Federal Budgeting and Finance in 1991: The Future is Now

The large federal deficits run throughout the 1980s generated concern that we were mortgaging our future. In 1991, the note came due. The potential for aggravating the long-run deficit problem constrained fiscal policy from reacting to the recession. Institutional and partisan conflict and the controls established by the Budget Enforcement Act (BEA) limited responses to a remarkable budgetary opportunity—the dissolution of the Soviet Union—and to a serious budgetary threat—exploding health care costs. The BEA controls were applied rigidly with a few minor exceptions, and credit reform was implemented successfully; on the other hand, Congress and the president made no headway on further deficit reductions even though long-run projections worsened. The agenda-setting role of the president's budget for the fiscal year 1993 diminished, as the document's format was heavily influenced by the upcoming presidential election. In contrast to this mixed record for federal budgeting, progress was made in building a financial management structure and developing accounting standards.     

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.     

Reforms for Improved Efficiency in Public Budgeting and Finance: Improvements,Disappointments, and Work‐in‐Progress

The past half‐century has brought heightened expectations for what systems of budgeting and finance may be expected to deliver for the public. From systems to provide a first defense against theft and gross misappropriation, they have become systems to help lawmakers direct public resources where they can give the best public return, to help managers efficiently utilize resources under their control, and to communicate plans and results to the public. Government fiscal systems have developed more useful expenditure classification, established new measures for identifying public performance, brought nontraditional spending into control systems, and made finances considerably more transparent. Systems should, in combination with robust democratic institutions, make the public sector perform in the best interests of the citizenry. But in the face of great fiscal system improvements, governments struggle with staying fiscally sustainable, with meeting financial obligations to vulnerable populations, and even with avoiding default, receivership, or bankruptcy. Even as systems improve, government finances decline amid considerable private sector prosperity. Research over the past decade has done little to aid or explain the sweeping expectation and limited success of budget systems to transform essential elements of governance. It is the purpose of this paper to review progress in the development of robust fiscal systems, identify the major obstacles and failures, and link this evidence to the record of recent governmental financial distress, paying particular attention to the struggles of American governments. The broader questions needing to be addressed are the same questions at the forefront of public sector finance 100 years ago; however, the present focus has not been on these broader implications.     

Introduction: Reflections on Two Decades of Congressional Budgeting

Even casual observers of federal policy making cannot help but notice the increasing preeminence of the Congressional budget process. The Congressional Budget and Impoundment Control Act of 1974, which created this process, brought forth profound changes in budgeting practices, both within Congress and between Congress and the president. In addition, the last decade has seen numerous attempts to use the process for deficit control. The goal of this special symposium is how congressional procedures-adapted over time-have affected the federal budgeting process. Each article examines the original purpose of the 1974 statute and analyzes the statute's impact over more than two decades.     

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.     

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.     

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.     

Public Finance Issues and Problems in Switzerland

Switzerland is regarded as a bastion of financial conservatism, yet the Swiss federal government presently faces annual budget deficits of the highest magnitude in recent history. This article provides an overview of measures instituted in Switzerland to control the growth of the public sector and public spending. Recent efforts to raise new tax revenues are also discussed. To place the fiscal dilemma in perspective, an introduction to the structure of Swiss national government and the budgetary process is included. In analysis of Swiss budgetary politics, particular emphasis is given to the influence of the public referendum process on the political dynamics of resource decision making. The authors also analyze the area of the Swiss budget that is growing most rapidly—mandated entitlements—especially payments for unemployment compensation. A prolonged economic recession in Europe has created high unemployment and, consequently, high demand for unemployment compensation and other social "safety net" programs and spending. The most prominent feature of the Swiss political system is that it is headed by a stable coalition government in which leadership does not alternate between different political parties. This system confronts social and policy problems in a slow and deliberate manner due to the necessity for consultation and compromise in a multi-party coalitional government. The advantage of this system is stability and prudence, the disadvantage is perhaps short-term unresponsiveness to budgetary and policy dilemmas of the type now faced in Switzerland. Parallels are drawn between the Swiss budgetary problem and that faced by the U.S. executive and Congress.     

Accrual Budgeting: Accounting Treatment of Key Public Sector Items and Implications for Fiscal Policy

Budgeting in accrual terms is one of the most controversial issues in public sector accounting. In this paper, we analyze the accounting treatment of problematic elements of the financial statements when introducing accrual budgeting, and discuss the effects of the analyzed accounting alternatives on fiscal policy. We focus on three pioneer countries in the implementation of accrual budgeting and accounting: the United Kingdom, Sweden, and New Zealand. The accounting standards of the International Public Sector Accounting Standards Board, the European System of Accounts, and the Government Finance Statistics Manual of the International Monetary Fund are taken as benchmarks.     

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.