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Guide to Budget Work, October 2001 - Part 3, International Budget Project Part III. Types of Applied Budget Work
6. ADVANCING BUDGET LITERACY
A Taste of Success in Advancing Budget Literacy
In 2000, the Institute of Public Finance in Croatia published a guide that provides a general introduction to Croatia's budget. It analyzed the fundamental aspects of national and local budgets, including revenues, expenditures, extra-budgetary funds, and the consolidated budget of the general government. The Croatian guide also described the different stages of the budget. It was published when the executive's budget proposal for the next financial year was being discussed in parliament, and has been widely quoted and commented upon in the Croatian media. Soon after receiving the guide, one of the members of the parliament stood up, flashing the document, and said to the deputy minister of finance: "Now we don't have to simply listen to you anymore, we have a guide!"
In this and the next two chapters we lay out a range of activities that could be undertaken in the first few years of budget work. Which activities are most suitable depends on a group's background, operating environment, and objectives. Some groups, for example, have traditionally focused on academic research and might want to undertake activities that are different from groups with a grassroots background. Despite such differences, budget guides and training sessions have proven useful for a variety of groups.
Groups are motivated by different reasons to undertake work on guides and trainings. Improving the group's comprehension of the national budget is a common objective. Guides and trainings are also part of efforts to advance budget literacy in society. Further, there is a large audience for easily accessible and relevant information on issues related to budgets. This audience might include different non-governmental groups, journalists, legislators, and other stakeholders.
A guide to the budget typically presents the basic facts about the budget, some discussion of key budget issues, and a description of the budget decision-making process. Guides are designed to make the budget and budget process understandable to a broad audience.
A budget guide is a useful initial project from the perspectives both of organizational development and generating relevant products. Developing a guide can be an excellent learning process for the producer of the guide, and a way to lay the groundwork for in-depth budget knowledge in an organization. It can also help establish a group's status as an important source of information on the budget. In addition, in many countries a basic budget guide is lacking, which makes it harder for a broad community to understand budget issues and their importance. A number of activities can be organized around a budget guide, such as training sessions for other groups interested in learning more about budgets.
Budget systems differ considerably and it is not possible to write a guide that could be generally applied to budget systems around the world. Some guides that are available, however, can be valuable as a starting point as groups develop manuals for their own countries. In addition to the Croatian guide (see http://www.ijf.hr/eng/budget_guide/proen.pdf version in English) mentioned at the start of this chapter, some sample guides are:
Example:
"Essentials of the Budget Process of the State Government," Centre for Budget Studies, India, 1999. http://www.internationalbudget.org/resources/library/essentials.pdf
This is a basic introduction to a state budget in India. The author describes the need for a budget guide as follows: "There is an urgent need to demystify the budgets, whether of the Central or State Governments. It is also necessary to do away with a great deal of secrecy surrounding the preparation of the budget. The whole process of budget-making should be as open as possible."
Example:
"A Citizen's Guide to the United States Budget," U.S. Federal Government, Office of Management and Budget, 2001. http://www.gpo.gov/usbudget/fy2001/guidetoc.html
This document is an example of a guide prepared by a government. The Citizen's Guide describes "how the national government raises revenues and spends money, how the President and Congress enact the budget, and what the President hopes to accomplish with ... [the] budget."
Example:
"The Budget — A Tool for Change," Idasa, South Africa, 1998. http://www.internationalbudget.org/resources/library/trainingmanual.doc
This is an example of an easily accessible presentation of the budget and budget issues that is used as a training manual for social advocates.
Budget training sessions are closely related to budget guides. A well-designed budget guide is a perfect foundation for budget trainings. Training materials also can be developed for the entire budget process or for certain areas of the budget. For example, training materials can be prepared for analyzing provincial budgets, sectoral budgets, or other relevant areas of the budget.
Many groups place a heavy emphasis on budget trainings. As with budget guides, budget trainings serve several purposes at once: building an audience and allies, developing capacity within the organization, and broadening the base of knowledgeable observers of the budget. Training courses introduce participants to an organization and enhance its credibility as a future source of information in the budget. Conducting budget training improves an organization's own capacity because its staff need to become experts on the issues themselves, and on communicating those issues, if they are to be effective at training. Trainings are productive because a main objective of many budget NGOs is to improve understanding of the budget by other researchers and organizations. This educational role recognizes that a broad spectrum of a society needs to have some understanding of the budget if a constructive budget debate is to occur.
Some budget trainings have focused on other NGOs and members of civil society, but programs have also been designed for government officials and the media. The presentation noted earlier by the Mexican group CIDE includes some discussion of their work on budget trainings (http://www.internationalbudget.org/conference/2nd/cide.htm). The CIDE training is a comprehensive three-day course (see http://www.internationalbudget.org/resources/howto/CIDEtrainingcourse.pdf for a detailed agenda for the course). This intensive course provides participants with a general understanding of the broad contours of Mexico's federal budget, exposing them to its origin, approval process, administration, and effects. The course has the objective of teaching the basic knowledge that would enable one to carry out an analytic review of Mexico's budget. It is designed for members of the Congress, legislative staff, journalists specializing in budget coverage, and members of NGOs.
