A call for budget reform

This article calls for reform of the U.S. Federal budget from two perspectives, preparation and content. The first aspect of reform proposes to amend the Budget and Accounting Act of 1921 by eliminating the requirement for an executive budget. It proposes replacing the executive budget submission with a budget prepared by a joint executive-legislative council. While the decision-making process for approval of the budget would remain the same, the council-proposed budget would eliminate several time consuming issues of disagreement such as whose economic estimates are used. The second aspect of reform proposes an examination of the contents of the budget. The current budget focuses on agency appropriations and the debt/surplus figure. Many more issues such as unfunded pension liabilities, true costs of credit, value of government-owned assets and the number of appropriations are largely neglected. This aspect of the budget should be examined by a non-partisan group of experts to make recommendations for an improvement in the informational content of the budget. Improved information could help support sound decisionmaking. The article contends that we can preserve the constitutional separation of powers dealing with the budget while we simply improve the methods used to prepare the document itself, and once the document is prepared it would be structured so it can be examined in a meaningful manner by interested citizens in order to ascertain the financial conditions of the country.     

Factors Explaining Public Participation in the Central Government Budget Process

This paper attempts to examine which factors explain public participation in the budget process in an international comparative approach. In particular, we investigate which socioeconomic, institutional, and political factors promote public engagement in the central government budget process. Using a sample of 93 countries, our results indicate that Internet penetration, population diversity, governmental financial situation, and budget transparency determine opportunities for public engagement in the central government budget process. In addition, we show that not only budget transparency promotes public participation but also public participation is necessary to enhance budget transparency.     

Budget Deficits in the States: Massachusetts

Massachusetts entered the current recession carrying a structural deficit counterbalanced by a healthy, $2.1 billion stabilization fund, equal to 10 percent of total tax revenue. Like most states, Massachusetts only dimly realized the depth of the current recession in October 2008 when revenue collections began to slip and welfare caseloads began to increase. By May of 2009, a total FY2009 budget gap of $4 billion had been identified, the combined effect of plummeting revenues and increased costs for welfare and medical assistance. The Commonwealth closed the FY2009 budget gap through a combination of budget cuts, stabilization fund transfers, and federal stimulus funds. The Commonwealth faced an even larger $4.8 billion budget gap in FY2010. With the stabilization fund severely depleted, the FY2010 budget gap was closed primarily by budget cuts, federal stimulus money, and a sales and use tax increase. Because of the Commonwealth's reliance on one-time money to close current budget gaps, a significant budget gap of at least $2.8 billion for FY2011 was identified soon after passage of the budget. In this paper we discuss the political and historic context in which the budget gaps occurred, outline the causes of the budget gaps, and evaluate the strategies employed to close them.     

Separation of powers and political budget cycles

Political budget cycles (PBCs) arise when the electorate is imperfectly informed about the incumbent’s competence and the incumbent has discretion over the budget. Focusing on the second condition, we study how separation of powers affects PBCs in the composition of government spending. We find that the details of the budget process, namely, the bargaining rules, the status quo’s location, and the degree of compliance with the budget law, are critical for the existence and the amplitudes of PBCs. In particular, when the status quo is determined by the previous budget and there is high compliance with the budget law, separation of powers acts as a commitment device which solves the credibility problems that drive PBCs.     

Budgetary Decision Making by Executive and Legislative Budget Analysts: The Impact of Political Cues and Analytical Information

We explore the extent to which attributes of individual analysts and institutional factors lead to budgetary decisions based on political cues and/or analytical information among executive and legislative budget analysts. We surveyed executive and legislative budget analysts in 13 western states to ascertain the factors that influence their budgetary decisions. The findings build on evidence from previous studies that confirms the complexity of factors affecting budget analysts' decisions, and they provide empirical support to analysts' use of a combination of information labeled "budget rationality" by Thurmaier and Willoughby. Also, we provide more conclusive evidence that both executive and legislative analysts follow similar decision-making patterns.     

Legislative budget cycles

Recent literature suggests that electoral budget cycles are a phenomenon of new rather than established democracies. What part of the democratization process explains the amelioration of the political budget cycle? We argue the answer lies (in part) in the development of a strong party system. We extend the classic Rogoff-Siebert model to show that political budget cycles are possible in a legislative context with rational voters. We then demonstrate that the development of a strong party system can restrain political budget cycles in a majoritarian electoral system. Finally, we follow prior work in using vote share volatility as a measure of the institutionalization of the party system. Using newly collected vote-share data for 433 elections for 90 democracies from 1980–2007, we calculate a measure of party institutionalization. We then use this data to demonstrate that institutionalized party systems are associated with mitigated political budget cycles, especially in majoritarian electoral systems.     

