Public Sector Governance and Accountability Series: Budgeting and ...

272 Salvatore Schiavo-Campo
government from operating or giving formal approval to a budget of which
it knows virtually nothing. In some extreme cases, the legislature does not
meet to consider the budget until after the commencement of the fiscal year
and is thus asked to give retroactive approval to a budget that is already being
implemented. Systematic delays in presenting the proposed budget to the
legislature are a symptom of grave governance problems.
Under special circumstances delays may be justified. The organic budget
law (see chapter 2) should include provisions authorizing the executive to
commit expenditures before the budget is approved, under explicit specified
circumstances. These provisions should be based on the budget of the previous
year, rather than on the new budget that has not yet been scrutinized.
(An example is the continuing resolution used in the U.S. Congress, when
the budget is not approved before the start of the fiscal year in October, to
authorize the executive to commit each month up to one-twelfth of the
appropriations of the previous year.) In all cases, in developing and industrial
countries alike, care must be taken lest these special provisions be
abused and become a systematic way to sidestep the normal budget process.
Individual members of the legislature have different preferences regarding
the manner in which resources are allocated and are subject to a variety of
pressures from their constituents. The sum of these various preferences and
related claims can generate a systematic tendency to increase expenditure
during budget debates (a phenomenon known as logrolling). Much worse is
the practice of “pork,” whereby certain expenditures are introduced in the
budget by influential members of the legislature at the last minute, without
any scrutiny of their economic and social viability and even without the
knowledge of members of the legislature who vote on the final package. (In
the United States, this practice has grown dramatically since 2000, reaching
more than 13,000 different projects in 2005, accounting for a total of more
than US$60 billion.) 7 Accordingly, many countries have adopted procedural
rules to regulate and limit such practices. These rules cover the sequence of
voting on the budget and the legislature’s powers to amend the budget. In
parliamentary systems with a clear majority of one party, the budget prepared
by the executive is routinely approved by the legislature; in most parliamentary
systems, legislative refusal to approve the budget is equivalent to a vote of no
confidence and normally results in the resignation of the government.
To enforce ex ante fiscal discipline, in several countries, such as France,
the budget is voted in two phases: the overall amount of the budget is voted
first, and appropriations and allocation of resources among ministries are
voted only in the second phase. This procedure is aimed at protecting the
overall fiscal target and the aggregate expenditure limit. The real effect of this