Two other presentations at the IBP's second conference discussed budget trainings in some depth. These concerned the work of DISHA in Ahmedabad, India, and the work of the Institute for Social-Economic Studies (INESC) in Brasilia, Brazil. The presentations are posted on the IBP website: http://www.internationalbudget.org/conference/2nd/disha.htm and http://www.internationalbudget.org/conference/2nd/inesc.htm.
Appendix IV includes a further example of a training program: "Budget Training for Journalists: A Two Day Workshop in Lusaka, Zambia, February 2000." The workshop was hosted by the Swedish embassy in Lusaka. Technical assistance was provided by several NGOs, including the Economics Association of Zambia. The objectives of the workshop were to increase awareness of the importance of the budget system and process for governance and all major policy areas, as well as to promote involvement by outside parties (NGOs and the media) in budget issues.
Finally, three examples of comprehensive courses on budgeting and public expenditure management by the World Bank are listed below. The first course focuses on intergovernmental issues, the second and third are more general. These courses — and the links they include to background papers and other materials — can be adapted to NGO training courses.
Example:
"Intergovernmental Fiscal Relations and Local Financial Management," World Bank Institute. http://www1.worldbank.org/wbiep/decentralization/default.html - Click on "Course Content Organized by Topics."
This is a comprehensive course on Intergovernmental Fiscal Relations and Local Financial Management. It is tailored to address specific country and regional interests, and would be useful in part or in full. It provides a framework to identify key issues for strengthening the roles and responsibilities among governments. The course includes 13 major topics; for each topic there are papers and suggested readings.
Example:
"Budgetary Processes and Public Expenditure Management," World Bank Institute, 2000. http://www1.worldbank.org/publicsector/pe/budgetprocess.htm
This is a comprehensive training program for senior policymakers in the World Bank's client countries. The course might primarily be useful for its structure and as a source of information on different topics that groups want to work on. The topics include common public expenditure management and budgeting issues, such as: fiscal discipline, resource allocation and policymaking, intergovernmental relations, performance measurement, poverty reduction, evaluation, the sequencing of budget reforms, accrual accounting, and how to use public expenditure diagnostic tools.
Example:
"Public Expenditure Analysis and Management Training Course," World Bank, May 22-24, 2001. http://www1.worldbank.org/publicsector/pe/pemtraining.htm
In its own words, this is the World Bank Thematic Group's "flagship course on Public Expenditure Analysis and Management. The course was designed to introduce participants to a full range of issues associated with public expenditure — economic policy, analysis, management and institutions. Participants were introduced to concepts in these areas and provided with practical tools for use in economic and sector work and lending programs. In this latter context, current developments in the lending instruments to support public expenditure at the macro, sector and project levels were explored."
7. ASSESSING THE BUDGET PROCESS AND BUDGET SYSTEMS
A Taste of Success in Improving Budget Transparency
In the 1990s a broad coalition of Mexican NGOs called the Civic Alliance mobilized around the issues of the President's "secret fund" — a portion of the budget that allowed the President to spend money without having to account for it — and discretionary allocations for public officials' salaries and benefits. It took a long and costly campaign, but the Alliance's research and publicity on public officials' salaries and discretionary spending were ultimately effective. Allocations to the secret fund were eliminated entirely and the federal government started to regulate salary benefits and to make its operations more transparent. Some of those involved in this effort ultimately helped form the organization Fundar, which is now actively engaged in applied budget work in a wide range of areas. (See the case study "Analyzing and Affecting Budget Policy: Fundar, Mexico," in A Taste of Success, International Budget Project. http://www.internationalbudget.org/resources/Fundar.pdf)
Assessing the budget process and budget systems is a critical task for independent researchers. The budget process and system can dictate both policy outcomes and the degree to which a policy debate can actually occur. The mechanisms of the budget, however, are often a mystery to most of the population, including much of civil society, so it is essential that at least some NGOs understand these mechanisms and their implications. This chapter is split into three areas:
- "Budget Process and System Studies" addresses why these studies are important and provides a few examples;
- "Transparency and Participation Reports" discusses the crucial area of budget system studies; and
- "Participatory Budgeting" describes this innovative budget process — in which the budget is created with direct public input — and the role of NGOs in it.
7.1 Budget Process and System Studies
Greater influence and participation are likely to be facilitated by an in-depth knowledge about the budget decision-making process (which generally covers the formulation and enactment of the budget). Indeed, without a thorough understanding of a country's budget process, it is difficult if not impossible for an NGO to figure out how its budget work can be most effective. Budget process work is gaining increased interest, partly because a stronger focus on openness and transparency in the budget process is a prerequisite for independent analysis and greater participation in the policy dialogue.
The growth in budget process work has also reflected the changing nature of reforms to the budget process. Changes to the budget process are usually partial, but in recent years sweeping budget reforms — reflecting dramatic changes in governmental systems — have occurred in many countries. This has given groups and researchers operating in the rapidly changing environment of new democracies and developing countries the opportunity to influence reforms, and to increase their participation in the budget process.
