Budgetary principles

Beyond the theoretical approach of budgetary principles, different allternative ways of

respecting them, or even violation of them could be found. The following case studies intend to
present a part of the budgetary procedure variety from the budgetary principle perspective.
Universality
- All revenues and expenditures are included in the budget on a gross basis.
- Revenues are not earmarked.
Case study: Net budgeting in Singapore
Singapore has a system of net budgeting, whereby expenditure budgets for services that are
financed by user charges can fluctuate in line with amounts collected as user charges. The Ministry
of Finance will provide supplemental budget authority in such cases. If the revenues fall short of
what was projected, the organisation will have to make up for the shortfall from its own budget. If
extra revenues exceed projections, the organisation will keep them. This only has a material effect
on a few organisations. It would appear to operate well, reflecting the soundness of the revenue
projections. (Blondal, 2006)
Please identify arguments and critics for net budgeting.
Case study: Gross and net budgeting in Ireland
The bulk of government revenues and expenditures are presented on a gross basis in budget
documentation. All domestic tax revenues and Exchequer expenditures are presented on both a net
and gross basis. However, while the spending from non-tax revenues collected by central
government departments and agencies (known as appropriations-in-aid) is presented on a gross
basis, the budget estimates do not include appropriations-in-aid or social contributions within the
revenue estimates. At 7.5 percent of GDP, or 23 percent of revenue, Irelands non-tax revenues are
relatively large. Recognizing the need to provide a clearer picture of the gross Exchequer revenues
and expenditures, the government now presents revenue on a gross basis in the revised estimates
and in its new Alternative Presentation of the monthly Exchequer Statement. However, this
presentation has not yet been extended to the annual budget documentation, making it difficult to
compare budgets and outturn for Exchequer receipts. (IMF, 2013)
Please comment when gross budgeting, respectively net budgeting are recommended.
Case study: Earmarked revenues in US Medicare program
The Medicare program consists of two major parts, each subject to a different form of fiscal control.
Medicare Hospital Insurance (Part A)which covers hospital, skilled nursing facility, and hospice
costsis financed by earmarked payroll and income taxes. These taxes are deposited in a trust fund
from which all Part A benefits are paid. Cumulative expenditures under Part A cannot exceed
cumulative earmarked taxes plus interest earnings on bond holdings purchased when earmarked
revenues exceeded outlays. Supplemental Medical Insurance (Parts B and D) is subject to no such
constraint. It is financed by a permanent appropriation from general revenues that covers all costs in
excess of premiums paid by enrollees. (Aaron, 2014)
Please identify pros and cons for earmarked revenues.

Info

In 2005, Alabama earmarked 84 percent of its total state revenue, the largest
percentage in the United States, while Rhode Island earmarked only 4 percent of
its revenue, the lowest among U.S. states. (Crowley and Hoffer, 2012)

Unity
The budget presents, and the legislature approves, all receipts and payments in the same annual
budget law.
Case study: Dual budgeting
Dual budgeting systems, with separate recurrent and development budgets, are an obstacle to
coherent planning and budgeting in many aid-dependent countries. (...) Development budgets often
originated as a way to make donor (and investment) funds visible on the budget. However, from
being part of the solution, they became part of the problem distorting the budget and the budget
process, and accentuating fragmented planning on the government side. Negative experiences with
dual budgeting demonstrate the need for coherence in planning (and therefore aid coordination) on
the government side. It helps if the same people are managing both the recurrent and the
development budget for each sector/agency. Part of the distortion of dual budgeting happens when
the development budget becomes an aid budget, with aid funded recurrent costs and technical
assistance misleadingly included in what is nominally an investment budget. Donors need to be
transparent in their financing of recurrent costs, and realistic about the likely duration of such
financing. (CABRI, 2007)
Please analize the reasons of introducing dual budgeting

Annual basis
Budget authority is for a 12-month period called fiscal year.
FY
2015 (in Romania)
2016 (in UK)
2015/16 (in US federal level)
FY 2015-2016 biennium (Wyoming)

Covered period
January 1st, 2015 December 31st, 2015
April 1st, 2015 March 31st, 2016
October 1st, 2015 September 30th, 2016
July 1st, 2014 June 30th, 2016

Case study: Biennial budgeting

Is a concept that may involve several variations. Biennial budgeting proposals may focus on
enacting budgetary legislation for either a two-year period or two succeeding one-year periods in a
single measure. (Tollestrup, 2015)
Please identify arguments and critics for biennial budgeting.

Case study: Biennial budgeting

Comment the situation of biennial budgets in US.

Info

Forty-four US states enacted biennial budgets in 1940. Only 19 do now.

In 1940 only four state legislatures held annual sessionsand Alabama's
legislature met only once every four years. (Snell, 2011)

Specificity
Revenues and expenditures are approved with some detail in the budget estimates. In this regard
budgetary classification, expenditure series or charts of accounts are used.
Case study: Economic classification of expenditure in Wyoming:
100 series all costs associated with personnel, salaries and benefits for all employees,
at-will-employee-contract (AWEC) expenditures are counted here as well;
200 series support costs such as equipment, communications, supplies and travel;
300 series essentially this is cost allocation;
400 series these are charges from Enterprise Technology Services (ETS) (computer
services);
500 series space rental, charged to non-generally funded agencies that are housed in a
non-state owned building;
600 series grants and aid payments, which includes Medicaid payments, welfare
payments, contract payments to local providers of health services, transfers to local
governments, etc.;
700 series capital construction expenditures;
800 series non-operating expenditures, such as items purchased for resale;
900 series contractual expenditures.
Case study: United Nations functional classification of expenditure
01 - General public services
02 - Defence
03 - Public order and safety
04 - Economic affairs
05 - Environmental protection
06 - Housing and community amenities
07 - Health
08 - Recreation, culture and religion
09 - Education
10 - Social protection