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Relationship between the Legislature and the Budget Office in the Budget Process

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Two key players in the budget process ... Feeble faith in their own institutional self restraint / greater fiscal responsibility ... – PowerPoint PPT presentation

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Title: Relationship between the Legislature and the Budget Office in the Budget Process


1
Relationship between the Legislature and the
Budget Office in the Budget Process
  • Eastern Europe SBO Meeting

  • Chung-Keun Park

2
1. Background of this study
  • Two key players in the budget process
  • Increasing demand for active legislative
    involvement in the budget process
  • OECD experts meeting in October, 2006
    9 countries with different power
    structure
  • - Presidential Mexico, U.S.
  • - Semi-Presidential France, Korea
  • - Parliamentary Italy, Japan,
    Netherlands, Sweden
  • - Westminster Parliamentary U.K.

3
2. Factors affecting relationship between the
Legislature and the Budget office
  • Power structure
  • - Presidential to Westminster Parliamentary
  • Party system
  • - Strong, cohesive two party system

    /
    weaker two party or multiple party system
  • Structure of the legislature
  • - Unicameral / bicameral
  • Structure of the budget
  • - Comprehensive / fragmentary

4
3. Recent trends
  • Executive predominance in 20th century
  • - Expansion of the government
  • - Growth in technical complexity and
    bureaucracy
  • - Rise of disciplined political party
  • Recent resurgence of legislative role in
    budgeting
  • - To improve deteriorating fiscal balance
  • - Demand for transparency and
    accountability
  • - Change from disciplined to fragmented
    party

5
4. Increasing legislative role, positive or
negative for budgetary goals?
  • Fiscal discipline
  • - Feeble faith in their own institutional
    self restraint
  • / greater fiscal responsibility
  • Allocation
  • - Narrow purpose for local constituency
  • / broader national priorities
  • Efficiency
  • - Hamper administrative efficiency
  • / provide sufficient flexibility
  • Accountability

6
  • 5. Interaction between the Legislature and
  • the Budget Office in the Budget Process

7
(1) Budget preparation and submission
  • Deadline for submission
  • - On average, 3 months before new fiscal
    year begins
  • Economic assumptions
  • - MOF or shared responsibility of related
    ministries
  • - Central Planning Bureau (Netherlands)
  • Legally independent body composed of
    200 economists
  • Medium-term budget frameworks
  • - 75 of OECD countries prepare MTBFs
    (survey, 2003)
  • - Not legal requirement in most countries,
    but significant in
  • top-down budgeting
  • - Coalition Agreement in the Netherlands

8
(2) Budget deliberation
  • Legislative committees
  • - Budget committee / Sectoral committees
  • Most countries have budget committee
    but the U.K.
  • Increase of entitlements for sectoral
    committees
  • - Recent trend emphasizing balanced role of
    the two committees
  • Legislative budget office
  • - 3 out of 39 countries with more than 26
    staffs (survey, 2003)
  • - U.S. CBO (Congressional Budget Office)
  • Non partisan / 235 staffs with
    budgeting experiences
  • Providing legislative estimates and
    analysing proposal
  • - Case of Korea, Italy and Sweden

9
(3) Budget approval
  • Amendments
  • - Presidential / Parliamentary
  • Two-stage budget approval in Sweden
  • - Spring Budget Bill aggregate expenditure
    limit
  • - Budget Bill 27 sectoral ceilings and
    appropriations
  • Earmarked provisions
  • - Allocating resources for constituency /
    smoothing negotiation process in the legislature
  • - Executive veto power Line-Item Veto Act in
    the U.S

10
(4) Budget execution
  • In-year report of budget execution to the
    legislature
  • Appropriations accounts simpleprogrammatic /

  • complexadministrative
  • Flexibility in execution process
  • Cancellation or postponement of appropriations is
    permitted
  • under limited conditions
  • France (up to1.5), U.S. (cancellation
    forbidden),
  • Korea/Japan (supplementary budget)
  • - End-year flexibility to avoid wasteful
    end-year surges
  • Audit
  • - From financial audit to performance audit

11
6. Budget reform
  • Most reforms are initiated by the executive
  • - They have more information and
    responsibility
  • Legislative role in budget reform
  • - Top-down budgeting in Sweden
  • - The Budget Enforcement Act in the U.S.
  • - Italys budget reform
  • Requirements for successful budget reform
  • - A common objective and co-operative
    attitude
  • - Enacting the reform in a law as well as
  • establishing it as a practice

12
7. Issues for discussion
  • Tradeoff of more involvement of the legislature
  • - Negative (Fiscal discipline, Efficiency)
  • / Positive (Accountability)
  • Issues to consider for strengthening budget
    process
  • - Information sharing and collaboration of
    two bodies
  • - Simplifying budget classification for
    transparency
  • - Enhancing legislative capacity to
    analyze proposal
  • - More utilization of performance
    information
  • - Ensuring fiscal discipline in
    preparation for future
  • fiscal risk (increasing entitlements,
    population ageing)
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