Following are two examples of work related to the role of legislatures in the budget process. Work that promotes a stronger role for legislators reflects certain common concerns shared by non-governmental groups and legislatures, particularly the desire to open up the budget process to more legislative input. Both NGOs and legislators are "outsiders" to the executive budget process and dependent on information from the executive. Frequently, legislatures are not informed about issues related to the budget, and many countries lack legislation to safeguard and support the important role of the legislature in the process. The third example below is an analysis of a budget process — biennial budgeting, or voting on the budget every two years instead of every year — that some have advanced, but which the analysis finds of mixed merits.
Example:
"The Role of Parliament in the Budget Process," Idasa, South Africa, 1998. http://www.internationalbudget.org/resources/library/parliament.pdf
South Africa has experienced a major transition since the introduction of democracy in 1994. A number of governmental reforms have been implemented, including budget-related reforms. One of the main remaining problems in the budget process is the limited involvement of the legislature. This report investigates the role of parliamentary amendment powers in the South African budget process. It includes an examination of the role of the legislature in other countries.
Example:
"The Role of the Knesset in the Budget Making Process," Adva Institute, Israel, 2000. http://www.adva.org/budgrefe.html
This document sets forth a proposal for changing the role of the Knesset in preparing and ratifying the state budget.
Example:
"Biennial Budgeting: Do the Drawbacks Outweigh the Advantages?" Center on Budget and Policy Priorities, United States, 2000. http://www.cbpp.org/3-1-99bud.pdf
This five-page analysis examines the limitations of a proposal that has been advanced within the U.S. Congress for the adoption of a biennial budgeting process.
As noted, the quality of the entire budget system in a country — which includes both the budget decision-making process, as well as how the budget is implemented and audited — can affect the type of analyses groups can and should undertake. For instance, a malfunctioning budget process and weak management systems can lead to a disconnect between allocated funds and disbursed funds. So a group with an interest in a particular issue, such as health, will find that analyzing budgeted amounts may not be meaningful; budget allocations to health programs ultimately might have little to do with actual disbursement to clinics and hospitals. In such circumstances, groups might be more effective if they highlight the disconnect and promote solutions to these disbursement problems — which are likely to plague other sectors as well — in addition to carrying on the more traditional analyses of health policy.
Such analyses may take the form of "tracking" studies that attempt to assess how funds allocated for a particular purpose are spent on that purpose. The next example relates to a recent joint IMF-World Bank effort that provides a methodology to track poverty-related expenditures, and assesses current tracking mechanisms in 25 "HIPC" countries. (See Section 8.2 for an example of a tracking study covering the education and health sector of Uganda.)
Example:
"Tracking of Poverty-Reducing Public Spending in Heavily Indebted Poor Countries (HIPCs)," The IMF and World Bank, 2001. http://www.imf.org/external/np/hipc/2001/track/
The findings of the study underscore the inadequacy of most budget systems in HIPC countries to track expenditures: "The preliminary assessment finds that two of the 25 HIPCs should be able to carry out satisfactory tracking and reporting within one year, with a small amount of upgrading of their present systems. A further seven will require some upgrading to achieve the same objective over 1-2 years; and the remaining 16 HIPCs have systems where substantial upgrading is required." A central element of the proposed approach is to "track the composition of overall government spending on poverty-related programs" and not just HIPC assistance.
Toolkits on Budgets and Related Issues
New groups, as well as more experienced groups, can benefit from some of the methods to analyze budget processes and systems that are available on-line, many of which were developed by multilateral institutions. These tools can be used for comprehensive work on a budget process, as well as on the analysis of a particular stage or aspect of the process. In addition, the development of standard diagnostic tools for assessing institutional settings has advanced rapidly in recent years. Toolkits are standardized approaches that set out the principles which experience suggests should underpin public sector governance arrangements, provide methods for assessing the degree to which specific country arrangements are consistent with those principles, and present those assessments in a format that readily contributes to the dialogue between the government, donors, and civil society on reform priorities. The topics include Assessing Central Government Policy-Making Institutions in Cabinet Government; Assessing Constraints on Service Delivery; Diagnostic Framework for Revenue Administration; Governance and Poverty Toolkits; Inter-Governmental Relations Institutional Review; and Public Expenditure Institutional Assessment. See http://www1.worldbank.org/publicsector/pe/petoolkit.htm and http://www1.worldbank.org/publicsector/anticorrupt/toolkits.htm.
7.2 Transparency and Participation Reports
It has become increasingly evident that fiscal transparency is of considerable importance to achieving good governance, meaningful participation by citizens, and macroeconomic stability.
Public sector transparency enhances accountability and, when coupled with increased opportunities for public debate, may contribute to better policy and trust in government. Many countries, however, are plagued by poor transparency and weak accountability, as can be seen by their closed-door budget processes, unforeseen expenditures, weak accounting and reporting systems, and ineffective audits. Many countries also exclude the legislature and/or civil society from the dialogue on budget issues.
