Budgeting for Fiscal Stability over the Business Cycle: A Countercyclical Fiscal Policy and the Multiyear Perspective on Budgeting

This essay is a theoretical exploration of a new budgetary system to cope with fiscal uncertainty and instability. ¹ It examines policies requiring positive year-end balances and infers that annual budget cycles lead to a mismatch between the budget cycle and the continuity of public service provision. The author considers a multiyear perspective on budgeting as a potential solution, with countercyclical fiscal reserves to help ensure stability during fluctuating economic conditions. By adopting budget stabilization funds and keeping sufficient reserves, states can better maintain trend-level public services during recessions. Panel data analysis provides empirical evidence that such funds helped stabilize state general expenditures during downturns. The adoption of countercyclical fiscal policy and budget stabilization funds is a step toward a longer-term perspective on budgeting, thus promoting fiscal stability over the economic cycle.     

Flexibility and Adjustment in Public Budgeting: The Netherlands Experience

This article deals with the flexibility of public expenditure, or perhaps the lack of it. Inflexibility finds its roots in the establishment of public services, their expansion and development. Therefore, in this article the structure and development of the public sector is discussed. In many western countries the largest part of the public sector consists of transfer expenditures. These statutory programs are directly affected by economic development, cyclical and structural. That is why attention is directed here to the relationship between the economic situation and perspective on the one hand and the public sector on the other. These are also a reflection of the sociological and political development of the society in question. This is a relationship that is difficult to examine in terms of managing expenditures. In addition, inflexibility is a product of the public services provided, and certain methods, such as multiyear budgeting, can further enhance inflexibility. In the last part of this article, methods to create more flexibility in public expenditure are discussed. Experience with new budget techniques to enlarge flexibility is considered.     

The Local Political Business Cycle

Although local political leaders have fewer policy instruments available than national politicians, they nevertheless engage heavily in the creation of political business cycles, i.e. they try to locate and time the costs and benefits of government policies in such as way as to optimize voter support. The study, which is based on data from the four Nordic countries and Italy and France, shows that expenditures tend to grow faster the closer the local election, while political action to increase local taxes is generally taken only in mid-term years. If one wants to predict how local tax rates and expenditures change, it is as important to know the number of years' to the next election as it is to know the change in the fiscal capabilities of local governments.     

Budgeting during the Clinton Presidency

This article assesses the Clinton administration record of budgeting. During President Clinton's two terms, the federal government moved from an era of large deficits to one of equally large surpluses. This turnaround was caused by both the strong economy and the deficit reduction deals of 1990, 1993, and 1997. Defense spending and interest declined as a percentage of the budget, whereas mandatory spending and nondefense discretionary spending increased. Acrimonious interbranch budgetary relationships dominated, with Clinton ultimately winning far more fights than he lost. Executive branch budgetary and financial management capacity improved during the Clinton administration.     

From Cash to Accrual Budgeting and Accounting in the Public Sector: The Dutch Experience

Traditionally, governments used to deploy input‐based budgeting systems and cash‐based accounting systems. However, these systems do not provide the information that is necessary for a government to operate efficiently and effectively. Therefore, a growing number of countries have already shifted or are planning to shift from cash‐based to some form of accrual accounting in the public sector. Usually, the implementation of some accrual‐based system is linked to wider financial management reforms including performance management requiring information on cost. This paper focuses on the Dutch experience with the shift from cash‐based accounting and budgeting systems to an accrual‐based system.     

Does the Fed Contribute to a Political Business Cycle?

In contrast to findings of other studies, evidence is presented to support the existence of a Federal Reserve-induced political monetary cycle that corresponds to the U.S. presidential election cycle. Using various Taylor rules, we find support for the view that Fed policy turns significantly more expansionary in the seven quarters prior to the election, but only when the Fed chair and incumbent presidential party have partisan affiliations.     

Budgeting for Accountability: Municipal Budgeting for the 1990s

The emphasis of a public budget depends on the time and circumstances in which it is developed. During the 1990s, for example, the emphasis has increasingly been on accountability due to widespread public belief in recent years that government is uncontrollable and responds only to special interests. Over the past few years, local budgeters have begun to adapt to this new environment by improving the accountability of the budget to the public. This article summarizes some of the changes taking place and suggests some additional changes that could be adopted to make local budgeting more accountable.     

The Profession of Budgeting

Budget practitioners may have difficulty in defining a common academic ground for preparation for their careers sufficient to permit calling themselves professionals. Nevertheless, senior budget persons share common concerns, including significant changes in their relationships to the political officials of their agencies. These changes may be the result of the transition from incremental budgeting in a time of plenty to a time of scarcity and intense competition for resources.     

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.     

Performance Budgeting: The Perspective of State Agencies

Although performance‐based budgeting requirements are pervasive, what remains a challenge is how to gain the support from all stakeholders in the budget process that are essential to the integration of performance information with budgeting. This study examines the perspective and role of state agencies on performance budgeting. The finding indicates that for agencies to conduct performance‐informed budgeting, the focus needs to be on elevating managerial capacity to use performance information, and improving measurement quality. Moreover, it is crucial to recognize that performance budgeting is a collaborative process in which each participant plays a valuable role.     

Budgeting for Development: The Case of Nigeria

This article evaluates the developmental efforts of the federal government of Nigeria and how these efforts have proceeded during the "boom and bust" cycles that have been a major feature of the Nigerian economy. The unpredictability of resource flows creates uncertainty in resource allocation and capital accumulation. Thus, economic development is subject to the characteristic "boom and bust budgeting," resulting in disastrous delays and cancellations of expenditures and projects. For economic development to continue uninterrupted, Nigeria must develop a core of ability-based, as opposed to needs-based, programs that must be protected from the hazards of boom and bust budgeting and the business cycle.     

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.     

Recalibrating Policy Orthodoxy: The IMF Since the Great Recession

This special issue reviews patterns of policy stability and change at the International Monetary Fund (IMF) since the Great Recession and attempts to explain their causes. The contributors show that the crisis ignited a reassessment regarding how the IMF would position itself as a pivotal player in global economic governance. Some new ideas and evidence definitely found their way into IMF decision making, but this process was often tempered by the nature of the institution and the powerful interests that control its governing structure. Where change did occur, its causal generators could be found in some combination between IMF staff politics, a string of innovations coming from academic and IMF economists, and the emerging economic powers' creative leveraging of institutional fora both within and inside the Fund.