Nonpartisan Legislative Budget Offices: A Tentative Step toward Improving Legislative Oversight

Strengthening the budgetary powers of legislatures through nonpartisan budget offices adds to the capacity‐building repertoire of development donors. Budget offices are supposed to provide legislatures with information and analysis independent from the executive. The United States Agency for International Development believes that strengthening the legislature's power of the purse improves governance. We highlight USAID‐funded legislative strengthening projects implemented in Jordan, Kenya, Morocco, and Afghanistan to show how these budget offices function. There is a significant potential for these units to assist members of parliament in understanding the budget process, the broad fiscal challenges facing government, and expenditure control and budgetary trade‐offs that affect present and future spending. These cases demonstrate the challenges of creating and sustaining a parliamentary budget office. Finally, in an effort to make budget offices effective and sustainable, we outline several key steps that we believe are important both for donors and the legislative bodies.     

Do fiscal rules cause budgetary outcomes?

This paper focuses on the observed empirical relationship between fiscal rules and budget deficits, and examines whether this correlation is driven by an omitted variable, namely voter preferences. We make use of two different estimation methods to capture voter preferences in a panel of Swiss sub-federal jurisdictions. First, we include a recently constructed measure of fiscal preferences. Second, we capture preferences through fixed effects with a structural break as women are enfranchised. We find that fiscal rules continue to have a significant impact on real budget balances.     

Is The National Budget Controllable?

Previous scholarly analyses of national spending have shown a penchant for incre-mentalism in interpreting changes. They have also focused almost exclusively on annual national outlays or annual expenditures. This article argues that, in many cases, budget authority figures provide a better basis for analyzing the national budget. The author gathered annual budget authority (BA) figures from fiscal years 1969 to 1993 and used this BA data for an empirical test of budget controllability. If the national budget has or has not been controlled in the recent past, then it should help us to judge whether or not it is controllable now. Five potential major budget interventions from fiscal year 1980 to 1993 were tested using an interrupted time-series and two regression models. Different intervention results are anticipated depending upon whether one has a policy perspective that is incrementalist, international systemic, or domestic political. The analysis provides more support for the domestic political perspective than for incrementalist or international systemic views. Budget authority was found to be superior to outlays for linking budget results to policy decisions. The national budget responded appropriately to policy decisions in the recent past. In this sense, the budget was controlled and we should view it as controllable.     

参与式预算的公共投资效率意义——以浙江温岭市泽国镇为例

主要的论题是政府在公共预算制定过程中,通过怎样的机制实现公共投资效率的最大化.采用了规范研究与实证案例研究相结合的研究方法.研究表明,公共投资效率的涵义是公共投入为相关民众带来福利的最大改进,其规范性制度意义是相关民众就公共预算方案达成一致同意.研究指出,实现公共投资效率的核心问题是居民偏好的有效表达与偏好的集结;基于偏好表达与偏好集结的不可能性困境,在居民偏好给定的情况下,通过居民参与公共预算方案的讨论与协商,居民的偏好能够有效表达,并在协商过程中理性地、非强制地改变自己的偏好,进而就公共决策达成一致同意.浙江省温岭市泽国镇实施的参与式公共预算模式,有效解决了公共投资决策中的偏好表达与偏好集结的问题,促进了公共投资效率的实现,在基层公共预算制度改革中具有普遍意义.居民在公共预算制定过程中的协商参与,不仅使得政府公共决策具有了政治上的合法性,公共决策满足了民众需求,更重要的是促进了公共投资效率的实现.     

Multi-Year Forecasting and Municipal Budgeting

The "black hole" of budget theory still is, after 50 years, budget preparation—much effort goes in but little seems to come out. This article examines municipal forecasting as a means of reforming this first stage of the budgetary process. Drawing on evidence from a cross-sectional study, we find that forecasting is likely to be within the cognitive limits of most municipal budget directors Moreover, budgetary forecasting can be structured to reflect previous and current political concerns.     

The timing of elections in federations: a disciplining device against soft budget constraints?

We introduce political economics into the soft budget constraint problem by asking if the timing of elections has the potential to harden budget constraints. Specifically, we ask under which circumstances the soft budget constraint problem is worse—with synchronized elections, i.e. simultaneous central and regional office terms, or with staggered elections, i.e. terms of office that do not coincide. We find that staggered elections clearly improve fiscal discipline at the local level as well as welfare.     

Spending Stabilization Rules: A Solution to Recurring State Budget Crises?