Several institutions have recently developed methods to assess transparency and participation standards in budgeting and fiscal performance. Idasa, with support from the International Budget Project, was the first independent group we know of to carry out a comprehensive transparency and participation study on the budget system in a country. The Idasa report, which is briefly discussed below, will soon be followed by other versions of such a report that are being prepared by NGOs in Africa (including a cross-country effort involving the groups Isodec in Ghana, Transparency International in Kenya, Integrity in Nigeria, Idasa in South Africa, and the University of Zambia, Women for Change, and Catholic Commission for Justice and Peace in Zambia) and by NGOs in Russia and Latin America (see the IBP's May 2001 newsletter for an update on a five-country effort in Latin America that involves Poder Ciudadano in Argentina; IBASE in Brazil; the Department of Economics at the University of Chile; the Center for Teaching and Research (CIDE), Fundar, and Gender Equity in Mexico; and the Research Center of the Universidad del Pacífico in Peru. (http://www.internationalbudget.org/resources/newsletterIII.htm). A session at the third conference of the IBP described the ongoing efforts in these other countries (http://www.internationalbudget.org/cdrom/sessions/advocacy/networking.htm).
Idasa/IBP Transparency and Participation Study
The basic rationale for the Idasa/IBP study was the recognition that a transparent and effective budget system is essential for achieving sound public finances and budgetary practices that assist the poor. The work draws on the IMF transparency code described below, but the focus is somewhat different, emphasizing participation in the budget process to a larger degree. The methodology developed for the study is designed to help legislatures and civil society assess whether the government undertook what it planned in the budget, to discuss checks and balances in fiscal policy and budget processes, and to measure the availability of independently audited actual expenditure data and internal checks that prevent over-expenditure or illegal expenditure. Another goal of the report is to assess whether both the legislature and civil society have input into the decision-making process.
The questionnaire developed for the study covers five basic areas of transparency and participation in the budget system.
- A legal framework for transparency: The legal framework typically dictates the nature of the budget system; to the degree that governments advance transparency only in an informal fashion, such advances are more likely to prove transitory.
- Clarity of the roles and responsibilities of the national and provincial governments: The clarity of roles and responsibilities in the management of public finances is essential to the electorate's capacity to hold specific parts of government accountable for budget policy and decisions.
- Public availability of budget information: A fundamental requirement of fiscal transparency is that comprehensive, reliable, and useful budget information is made available.
- Independent checks and balances of budget execution and government data: A critical requirement of fiscal transparency in the context of democracy is the opportunity for legislatures and civil society to influence the budget and assess whether government undertook what it planned. Another fundamental issue is to establish checks and balances on the data used in the budget process.
- Budget decision-making process: A key issue is whether the legislature and civil society are able to participate effectively in the budget process. By effective participation the study refers to the opportunities for the legislature and civil society to make their viewpoints known and to have these views taken seriously.
Example:
Transparency and Participation in the Budget Process. South Africa: A Country Report, Idasa/IBP, 2000. http://www.internationalbudget.org/resources/library/transparencyfinal.pdf
The link here is to a generic version of the study that was specifically written to be of use to those interested in undertaking transparency work in their own countries.
The IMF Code of Good Fiscal Practices and Other Transparency Studies
International financial institutions and bilateral donors are placing an increased emphasis on the need to engage civil society in the debate on public expenditure to ensure good governance. One example of a coherent framework for an analysis of a country's fiscal and budgetary situation is the IMF's "Code of Good Practices on Fiscal Transparency," which deals with fiscal issues in broad terms, but has particular relevance for the budget process and system. The Code's principles are based on the experiences of the Fund's member countries, but are intended to be generally applicable. Since the Code is in the public domain, country authorities, civil society, financial markets, and international institutions can access and use it for a variety of purposes. The IMF has used the code to assess the fiscal transparency of a growing number of countries; these reports are available on the IMF's website. See http://www.imf.org/external/np/fad/trans/index.htm for the IMF's website on fiscal transparency, which includes the code — translated into seven languages — and substantial other information on transparency issues.
Noted below are the IMF studies for Brazil and India. These are followed by an example of a study of fiscal transparency in Poland by a Polish NGO, using the IMF code as well as the Idasa/IBP approach.
Example:
"Brazil: Report on Observance of Standards and Codes (ROSC) - Fiscal Transparency Module," IMF, 2001.
http://www.imf.org/external/pubs/ft/scr/2001/cr01217.pdf
"Fiscal transparency in India," IMF, 2001. http://www.imf.org/external/np/rosc/ind/fiscal.htmThese are recent examples of studies on how countries fared according to the IMF's Code of Good Practices on Fiscal Transparency. The studies were prepared by staff of the IMF on the basis of information provided by governmental authorities.
Example:
"Openness and Transparency of Public Finance in Poland in the Light of International Monetary Fund Standards," Gdansk Institute for Market Economics, Poland, 2001. http://www.internationalbudget.org/resources/library/Poland.pdf
This report provides an assessment of fiscal transparency in a country undergoing a sharp economic and political transition. It relies mainly on the IMF Code, but also on the Idasa/IBP approach; its investigation was conducted through a detailed questionnaire to government officials.
