Public budgeting

Public budgeting is a field of public administration and a discipline in the academic study thereof. Budgeting is characterized by its approaches, functions, formation, and type.

Authors Robert W. Smith and Thomas D. Lynch describe public budgeting through four perspectives. The politician sees the budget process as "a political event conducted in the political arena for political advantage".[1] The economist views budgeting as a matter of allocating resources in terms of opportunity cost where allocating resources to one consumer takes resources away from another consumer.[2] The role of the economist, therefore, is to provide decision makers with the best possible information. The accountant perspective focuses on the accountability value in budgeting which analyzes the amount budgeted to the actual expenditures thereby describing the "wisdom of the original policy".[3] Smith and Lynch's public manager's perspective on a budget is a policy tool to describe the implementation of public policy. Further, they develop an operational definition:

A "budget" is a plan for the accomplishment of programs related to objectives and goals within a definite time period, including an estimate of resources required, together with an estimate of resources available, usually compared with one or more past periods and showing future requirements.[4]

Leading definitions

Leading theorists and contributions

  1. Strategic Planning; deciding on the goals and objectives of an organization.
  2. Management Control; management's process of assuring effective and efficient accomplishment of goals and objectives laid out via strategic planning.
  3. Operational Control; focused on proper execution of specific tasks that provide the most efficient and effective means of meeting the goals and objectives ordered by management control.[13]

Approaches to budgeting

A brief note on Systems Theory applied to Political Science: Inputs enter the governmental system that produces outputs which—in turn—are related to outcomes.[16] The conversion of inputs to outputs is a measure of efficiency as the measurement of contributing inputs to impacting outcomes is a measure of efficacy.

Functions of a budget document

As a policy document, a government's budget is designed as a plan for implementing its policy. Traditionally, budgets served as a more rigid tool to implement policy in a retrospective setting. The functions associated with these values are listed under the Traditional Model and are control, management, and planning. The Modern Model, taking a less rigid approach, has replaced the control function with the monitoring function, the management function with the steering function, and the planning function with the strategic brokering function.

to the traditional control function, the monitoring function focuses on the consequences of expenditures.

Steering: as a response to the traditional management function, the steering function serves as a guide for managing.
Strategic Brokering uses the budget document as a means of constantly looking for possible directions and reacting to the environment.

Values in budgeting

Three values are generally discussed in the literature of public budgeting: accountability, efficiency, and efficacy.

Accountability focuses on the inputs going into the system or program in action and is best characterized by the line-item budgeting approach. It is best suited for the control and monitoring functions of a budget.

Efficiency focuses on the process of the system or program and its conversion of inputs (resources) into outputs (policy). Its focus on the process makes this value appropriate for performance budgets and most in-line with management and steering functions.

Efficacy focuses on outputs and outcomes, measuring the impact of policy. This value follows both the program budget and PPBS budget approaches and coincides with the planning and strategic brokering functions.

Six steps of the budgetary process; simplified

Typically, the budget cycles occurs in four phases.[17] The first requires policy planning and resource analysis and includes revenue estimation. The second phase is referred to as policy formulation and includes the negotiation and planning of the budget formation. The third phase is policy execution which follows budget adoption is budget execution—the implementation and revision of budgeted policy. The fourth phase encompasses the entire budget process, but is considered its fourth phase. This phase is auditing and evaluating the entire process and system. See the associated points below:

Types of public budgets

See also

References

  1. Smith, Robert W. and Thomas D. Lynch. (2004) Public Budgeting in America. 5th Edition. Pearson; Upper Saddle River, New Jersey. 37.
  2. Smith, Robert W. and Thomas D. Lynch. (2004) Public Budgeting in America. 5th Edition. Pearson;Upper Saddle River, New Jersey. 37.
  3. Smith, Robert W. and Thomas D. Lynch. (2004) Public Budgeting in America. 5th Edition. Pearson;Upper Saddle River, New Jersey. 37.
  4. Smith, Robert W. and Thomas D. Lynch. (2004) Public Budgeting in America. 5th Edition. Pearson;Upper Saddle River, New Jersery. 37.
  5. Cleveland, Frederick A.(1915)"Evolution of the Budget Idea in the United States". The Annals of the American Academy of Political and Social Science. 15-35.
  6. Key Jr., V. O.(1940)American Political Science Review 34. 1137-40.
  7. Cleveland, Frederick A.(1915)"Evolution of the Budget Idea in the United States". The Annals of the American Academy of Political and Social Science. 15-35.
  8. Willoughby, William F. (1918) "The Movement for Budgetary Reform in the States". D. Appleton and Company for the Institute for Government Research. 1-8.
  9. Key Jr., V. O. (December 1940) American Political Science Review 34. 1137-40
  10. Lewis, Verne E. (Winter 1952) Public Administration Review 12.1. 43-54
  11. Walsh, Mary Williams. "Richard A. Musgrave, 96, Theoretician of Public Finance, Dies". January 20, 2007. New York Times: Business.
  12. Wildavsky, Aaron. (Autumn 1961) Public Administration Review 21. 183-190.
  13. Schick, Allen. (December 1966) Public Administration Review 26. 243-58.
  14. Rubin, Irene S. (1990) "Budget Theory and Budget Practice: How Good the Fit?" Public Administration Review March/April 1990. 179-89.
  15. Rubin, Irene S. (1997) The Politics of Public Budgeting: Getting and Spending, Borrowing and Balancing. Third Edition, Chatham House Publishers: Chatham, New Jersey.
  16. Easton
  17. Smith, Robert W. and Thomas D. Lynch. (2004) Public Budgeting in America. 5th Edition. Pearson;Upper Saddle River, New Jersey. 37.