Abstract
This chapter develops a simplified framework for conceptualizing budget control. It surveys the centrality of budgeting to organizational control, and focuses on the traditional model of public budgeting to better understand why its practices remain prevalent in government. The chapter develops a new taxonomy to characterize general ‘budget rules’ in the public sector and uses two of the most prominent rules (the ‘annuality’ and ‘purpose’ of spending) to explain how the rules operate through key properties of control. The chapter explores what high flexibility looks like for each of the budget rules and speculates on the implications for sustainable rule modification.
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Notes
- 1.
- 2.
The classic formulation of the key budgeting question in government is that coined by its namesake, V.O. Key, ‘On what basis shall it be decided to allocate x dollars to activity A instead of B?’ (Key 1940: 1138).
- 3.
Budgeting research is multidisciplinary in that its key phenomena have been of interest in disciplines as diverse as economics, political science, public administration, organization studies, psychology, management, and accounting. We concede our characterization of the literature is reductive and inclined toward political science and management, but we note that the two broad approaches we discuss—‘routines’ and ‘economics’—are not inconsistent with other analytical frameworks (for example, Covaleski et al. 2003).
- 4.
Limited in certain of these jurisdictions by the overriding authority of any written constitution, for example as is the case for the Commonwealth (or national) government of Australia.
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We are not aware of this type of rule taxonomy having been developed specifically in the context of public budgeting. Some have articulated ‘classical rules’ of budgetary theory, most of which correspond with public finance principles about the relationship between taxation and expenditure (Jones and Pendlebury 2010). Similar taxonomic intentions inform other analyses of budget behavior, such as efforts to classify the incentive effects of budget controls for ‘strategic misrepresentation’ (Jones and Euske 1991). As we will see, some of these controls—budget constraints, program information asymmetry, detailed and rigid legislative oversight, temporal constraints, and excessive external audit of inputs—have some equivalency in the taxonomy we propose. By and large, though, efforts to develop ‘measurement instruments’ for budget control are to be found in the private sector context (see, for example, the micro-attributes for ‘tight budget control’ proposed in Van der Stede 2001).
- 6.
In his discussion, Forster also sets out analysis to demonstrate why expenditure surge can be explained as ‘rational behavior’ in the sense that perfect ‘phasing’ of expenditure by public officials is not a realistic strategy for managing risk and uncertainty (Forster 1990: 104–108).
- 7.
Having said this, it is important to recognize that even large components of operating expenses within the public sector are in effect nondiscretionary. These include, for instance, eligibility-based statutory entitlements and staffing costs (it is not uncommon for labor costs to account for three-quarters of operating expenses and, whether because of skill set demands or industrial relations arrangements, the related human capital is often not ‘fungible’).
- 8.
This may be due to the increasing adoption of accrual accounting for budget management in the public sector, which deemphasizes the timing of cash transactions and, in theory at least, obviates the need for carryovers (Lienert and Ljungman 2009).
- 9.
Bourdeaux surveys these issues in the context of sub-national (state) governments operating within the US separation-of-powers system, but the broader observations on the interaction between transfer rules and program definition have no less prescience in other political systems. For a more targeted critique of volatility in the way executive government defines and structures programs and outputs in a Westminster-based parliamentary system, see Carlin (2006).
- 10.
Budgeting as continuous adjustment—where approved spending limits are a starting point for ‘rebudgeting’ during the reporting period—is certainly not unknown in government but is strongly associated with incrementalism and informality. For these reasons rebudgeting is often equated with ‘repetitive budgeting’ (Wildavsky 1986: 17–20), which is seen as an indicator of high levels of institutional incapacity and low levels of budget control.
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Di Francesco, M., Alford, J. (2016). Budget Rules and Budget Flexibility. In: Balancing Control and Flexibility in Public Budgeting. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-10-0341-7_4
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