The OECD has also released a publication on "Best Practices for Budget Transparency" that identifies the key budget reports that governments should release, what should be included in these reports, and approaches to ensuring the quality control of these reports. See http://www.olis.oecd.org/olis/2000doc.nsf/c5ce8ffa41835d64c125685d005300b0/c125692700623b74c1256a4d005c23be/$FILE/JT00107731.PDF
Participatory budgeting is an innovative approach to budget decision-making that began at the municipal level in Brazil in 1989 and has generated widespread interest. In participatory budgeting, the general public is directly involved in making policy decisions. Open forums are held throughout the budget process that permit the public the opportunity to allocate resources, prioritize broad social policies, and monitor public spending. Participatory budgeting breaks decidedly with the tradition that the budget process should occur exclusively in the executive, with the input only of budget technicians and a few politicians.
Where participatory budgeting is in place, budget NGOs have been actively engaged in analyzing the approach and in providing information to citizens engaged in the process. Where participatory budgeting is not in place, several NGOs have expressed interest in installing this approach, and current experiments with this method are occurring in places such as Buenos Aires, Argentina and Cape Town, South Africa.
There is no single model for participatory budgeting, though there are similarities between programs. The models are influenced by the political, economic, and social context of the particular city or state. As the paper below notes, the main objectives of participatory budgeting are:
- To promote public learning and active citizenship;
- To achieve social justice through improved policies and resources allocation; and
- To reform the administrative apparatus.
Example:
"A Guide to Participatory Budgeting," Brian Wampler, consultant to the IBP, 2000. http://www.internationalbudget.org/resources/library/GPB.pdf
This paper examines participatory budgeting programs, with an emphasis on Brazil, designed to incorporate citizens into the policymaking process, spur administrative reform, and distribute public resources to low-income neighborhoods. The guide explores the mechanisms of participatory budgeting, the results of this approach, and its potential applicability elsewhere.
Example:
Discussion on Participatory Budgeting from the Third Conference of the IBP, Presentation by CIDADE, Porto Alegre, Brazil. http://www.internationalbudget.org/cdrom/papers/systems/ParticipatoryBudgets/Cidade/CIDADEbudgetsEn.htm
The speaker from CIDADE observed: "Participatory budgeting programs confront Brazilian political legacies of clientelism, social exclusion, and corruption by making the budgetary process transparent, open, and public." Since 1994 CIDADE has been actively involved in the Participatory Budgeting process in Porto Alegre.
Example:
"The Participatory Budget in Brazil," Brazilian Institute for Social and Economic Analysis (IBASE), 1999. http://internationalbudget.org/conference/2nd/brazil.htm
This is a general talk on participatory budgeting in Brazil by researchers for an NGO (based in Rio de Janeiro) that supports those involved in such efforts. Among other helpful aspects of this presentation is that it places the participatory budgeting movement into the context of overall political developments in Brazil.
8. ANALYZING BUDGET POLICIES
A Taste of Success in Influencing
the Discussion of the Executive's BudgetThe Budget Information Service of the Institute for Democracy in South Africa's experience with executive budget analysis highlights the evolution of the impact of the organization. When BIS first started producing information and analysis during the release of the budget, its efforts received almost no attention from the media or the public. Only after several years of continuing to provide a high quality product and educational outreach, and working to establish important media contacts, did interest develop. After the release of the 2000 executive budget, BIS was inundated with requests for information and statements from print, radio, and TV media. Print journalists wanted quick-response pieces as well as more considered, in-depth op ed articles. Radio journalists wanted telephone interviews and promised — through community radio channels — exposure to large numbers of people throughout the country. Even the major public TV stations requested interviews in several languages.
Policy analysis is what might first come to mind when the concept of "budget work" is mentioned. This chapter discusses six different, albeit interrelated, ways of examining the implications of budgets, beginning with arguably the most high-profile activity for a group engaged in budget and policy work — analysis of the executive's budget proposal. The chapter then describes how a budget can be analyzed based on the allocations it makes to particular sectors, its impact on various groups, its relationship to fundamental rights, and its general effects on the economy. The chapter concludes with an important type of budget analysis that is, unfortunately, somewhat neglected by NGOs: the analysis of the tax policies contained in a budget.
The six types of analyses described here are among the most important approaches that can be taken in examining budgets, but they do not exhaust the various alternatives. As one example, "impact analyses" that attempt to measure the actual effects of various budget policies are not considered as a separate section here. Yet these analyses — whether they reflect approaches such as the report card surveys pioneered by the Public Affairs Centre in India (http://www.pacindia.org/) or specific studies of the effects of budget decisions on reducing HIV/AIDS — represent an important field of research for any policy group.
8.1 Analysis of Executive Budget Proposals
In most countries, budget issues receive the most attention when the executive branch releases its proposed budget to the legislature and the public. Frequently, it is at this point in the year that the key issues in the debate over the budget are established, and that judgments on a budget's merits are made. Thus assessing the government's proposed budget when it is released is a common activity among budget researchers. Such an analysis can establish a group as a source of expertise, and can help a group define the issues upon which it wants to focus. This type of analysis also has the advantage of providing information when it is in high demand. At other times of the year, budget analysis, however important, might not be of interest to a broad audience.
Since the budget cycle has many stages, effective budget work requires analysis and activities that continue throughout the year. In this context, a thorough and broad assessment of the budget when it is released by the executive can help groups identify particularly important areas that might require more work later in the budget cycle.
