Municipal Capital Budgeting: An Examination

The state of capital budgeting theory is going through its growing pains. While traditional literature on capital budgeting is grounded in rational decision-making, Nunn (1990) has suggested that such an approach is too limited to be of significant value. New theories, he argues, need to reflect differences in capital demand and differences in approaches to local policy, thereby reflecting both the economically-rational and other components of capital budgeting. In this study, we examine the rigor of the traditional rational approach and the typology put forth by Nunn. Based on a broad cross-sectional analysis of municipal finance directors, we find that capital budgeting is more complex than usually presented. Yet contrary to the argument by Nunn, we also find that the process is restricted more to internal participants, with limited and targeted participation by the public and other external actors.     

The Fables and Foibles of Federal Capital Budgeting

This article critically evaluates the notions behind proposals to institute capital budgeting at the federal level. Four critical assumptions are found to be behind the contention that capital budgeting will improve federal investment policies: (1) an agreed-upon and accepted definition of a capital budget exists; (2) a capital budget "adds value" by improving the quality of information; (3) better information leads to better decisions; (4) better decisions lead to better actions. Each of these assumptions is evaluated using examples drawn from various levels of government and from the private sector. The general finding is that if these assumptions hold, then it is reasonable to expect that capital budgeting will lead to better programmatic decisions. Unfortunately, one or more of these assumptions usually does not hold and for this reason the case for federal capital budgeting is not very strong     

Searching for Efficiency in the Public Sector: Interim Evaluation of Performance Budgeting in New Zealand

In this article I examine the efforts to promote performance measurement in the public sector with particular reference to New Zealand. In section two I examine the State Sector Act of 1988 and the Public Finance Act of 1989, which together brought about changes in the New Zealand public sector. In section three I examine the problems of implementing the reform. In section four I discuss the experience of developing statements of performance measurement required under the Financial Administration Act of 1989 and in section five I develop an alternative scheme on the basis that a uniform approach is less likely to be applicable to a range of public sector agencies. The final section contains a brief conclusion.     

Use of Capital Budgeting Techniques and an Analytic Approach to Capital Investment Decisions in Canadian Municipal Governments

Capital budgeting techniques are useful tools to municipal administrators in managing organizational resources. A survey of capital budgeting practices of Canadian municipal governments reveals that a minority used capital budgeting techniques; payback period dominates over discounted cash flow analysis in evaluating capital investments; and pitfalls are common in its application. More specifically, there is an emphasis of quantitative/financial items over qualitative/intangible factors. In this study, the analytic hierarchy process, a multi-attribute decision model that accounts for both tangibles and intangibles, is presented as a tool for capital budgeting decisions such that resource allocation becomes more effective in municipal governments.     

How Capital Budgeting Helped a Sick City: Thirty Years of Capital Improvement Planning in Cleveland

During the 1970s, Cleveland's capital improvement plan (CIP) was scorned as a bad joke, and the city's roads, bridges, and public buildings fell into disrepair. The city's default on its fiscal obligation in 1978 seemed to cap the city's infrastructure problem; there was no comprehensive strategy for capital spending and in a bankrupt city, no money to spend in any event. Yet, during the 1980s, with support from the administration, the business community, and the innovations of a small group of dedicated urban planners, the CIP was restructured and hundreds of millions were systematically invested in public infrastructure. By the 1990s, most of the innovative changes of the 1980s seemed to be institutionalized, but there were ominous clouds on the horizon.     

The Role of Civil Servants in National Budgeting: An International Comparison

Beginning in October 1988, a budgeteer-exchange program has existed between Her Majesty's Treasury in the United Kingdom and the Office of Management and Budget in the United States. Cultural and constitutional differences make the jobs of the budgeteers in each country analogous but not equal. Differences that exist include organizational structure, work content, and information presentation to legislative bodies.     

Capital Budgeting and Management Practices: Smoothing Out Rough Spots in Government Outlays

Public capital budgeting and management literature recommends long‐term capital and fiscal planning practices to prevent large fluctuations in outlays caused by fiscal stresses. This study extends the literature by examining the effects of long‐term capital planning and management practices such as the use of a capital budget, separate impact analyses, and the use of bond financing and dedicated revenue sources on capital spending volatility. The empirical results confirm that several of these practices smooth out state government capital outlays that vary because of socio‐economic and financial factors.     

Public Capital Investment and Economic Growth in Forth Worth: The Implications for Public Budgeting and Infrastructure Management

There is a common assumption that local government investment in infrastructure stimulates private development. This article examines relationships in one southwestern city between public capital spending and city infrastructure assets and private economic activity as measured by building permit activity, permit values, and assessed property valuations. Two research questions are examined: (1) Is public investment in new capital associated with private capital formation? and (2) Is public investment associated with improvements in the property tax base? The findings hold implications for infrastructure planning, budgeting, and management. First, public and private capital spending patterns varied in tandem across several cycles, and tracking such cycles may help public managers predict short- and mid-term infrastructure needs. Second, utility capital spending is critically related to private capital formation, and may offer higher fiscal returns than other public infrastructure. Third, infrastructure capital had a strong significant effect on the assessed value of urban property, and will therefore influence the property tax base.     

Multi-Sphere Governance in South Africa: An Interim Assessment

After considerable debate about whether a democratic South Africashould be constituted on federal lines, the 1996 Constitutionadopted three "distinctive, interdependent and interrelated"spheres of government. "Co-operative government" followed theGerman model, emphasizing concurrency, provincial delivery ofnational policies, and provincial representation at the center.Implementing this model, with new institutions, actors, andprocesses, has proved difficult because the governing partystrongly favors a relatively centralized polity, and becauseprovinces and local governments have weak political, administrative,and fiscal capacities. The analysis concludes that while thenew system has become fairly well established in a short time,its long-term success in promoting the values of democratization,effective governance, and conflict management remains uncertain.     

Zero Base Budgeting: The Manager's Budget

This article offers an assessment of zero-base budgeting (ZBB) derived from a field study conducted by the Urban Institute and supported by the National Science Foundation. Four cities and four states participated in the study, and several hundred public officials were interviewed.     

The Budget Enforcement Act of 1990: The Path to No Fault Budgeting

The Budget Enforcement Act of 1990, included in the controversial and comprehensive budget legislation passed by Congress in October, makes a number of significant changes in federal budgeting. It shifts the focus of the budget process from deficit reduction to spending control, provides five-year spending totals and mini-sequesters for defense, international and domestic appropriations, and puts entitlements and revenue expenditures on a pay-as-you-go basis. The Gramm-Rudman-Hollings deficit targets have been raised substantially, Social Security surpluses taken out of the deficit calculation and allowance made for further adjustments for inflation, Operation Desert Shield, and other emergency spending, minimizing the prospect for general sequestration. OMB has been given important new estimating authority and the roles of the congressional committees involved in budgeting have been altered.     

Budgeting Rights: The Case of Jail Litigation

Judicial decisions are one element in the erosion of local government budgetary discretion. For example, litigation concerning constitutional rights forces local government officials to allocate resources toward the rights-based population. While rights-based allocation decisions may narrow the budgetary discretion of public officials, some managers may, paradoxically, be "better-off"—defined as the ability to protect and defend their budgets — when discretion is reduced. This thesis is tested through a case study of jail overcrowding litigation in a county government.