Recurring state fiscal crises raise a fundamental question: Is it possible to stabilize budgets over the business cycle? This paper examines spending stabilization rules, an alternative to the inaccurate process of budget forecasting. Under two spending rules, we assess how state budget situations would compare with actual experience. Our analysis reconstructs recent aggregate state budget patterns assuming states had adopted a rule and then takes a closer look at California and South Carolina. With surpluses partially invested in a rainy‐day fund, a spending rule resulted in stable growth of state budgets throughout the recession and sluggish recovery of the early 2000s.     

Political budget cycles and election outcomes

This paper addresses two empirical questions. Is fiscal policy affected by upcoming elections? If so, do election-motivated fiscal policies enhance the probability of re-election of the incumbent? Employing data for 65 democratic countries over 1975–2005 in a semi-pooled panel model, we find that in most countries fiscal policy is hardly affected by elections. The countries for which we find a significant political budget cycle are very diverse. They include ‘young’ democracies but also ‘established’ democracies. In countries with a political budget cycle, election-motivated fiscal policies have a significant positive (but fairly small) effect on the electoral support for the political parties in government.     

State Court Strategies and Politics during the Appropriations Process

This article explores state court budgetary strategies and their effectiveness in the appropriations process as perceived by key budgeting actors. In general, we find evidence of state judiciaries that try to remain "above politics" when dealing with budget issues. The most important strategies to this effect include submitting realistic requests, providing documentation to support needs, and not using budget "weapons" at their disposal (e.g., writs of mandamus). However, the survey results do indicate that state judiciaries use certain strategies that have a more political tint, such as lobbying by court officials.     

Budget Redirection in Georgia State Government

Budget redirection in Georgia state government represents a change from the expectation of continuous budget growth to an expectation that budget expansion will be accompanied by compensating budget reductions through an ongoing process of priority assessment. Its essential features are: the requirement that state agencies identify a minimum of 5 percent of their current year's budget which becomes the primary means for funding new programs and services in the coming fiscal year; and a limit, based upon revenue projections, on the amount an agency may request above the current year's budget. Like budget reforms in any era, it emanated from a combination of fiscal, managerial, and political objectives.     

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.     

Redistribution in a political union: The case of the EU

A key function of centralized budgets in federal and political unions is to act as an equalizing mechanism to support economic and social cohesion. This is also the case with the European Union's (EU) budget, which operates as a redistributive mechanism that counteracts the cross-national and cross-regional inequalities created by the single market. Despite the limits on cross-national redistribution imposed by a centrifugal system of representation, the net fiscal position of member states – what they pay to the EU budget minus what they receive from it – is very diverse and has changed quite remarkably over the last decades. In this paper, we investigate how and why the net fiscal position of each member state toward the rest of the EU changes over time. We develop a novel panel dataset (1979–2014) to study how key national and EU-level political and economic variables affect the EU redistributive dynamics. We find that redistribution via the EU budget primarily targets developments in inequality within EU member states, and that an increase in domestic unemployment may also improve the country's fiscal balance. Moreover, we find that voting power in the Council is unrelated to a more positive fiscal balance. However, we find that governments with a centre-right profile are in general more successful in improving their redistributive position vis-à-vis the other member states. This may create a problem of budgetary ‘rent extraction’.     

Rules and Flexibility in Public Budgeting: The Case of Budget Modernisation in Australia

This paper explores the features of public budgeting that make it resistant to efforts to balance central oversight and situational flexibility. Its aim is to help explain why systemic efforts at budget modernisation in the name of ‘devolution’ may have failed to deliver expanded budget flexibility. After defining flexibility, and briefly surveying how it can be inhibited by budget practices using the example of collaboration, the paper applies a taxonomy of general ‘budget rules’ to illustrate the trade‐offs between control and flexibility. It uses an analysis of budget reform in the Australian federal government over the last 30 years to identify a key set of ‘legacy reforms’ – all intended primarily to enable budget flexibility – to show how their design and redesign were purposed as modification to the general rules, and how, ultimately, they were constrained by them.     

Executive Authority, the Personal Vote, and Budget Discipline in Latin American and Caribbean Countries

Recent scholarship on budgeting in Latin American and Caribbean (LAC) countries indicates that political institutions impact the level of budget discipline. Building upon this previous research, we argue that the principal problem that must be addressed in both the government and the legislature to insure strong fiscal discipline is the common pool resource (CPR) problem. At the cabinet level, the CPR problem arises because ministers consider the implications of decisions on their ministries only. The level of the CPR problem in the legislature depends upon the electoral system. Using a data set of LAC countries for the period 1988–97, we find that executive power in the budget process is most effective in reducing budget deficits when electoral incentives for the personal vote is high in the legislature, while strengthening the president (or prime minister) in countries where the personal vote is low in the legislature has no effect .