Example:
Collection of publications on the 2000 budget, Idasa, South Africa, 2000.
http://www.internationalbudget.org/resources/library/budgetresponses.pdfBIS's comprehensive analyses of the executive's 2000 budget included separate reports on its effects on the poor, on the public service, on children, on the disabled, and on the budget process. BIS also produced a general overview report of the national budget and a series of reports on provincial budgets. BIS was not able to generate such an array of reports when it first began to examine the executive's budget, but has refined its approach over a five-year period. See Appendix V of this guide for a case study of work done by Idasa's Budget Information Service around the release of the executive's budget; the case study summarizes BIS's preparation in advance of the budget as well as its dissemination strategy.
Example:
Case study of Kenya's Institute of Economic Affairs' work around the release of the budget. http://www.internationalbudget.org/resources/Kenya.pdf
The Budget Information Programme of the Institute begins its work on the executive's budget months before its release by conducting public hearings. Since Parliament only has seven days to debate and approve the budget, BIP assembled in advance a team of experts to analyze the 2000/2001 budget and develop a guide for Members of Parliament to assist them in the debate. The BIP team spent the weekend after the budget's introduction combing through the budget speech, the financial statements, and the finance bill in order to draw out the key points and make the information easily comprehensible for Members of Parliament in a timely fashion.
A common type of analysis undertaken by budget groups, advocacy organizations, and others focuses on an important area or sector of the economy or the government to which the budget allocates substantial resources. These analyses can review a sector — such as health, education, and defense — in relation to other sectors, the entire economy, or its historic levels of support. Military budget analyses, for instance, can focus attention on how much is spent on the military in comparison to how much is spent on social sectors. Analyses of sectors like health and education often include cross-country comparisons, or comparisons between the states of a country.
The budget and related public documents frequently provide comprehensive information on sectors. In many countries, obtaining information on sectors is facilitated by the structure of ministries (or departments) that cover over the whole sector, such as a Ministry of Education. This permits organizations with a focus on particular sectors to obtain much of the information they need relatively easily.
Example:
"Welfare Policy and Social Transfers in Croatia," Institute of Public Finance, Croatia, 1999. http://www.ijf.hr/ocpapers/op-8.htm
The paper reviews the range of social policies adopted in Croatia since independence together with those that have been retained from the socialist past, and examines whether these policies could be improved. The paper focuses on the issues of social welfare expenditures and employment.
Example:
"Highlights of Proposed Medicaid Funding in the House and Senate Budget Bills," Center on Public Policy Priorities, Texas, United States, 2001. http://www.cppp.org/products/policypages/111-130/111-130html/PP126.html
This report examines how a health insurance program for low-income people fared in bills moving through the state legislature. The U.S. state-level group that wrote this paper conducts a wide range of work in the health sector, and all its health policy work can be found at http://www.cppp.org/policy/healthpolicy/index.html.
Example:
"Do Budgets Really Matter? Evidence from Public Spending on Education and Health in Uganda," The World Bank, 1998. http://wbln0018.worldbank.org/research/workpapers.nsf/(allworkingpapers/7b711dd282486ea6852567e0004b3bf1?opendocument
The study demonstrates that when institutions are weak, budget allocations alone can be misleading in explaining outcomes and making policy decisions. The study used empirical evidence from primary education and health care in Uganda. Since adequate public accounts are not available, the study conducted a field survey of schools and clinics to collect data on spending. The report contributed to improvements in the budgetary system in Uganda.
This tracking study shows the important interaction between budget systems and budget policies, and the sometimes close connection between budget systems analysis and budget issue analysis.
8.3 Analysis of Effects on Different Population Groups
There are typically two types of analyses that examine the effects of budgets on particular groups. One kind examines the effects of spending proposals on different income groups. Such analyses might examine the proportion of total government spending devoted to programs and projects that assist the segments of the population living in poverty. These types of analyses also include the tax distributional reports described in Section 8.6.
A second kind of group analysis is to examine the effects of a government's budget on a particular group defined by characteristics other than income. Such analyses might look at the effects of the budget on the elderly population, or on a racial or ethnic minority.
In recent years budgets have increasingly been assessed in terms of their effects on children or women. In most cases budgets do not include any particular reference to their effects on women and children, nor do they show separate allocations for women's and children's programs. Thus the effects of budget decisions on women and children must be derived from various sources of information within the budget, and from other sources outside the budget.
Several NGOs in different parts of the world have worked on gender budget issues. For example, the Women's Budget Initiative in South Africa is a research and training project which aims to facilitate effective lobbying and advocacy around gender equity. Each year since 1996 it has produced a South African Women's Budget. An additional example is the Tanzanian Gender Networking Program (TGNP). Since 1993, its Gender Budget Initiative has been working to facilitate the process of gender equality, equity, and women's empowerment at different levels of society. The budget is one of the many projects through which the program is placing gender issues in the public debate (see http://www.tgnp.co.tz/). Other efforts in this area have been the work of two groups in Mexico, as mentioned below.
