Wildavsky’s Model

2. Wildavsky’s Model Aaron Wildavsky (1930-93) Pioneering work in public budgeting “In order to understand the budgeting process of a country, you must first determine the resources available to the country and the level of predictability in the process.” (1975)

3. Wildavsky’s Model Four possible outcomes based on wealth & stability • Rich and stable environments lead to incremental budgeting • Rich and uncertain produce alternating incremental and repetitive budgeting or supplemental budgeting • Poverty and predictability generate revenue budgeting • Poverty and unpredictability generate repetitive budgeting Factors: GDP, Per Capita Income, Tax Structure, Growth Rate, Educational Levels, Political Structure, and Culture

4. Wildavsky’s Model • Rich and stable • US, Canada & UK produce incremental budgets • Rich and unstable • United Arab Emirates incremental and repetitive • Poor and stable • Philippines engaged in revenue budgeting • Poor and unstable • Ghana engaged in repetitive budgeting

5. Rubin’s Model Irene Rubin (1930-93) Sociologist & professor of public administration Author of The Politics of Public Budgeting “Public budgeting is inherently political. Short-term partisan goals overrun long-term public interest and democratic processes, eroding institutional and public capacity to address collective problems.” (2005)

6. Rubin’s Model The political environment affects the process Based upon five decision making clusters: • Revenue Cluster • Budget Process Cluster • Expenditure Cluster • Balance Cluster • Budget Implementation Cluster

7. Rubin’s Model • Revenue Cluster • Raise or lower taxes & tax breaks for whom? • Budget Process Cluster • Who should participate? • Expenditure Cluster • Competing interest groups • Balance Cluster • Should the budget be balanced? • Budget Implementation Cluster • Can we vary from the budget & can revisions be made?

8. Framing Comparative Budgets Factors • Form of government • Key budget officials • Revenue sources • Expenditure sources • Accounting method • Performance budgets • Central capital budget • Subnational budget authority

9. Form of Government Country Brazil Canada Ghana Philippines United Arab Emirates United Kingdom United States Form of Government Republic Constitutional Monarchy Republic Republic Federation Constitutional Monarchy Republic

10. Key Budget Officials Country Brazil Canada Ghana Philippines United Arab Emirates United Kingdom United States Officials President, Ministry, Budget Commission Prime Minister, Parliament Ministry of Finance, Parliament DBM, Congress Supreme Council, Minister Chancellor Exchequer, Parliament President, OMB, Congress

11. Principal Revenue Sources Country Brazil Canada Ghana Philippines United Arab Emirates United Kingdom United States Revenue Sources Income, social security, industrial products Personal & corporate income taxes Direct & indirect taxes, trade Income, profits, property, trade Business & oil Personal & corporate income taxes, VAT Personal & corporate income taxes

12. Major Expenditures Country Brazil Canada Ghana Philippines United Arab Emirates United Kingdom United States Expenditures Education, transportation, health Elderly, health, social services, defense Ministries & debt Social services, defense, debt Defense, education, social services Social security, education, defense, health Social security, Medicare, defense

13. Accounting Method Country Brazil Canada Ghana Philippines United Arab Emirates United Kingdom United States Expenditures Modified accrual Accrual & cash for parliament Moving to accrual Taxes in cash, accrual for expenses Full accrual Full accrual Cash

14. Central Capital Budget Country Brazil Canada Ghana Philippines United Arab Emirates United Kingdom United States Expenditures Yes Yes Yes Yes No Yes No

15. Open Budget Initiative Transparency 71% n/a 54% 55% n/a 87% 82% Country Brazil Canada Ghana Philippines United Arab Emirates United Kingdom United States

17. Federal Budgeting in the United States

18. Quiz Question 1 Which assists the President in preparing the federal budget? A. Congressional Budget Office B. Office of Management and Budget C. Bureau of the Budget D. General Accounting Office

19. Quiz Question 1 Which assists the President in preparing the federal budget? A. Congressional Budget Office B. Office of Management and Budget C. Bureau of the Budget D. General Accounting Office

20. Quiz Question 2 This agency develop forecasts of the economy and baseline projections for the budget for Congress A. Congressional Research Service B. General Accounting Office C. Office of Management and Budget D. Congressional Budget Office

21. Quiz Question 2 This agency develop forecasts of the economy and baseline projections for the budget for Congress A. Congressional Research Service B. General Accounting Office C. Office of Management and Budget D. Congressional Budget Office

22. Quiz Question 3 Which one receives the smallest outlay? A. Social Security B. Medicare C. National Defense D. Health Care

23. Quiz Question 3 Which one receives the smallest outlay? A. Social Security B. Medicare C. National Defense D. Health Care

24. Quiz Question 4 The US uses which type of accounting system? A. Cash Basis B. Modified Accrual C. Accrual D. Hybrid Shared Accrual

25. Quiz Question 4 The US uses which type of accounting system? A. Cash Basis B. Modified Accrual C. Accrual D. Hybrid Shared Accrual

26. Quiz Question 5 This law adopted a form of accrual accounting requiring the cost of credit to be shown up front by recognizing the expected long term cost from defaults and interest subsidies A. The Government Performance and Results Act of 1993 B. The Credit Reform and Subsidy Act of 2009 C. The Federal Credit Reform Act of 1990 D. Civil Service Retirement and Disability Act of 2008

27. Quiz Question 5 This law adopted a form of accrual accounting requiring the cost of credit to be shown up front by recognizing the expected long term cost from defaults and interest subsidies A. The Government Performance and Results Act of 1993 B. The Credit Reform and Subsidy Act of 2009 C. The Federal Credit Reform Act of 1990 D. Civil Service Retirement and Disability Act of 2008

28. Federal Budget Process

29. Federal Budget Process • OMB preparing executive budget • CBO developing forecasts • Senate & House budget committees set limits • Joint resolution passed • Not enacted into law but used for procedure • Reconciliation produces bills for signature • Adopted budget enacted piecemeal • Shared authority through compromise

30. Discretionary Spending 12 appropriation bills must be passed each fiscal year Agriculture Commerce, Justice and Science Defense Energy and Water Financial Services Homeland Security Interior and Environment Labor, Health and Education Legislative Branch Military Construction and Veterans Affairs State and Foreign Operations Transportation, Housing and Urban Development

31. Authorization vs. Appropriation • Funds for programs must be approved by an authorizing committee while spending authority is then appropriated by the appropriations committees of both houses of congress • Authorizing legislation sets policies and funding limits for programs while appropriations legislation is what a program needs before it can spend any money • However, the difference between policy making and funding is often blurred… authorizations for many programs have long lapsed, yet still receive appropriated amountswhile other programs that are authorized receive no funds at all

32. Federal Outlays

33. Federal Revenues

34. Federal Budget Deficit

35. Federal Budget vs. GDP

36. Web Resources http://www.imf.org International Monetary Fund: economic data and statistics http://www.worldbank.org World bank: country overview and analysis http://www.internationalbudget.org International Budget Partnership: analyzes public budgets http://www.finance.gov.il/budget/takzleumiim.htm International Portal: links to 70 national budget sites