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Toward a More Inclusive and Effective Participatory Budget in Porto Alegre
AGENDA • Context • Objectives • Scope and Methodology • Impact Evaluation • What else have we learned?
CONTEXT Porto Alegre was one of the first local government to adopt PB as the core policy for improving governance and reducing social inequalities • Macro Changes in Brazil: The process was initiated during the early years of re-democratization and decentralization in Brazil, which significantly expanded the fiscal, political and administrative space of local authorizes • Local Innovation: It started as a response to social pressure for opening decision making and reducing social inequalities, but also as a strategy of a progressive mayor to gain social support for his progressive agenda under a constrained fiscal situation, and adverse local council • No Single Model: From its early experimental phase, PB has evolved from a very simple governance approach to highly diversified forms of engaging citizens in the budgeting process • Global Dissemination: From a left-wing administration in Porto Alegre, it rapidly expanded in more than 200 cities across the political spectrum in Brazil, Latin America, North America, Europe, Africa, and Asia
CONTEXT • ESW: Joint initiative of LAC Social Development Unit and the Social Development Department Anchor • Demand driven: Municipal Government of Porto Alegre and Participatory Budgeting Council (COP) requested WB support to strengthen the PBsustainability • PoA moved from a fiscal surplus to deficit in 3 consecutive years • About R$ 30 million of public investments prioritized through the PB process on hold • Transition in political leadership
OBJECTIVES Analyze the key challenges and recommend strategic reforms for improving the PB process • Research Questions: • How can the “quality of participation” in the PB be improved? • How can the interface between the PB and municipal fiscal management be strengthened? • How can the capacity of the PB to monitor budget execution be improved? • How can a more coherent system of social accountability in the city be established, • How to improve the articulation between the PB and different participatory fora? • What are the social and fiscal impacts of the PB?
SCOPE AND METHODOLOGY Conceptual Framework • WDR 2004: “the long route of accountability”
SCOPE AND METHODOLOGY • Chapter 1: Quality of Participation • representative survey of Porto Alegre households • 1300 interviews • Desegregated by gender, age, income, and territory • Focus groups with PB participants and non-participants • Interview with key informants • Chapters 2, 3, 4: Interface between PB and Municipal Finance Management, Budget Execution Oversight, the broader local governance space • Information gathering covering the past 15 years • Review of key data on municipal revenue and expenditure • Review of budget policies and guidelines • Review of key internal audit reports • Focus groups with PB participants and non-participants • Interview with key informants • Chapter 5: Impact Evaluation • Uses econometric tools to undertake a counterfactual analysis of the fiscal and social impacts • 150 PB municipalities • Porto Alegre
IMPACT EVALUATION The impacts of PB on Brazilian municipalities • Challenges/Limitations • Need to isolate the influence of PB from other variables which affect social and fiscal outcomes • i.e.: tendency to find PB in LGs run by the Workers Party which have progressive polices independently of having or not PB • PB potentially impacts on many areas, which were beyond the scope of the ESW • Certain impacts are likely to occur over a longer time period which data is not often available • Approach • Use of well-known econometric techniques to evaluate impact on intended variables • Isolating the causal relationship is the most important aspect to make compelling arguments • Comparing Brazilian municipalities that adopted PB to a group of non-PB municipalities with similar characteristics before the baseline point.
IMPACT EVALUATION Although Porto Alegre became internationally known for its progressive governance agenda, few studies tried to estimate the PB impacts • Marchetti’s (2004) evaluation concluded that PB in PoA led to a more progressive distribution of public goods, but did not provide contracfactual to compare results • Zamboni’s (2007) research used randomly Audit Report from CGU to suggest that PB municipalities were likely to have less corruption than non-PB municipalities • Baiocchi et all (2006) used cross-sectional data and a pairing approach to suggest a positive impact on empowerment and poverty reduction • The ESW built on these previous studies, but it used the same set of variables in years prior to the baseline to control for municipalities which have similar dynamics in the intended outcomes before PB was implemented
IMPACT EVALUATION • Expected outcomes of participatory budgeting
IMPACT EVALUATION • Positive social impacts • However, impacts on poverty reduction is more evident in the long run • Positive impact on local tax collection • However, the impact on capital investment to current expenditures is negative
MAY/JUNE/JULY Regions, Thematic and Municipal Forums of Employees; Election of delegates; Prioritization of works and services. First fortnight JULY Municipal Assembly Second Fortnight APRIL/ MAY Single round of assemblies in the regions; election of the thematic priorities; election of councilmen. MARCH/ APRIL Preparation Meetings in the regions; Integration meetings of the delegate forums and planning forums. JULY/ AUGUST/ SEPTEMBER Analysis of the demands and organization of the matrix. Data to send the LDO to the Chamber of Councilmen – August 15th. AUGUST/ SEPTEMBER Discussion and vote on the Budgetary Matrix; beginning of the distribution of resources for the regions and non COP themes. Approval of the LDO by the Mayor by Oct 10. Sanction of the LOA by the Mayor – December 15th. FEBRUARY Recess OCTOBER/DECEMBER Detail of the Investment and Service Plan. Finalization of the distribution of resources to the regions. NOVEMBER/ DECEMBER Discussion in the regional, thematic forums and municipal forum of employees of the alterations of the Internal Regime, general, technical and regional criteria. DECEMBER/ JANUARY Discussion and vote on the Internal Regulation, general, technical and regional criteria. Data to send the LOA to the Chamber of Councilmen – October 15th. Interface between PB and Municipal Finance
Expected Income = Actual Income 110% 105% 100% 95% 90% 85% 80% 75% 70% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Interface between PB and Municipal Finance • The revenue forecasting capacity deteriorated in recent years. Accuracy of municipal income forecasts, 1995–2005
Interface between PB and Municipal Finance • The share of investment prioritized through the PB in relation to total capital investment decreased in recent years. Percentage of total investments planned by the PB, 1997–2006
100% 90% 80% 70% 60% % 50% 40% 30% 20% 10% 0% 1999 2000 2001 2002 2003 2004 2005 2006 Ano Interface between PB and Municipal Finance • The capacity to executed the PB decreased continuously % of PB Priorities Executed
PB as an Independent Budget Oversight Mechanism • Although the PB formally enables citizens to monitor the execution of the Investment Plan, oversight takes place mainly in an ad-hoc manner. • The PB has not fulfilled its potential to improve budget literacy, and has paid scant attention to budget oversight.
Quality of Participation • The PB enjoys credibility among participants and the population of Porto Alegre as a whole. Public perception of the PB by percentage of population, 2006
Evolution of the number of PB participants 1990 to 2006 GeneralTotal Number of OP participants 20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 1993 1994 1998 2003 1999 2004 1997 1992 1995 2002 1990 1991 1996 2000 2001 2005 2006 Year Quality of Participation • Although the initial increase in the number of participants, the trend started to reverse in recent years
Quality of Participation • Social groups that suffer from a lack of incentives to participate: extremely poor, youth, middle- and high-income groups, entrepreneurs. • Over-representation of elder people.
Quality of Participation • Mismatch between the PB’s positive public perception and its weak internal accountability system • Uneven playing field for PB participants in delegating to upper levels of representation • Lack of systematization and records in reporting mechanisms between delegates and their constituencies.