Work on children's budgets has advanced during the last few years. Several initiatives related to public expenditure and children have been launched, and this work shows significant potential (see the Swedish chapter of Save the Children's website http://www.rb.se/economics/ for information on children and economics, such as a recent study from Vietnam on budgets for the education of children with disabilities).
Example:
"Review of Gender Budget Initiatives," Community Agency for Social Enquiry, South Africa, 2000. http://www.internationalbudget.org/resources/library/GenderBudget.pdf
This paper reviews gender budget activities in 42 countries, discusses the general issues raised by these activities, and provides a typology of different strategies that can be employed. In Mexico, the NGOs Fundar and Equidad de Género (Gender Equity) have translated and summarized the strategic section of this paper. This Spanish version of the paper can be found at http://www.internationalbudget.org/cdrom/papers/analysis/gender/Manualg.doc
Example:
"Introduction to the Fifth Women's Budget," Idasa, South Africa, 2000. http://www.internationalbudget.org/resources/library/5thwomenbudget.pdf
The Women's Budget Initiative was developed in 1995 to track and advance the interests of women during the South African political and economic transition. The initiative is a research, training, and advocacy project that produces the annual South African Women's Budget and related products.
Example:
The Children's Budget Initiative of Idasa, South Africa. http://www.idasa.org.za/m_main.php?view=10&project_id=2100&webzone_id=2000&project_name=Children's Budget
The Childen's Budget was developed by Idasa's Budget Information Service in 1997 to evaluate the impact of the South African budget on children. The project takes the United Nations Declaration on the Rights of the Child as a departure point and tracks government spending on children relative to the Declaration's commitments. The first two Children's Budget studies are First Call (1997) and Where poverty hits hardest (1999). The most recent study is Are children being put first? An evaluation of the child poverty and the 2000 South African budget (2000). The project concentrates on four key sectors — health and nutrition, education, welfare and justice, and policing. It also draws together existing data on child poverty and assesses the impact of current macro-economic policy on South Africa n children.
Example:
"Recent Changes in the Impact of the Social Safety Net on Child Poverty," Center on Budget and Policy Priorities, United States, 1999. http://www.cbpp.org/12-23-99wel.pdf
This study examines how many children are classified as poor in the United States before and after the effects of government programs (labeled as the "social safety net") are considered. It also examines child poverty trends in recent years. This study illustrates the type of analysis that can be done if sufficient data on the impact of government programs are available.
8.4 Budgets and Economic and Social Rights
While the focus on human rights began with an emphasis on civil and political rights, there has been increased international attention on the issues of economic and social rights. According to the International Covenant on Economic, Social and Cultural Rights, these include fair wages and remuneration, safe and healthy work conditions, social insurance, food, clothing, housing, physical and mental health, and education. Human rights advocates do not believe that all economic and social rights can be achieved immediately and all at once, but that they can and should be realized progressively over time.
There are several possible linkages between economic and social rights work and budget work. The achievement of these rights can depend directly on budgetary decisions. Budget analysis also can be used to estimate the cost of advancing particular rights and to sharpen advocacy arguments. Budget analysis examines how to operationalize rights by turning policy rhetoric or legal commitments to certain rights into budget allocations. Further, as noted in the previous section in the discussion of Children's Budget work in South Africa, budgets can be examined to see if they are consistent with rights conventions.
More generally, in some countries anti-poverty work is increasingly being understood from a human rights perspective. Some argue, in fact, that a human rights perspective is a helpful and necessary anchor of values for budget analysis. The IBP's third conference provides examples from different areas of work that have focused on the link between rights and budgets. A plenary discussion (http://www.internationalbudget.org/cdrom/sessions/expenditure/humanrights.htm) included the following presentations:
- DISHA, India introduced the work of a grassroots rights-based advocacy organization working with laborers to secure their rights to work and food, and its approach to estimating the costs of providing food security for everyone in the state.
- Centre for Public Interest Law in Ghana presented its work to defend the rights of poor people displaced from mining areas in northern Ghana through confiscation of land, pollution of drinking water, and other rights violations.
- The Women's Centre for Legal Aid and Counseling, West Bank/Palestine spoke about its work to address women's rights as human rights, through counseling, legal aid, and advocacy.
The budget is the primary fiscal policy instrument of government, and one important way to assess the budget is to examine its fiscal and economic assumptions and effects. These include the impact of the budget on the government's annual deficit and national debt, as well as the budget's expected effects on economic outcomes such as inflation, growth, and employment. Fiscal analysis is a fundamental part of budget analysis since fiscal issues will affect the size and composition of allocations to sectors and programs.
Studies that examine fiscal issues in the budget typically involve an analysis of budget goals and targets. Are the estimates of revenue and expenditure reasonable and accurate? What is the likely government deficit or surplus resulting from a budget proposal? What is the distribution of funds among the main economic sectors? These analyses can also critically examine the underlying assumptions in a budget that concern key economic variables such as inflation and unemployment.
Example:
"Is the House Tax Bill Needed to Avert a Recession?" Center on Budget and Policy Priorities, United States, 2001. http://www.cbpp.org/2-22-01tax.htm
This paper examines one of the main arguments used in favor of a tax cut proposed by President Bush. Its findings include that the "backloaded" design of the tax cut — in which most of the proposed tax cuts would not occur until many years after it would be adopted — is not well-suited to combat a recession.
