax increases in line with common-pool-problem arguments regarding public finances. Using detailed data on budgetary procedures from 15 EU countries, the empirical analysis shows that greater centralization of the budget process increases taxation as a share of GDP and that both the type of budget centralization and level of government fractionalization matter for the size of this effect. The results suggest that further centralizing the budget process limits government debt and deficits by increasing public revenues as well as constraining public spending.     

Trajectories of Administrative Reform: Institutions,Timing and Choices in France and Spain

The influence of national administrative institutions on contemporary reforms has often been noted but insufficiently tested. This article enriches the comparative perspective of administrative reform policies by focusing on four interrelated dimensions: the choices of reformers, institutional constraints, timing and sequencing and long-term trajectories. This article tries to determine whether most similar administrative systems exhibit analogous contemporary reform trajectories in content, timing and sequence. By comparing the administrative reform policies of two ‘most similar’ Napoleonic countries, France and Spain, this article analyses the commonalities and divergences of decentralisation, territorial state reorganisation, civil service reforms and policies that focus on performance management and organisational design. The article identifies the ‘causal mechanisms’ that characterise the specific role of institutions and considers both the role of context and the importance of policy intersections.     

THE SAUDI ARABIAN BUDGETING SYSTEM: AN INSTITUTIONAL ASSESSMENT

This article describes and evaluates the budgetary institutions in Saudi Arabia. The primary sources of information for this study are publications from the Saudi Ministry of Finance and a survey implemented to investigate the different aspects of budget formulation and execution. We find that the Saudi budget experiences difficulties associated with incremental annual line‐item budgeting systems. Although capital expenditures in the education and health sectors are guided by five‐year plans developed by the Ministry of Planning, the rest of the budget preparation procedure is mainly driven by requests from government agencies to increase spending (i.e. a bottom‐up approach), instead of being based on an early determination of the macroeconomic constraints and the acceptable level of deficit (i.e. a top‐down approach). The result is an exacerbation of tragedy of the commons problems associated with information asymmetry and conflict‐avoidance strategies. We discuss possible reasons for this finding and offer budgetary reform proposals. Copyright © 2014 John Wiley & Sons, Ltd.     

Testing Rival Decision–Making Theories on Budget Outputs: Theories and Comparative Evidence

This study demonstrates the link between the degree of economic rationality and budgetary decision–making outputs for Canada, the United Kingdom, and the United States. Three empirical models are derived with low, intermediate, and high degrees of economic rationality, namely, "garbage can," incrementalism, and rational choice budgeting, respectively. The methods used are time series analyses on real disaggregated national government budget outputs for the post–World War II period for Canada, the United States, and the United Kingdom. There was some support found for budgetary incrementalism, and the most consistent support for rational choice budgeting. There was no support for garbage can budgeting.     

Jesse Burkhead and the Multiple Uses of Federal Budgets: A Contemporary Perspective

The work of Jesse Burkhead continues to have great relevance today. Its germaneness could be taken as an indictment of how little progress has been made in federal budgeting in the past half century, but it also says a great deal about Burkhead's insights and the lasting legacy of his work. This article discusses some of Burkhead's ideas on the use of the federal budget and their pertinence to the budget issues of today, including the role of the federal government in the economy, budgetary relations between presidents and Congresses, and the role of performance information in budgeting.     

Is the U.S. Congress an Insurmountable Obstacle to Any “Far‐Sighted Conception of Budgeting”?

In recent years, Congress has recurrently failed to meet its minimum responsibilities in federal budgeting. This article analyzes whether it is possible to repair this problem, using concepts popularized by Allen Schick in his influential article “The Road to PPB.” His article compared the PPB reform effort to the history of budget process reforms that started with the design of the executive budget. It publicized a logical sequence of budget process improvements that started with control and then advanced through management and planning. The article did not substantially address the role of Congress, but eight years after it was published, Congress reasserted its constitutional role in the budget process. Its record of performance since then has ranged from mixed to dysfunctional. The Congress has been criticized for budgetary delays, micromanagement, myopia, procrastination, indiscipline, and an inability to prioritize intelligently. If these faults are set in stone, then an integrated system of budgeting, as described in “The Road to PPB” and related work, is unattainable. On the other hand, if reform of Congressional budgeting is politically feasible, improvements to that system can utilize the unique contributions that a legislature can make to a good system of budgeting.     

论人民代表大会在绩效预算改革中的运作与影响——以广东省A区为例

在当代中国的人民代表大会制下,加强人民代表大会对政府预算的监督是深化预算制度改革的核心内容。但是,在信息不对称的背景下,由于缺乏科学有力、具体可行的制度安排,人大的预算监督在实践中往往被大大弱化。通过参与式观察及无结构访谈的形式搜集广东省A区开展绩效预算改革的实证资料后发现,尽管以财政部门为主导的绩效预算改革模式缓解了人大与政府间的信息不对称现象而有助于加强人大的预算监督,但由于人大在改革中未能发挥主导作用而损害了绩效预算改革的最终效果。因此,发挥人大的内在优势,并以构建强化人大预算监督的制度安排为主要目标,应当是当前地方政府推行绩效预算改革的不二选择,而强化预算体制的公共性则应当是绩效预算改革的基本主轴。     

From Performance Budgeting to Performance Budget Management: Theory and Practice

This article examines the decades‐long practices of performance budgeting in different countries and their associated challenges from a multilayered institutional framework. Based on theory and lessons learned, the article recommends an array of strategies to address institutional and organizational barriers. It also proposes to reconceptualize performance budgeting as a performance budget management system and suggests how multiyear budget planning, financial risk assessment, policy planning, the departmental budget cycle, the program budget cycle, stakeholder engagement, regular spending reviews, and performance audits should be integrated more closely to address the long‐term fiscal challenges faced by many governments and to respond to the public pressure on agencies to do more with less.     

Incremental Thinking: "The Lack of a Budgetary Theory"

Editor's Note: More than 40 years ago. V.O. Key identified the basic budgeting question as: ”On what basis shall it be decided to allocate x dollars to activity A instead of activity B?“ Despite decades of budgetary research and innovation, the question remains unanswered and probably unanswerable. As Key recognized, a solution to this problem would constitute a full-blown theory of government. Although neither Key nor others have provided a firm answer to this basic question. Key's article is a valuable reminder that budgeting is much more than technique. This lesson is immediately forgotten when the latest reform comes to market promising a neat formula for dividing the budget pie. The lesson is relearned again when administrative and political pathologists seek cause and effect for the failure of the most recent promising innovation.