Example:
Idasa reaction to Budget 2000, Press Statement: "The Poor Remain Vulnerable," Idasa, South Africa, 2000. http://www.internationalbudget.org/resources/library/poor2000.pdf
This "quick reaction statement" discusses the macroeconomic effects of the spending and tax policies contained in the 2000/01 budget and the effects of these policies on the poor, concluding that the proposed tax cuts to middle- and upper- income earners would not stimulate greater growth or equity in the South African economy. While growth may improve in the medium term, in the short run poverty would deepen. As an alternative, the statement argues for a set of immediate, targeted interventions to marry short-term poverty alleviation with growth-enhancing skill formation.
The two examples above, in part or in whole, examine the macroeconomic effects of tax decisions. But many NGOs with an anti-poverty focus, unfortunately, ignore the revenue side of the budget. Groups that are engaged in issues affecting poverty, women, or children tend to focus on expenditure allocations in the budget. Tax policy, on the other hand, is more often examined by groups that traditionally do not have a poverty focus. Business organizations frequently focus their analysis and advocacy on tax breaks for businesses or those with high incomes. Independent research on the effects of revenue proposals on low- and moderate-income families tends to be scarce. Since tax issues are often neglected, we devote somewhat more space here to discussing the possibilities for applied work in this area.
In addition to assessing the macroeconomic effects of tax cuts, one of the most important types of revenue analysis is the examination of the distributional effects of the tax system. Would proposed tax reforms be of more help to the rich or the poor? Does the tax system take a larger share of the income of low-income people or of high-income people? In the words of a tax analyst, is the system regressive or progressive? Answering these types of questions requires an understanding of the various sources of revenue and the details of how taxes are levied.
A second important task for budget groups is to connect expenditure and revenue analysis. Expenditure and revenue are two sides of the budgetary coin; groups need to make sure that the tax base is large enough to sustain support for key government programs. In addition, when governments advocate tax cuts, they sometimes make them appear more attractive by understating associated revenue losses and exaggerating their impact on economic growth. So an important area of tax analysis is to provide a realistic assessment of revenue trends under a tax proposal and compare it to a projection of expenditures in order to determine if the mixture can be sustained.
A third area of tax work relates to compliance and administration. Particularly in developing countries, tax administration is likely to be an integral part of the tax policy debate, as it is frequently a constraining factor in the search for new and equitable sources of revenue. Low compliance means that all the taxes that could be collected are not being collected — the so-called tax gap. This means that either less revenue is available to finance expenditure needs, or higher tax rates must be imposed on those who do pay their taxes to ensure the desired level of revenue and expenditure. Weak administration can reflect a range of problems, from a lack of computer systems and skilled employees to corruption. Addressing these problems can provide benefits beyond raising more revenue, as widespread tax evasion both undermines the integrity of the tax system and reduces the credibility of the government as a whole, potentially undermining its ability to carry out policies in other areas. Improved transparency can be part of the reforms that help boost compliance and improve the effectiveness of tax administration.
These three areas of tax work were the subject of a plenary session and workshops at the IBP's third conference (http://www.internationalbudget.org/cdrom/sessions/4revenue.htm). Speakers from the Institute for Public Finance in Croatia, the Centre for Budget Studies in India, CIDE in Mexico, and several groups in the United States shared case studies of their work at the national and sub-national level. The summary of this conference also includes a number of papers and reports on tax issues (http://www.internationalbudget.org/cdrom/papers/home.htm#Tax). Some examples of tax work are:
Example:"Tax administration reform in transition: The case of Croatia," Institute for Public Finance, Croatia, 2000. http://www.ijf.hr/ocpapers/op-5.htm
The Republic of Croatia is currently reforming its overall fiscal system, including tax administration. This paper analyzes the extent to which reform in Croatian tax administration is in line with the theory and practice of tax administration in developed countries and countries in transition.
Example:
"Overview Assessment of President Bush's Tax Proposal," Center on Budget and Policy Priorities, United States, 2001. http://www.cbpp.org/2-8-01tax.htm
This paper provides a thorough analysis of the effects of the President's tax cut plan on different income groups and the long-term fiscal situation.
Example:
"Women and Tax in South Africa," Idasa, South Africa, 2000. http://www.internationalbudget.org/resources/library/WomenSA.pdf
According to this paper, "Most analyses of government budgets and their differential impacts on women and men usually assume that government expenditure has a greater direct impact than revenue in addressing issues such as poverty and inequality. However, the revenue side of the budget, and specifically taxation policy, can also have direct redistributive effects, through impacts on disposable income, which can either benefit or disadvantage certain sectors in society, such as women and the poor."
Of further interest, the World Bank has also developed a toolkit to provide a comprehensive framework for diagnosis of the institutional and organizational deficiencies of revenue administration. It can be found at: http://wbln0018.worldbank.org/prem/ps/iaamarketplace.nsf/075c69a32615405f8525689c0051fb88/4cdd74a05fd3506b8525689c005333bc/$FILE/DIAGFRMWK-5-2000.doc
