Relationship between
the Legislature and the Budget Office
in the Budget Process
Eastern Europe SBO Meeting
Chung-Keun Park
1. Background of this study
 Two key players in the budget process
 Increasing demand for active legislative
involvement in the budget process
 OECD experts meeting in October, 2006 ;
9 countries with different power structure
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Presidential : Mexico, U.S.
Semi-Presidential : France, Korea
Parliamentary : Italy, Japan, Netherlands, Sweden
Westminster Parliamentary : U.K.
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2. Factors affecting relationship between
the Legislature and the Budget office
 Power structure
- Presidential to Westminster Parliamentary
 Party system
- Strong, cohesive two party system
/ weaker two party or multiple party system
 Structure of the legislature
- Unicameral / bicameral
 Structure of the budget
- Comprehensive / fragmentary
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3. Recent trends
 Executive predominance in 20th century
- Expansion of the government
- Growth in technical complexity and bureaucracy
- Rise of disciplined political party
 Recent resurgence of legislative role in budgeting
- To improve deteriorating fiscal balance
- Demand for transparency and accountability
- Change from disciplined to fragmented party
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4. Increasing legislative role,
positive or negative for budgetary goals?
 Fiscal discipline
- Feeble faith in their own institutional self restraint
/ greater fiscal responsibility
 Allocation
- Narrow purpose for local constituency
/ broader national priorities
 Efficiency
- Hamper administrative efficiency
/ provide sufficient flexibility
 Accountability
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5. Interaction between the Legislature and
the Budget Office in the Budget Process
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(1) Budget preparation and submission
 Deadline for submission
- On average, 3 months before new fiscal year begins
 Economic assumptions
- MOF or shared responsibility of related ministries
- Central Planning Bureau (Netherlands)
• Legally independent body composed of 200 economists
 Medium-term budget frameworks
- 75% of OECD countries prepare MTBFs (survey, 2003)
- Not legal requirement in most countries, but significant in
top-down budgeting
- Coalition Agreement in the Netherlands
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(2) Budget deliberation
 Legislative committees
- Budget committee / Sectoral committees
• Most countries have budget committee but the U.K.
• Increase of entitlements for sectoral committees
- Recent trend emphasizing balanced role of the two committees
 Legislative budget office
- 3 out of 39 countries with more than 26 staffs (survey, 2003)
- U.S. CBO (Congressional Budget Office)
• Non partisan / 235 staffs with budgeting experiences
• Providing legislative estimates and analysing proposal
- Case of Korea, Italy and Sweden
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(3) Budget approval
 Amendments
- Presidential / Parliamentary
 Two-stage budget approval in Sweden
- Spring Budget Bill; aggregate expenditure limit
- Budget Bill; 27 sectoral ceilings and appropriations
 Earmarked provisions
- Allocating resources for constituency / smoothing
negotiation process in the legislature
- Executive veto power; Line-Item Veto Act in the U.S
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(4) Budget execution
 In-year report of budget execution to the legislature
 Appropriations accounts; simple·programmatic /
complex·administrative
 Flexibility in execution process
- Cancellation or postponement of appropriations is permitted
under limited conditions
• France (up to1.5%), U.S. (cancellation forbidden),
Korea/Japan (supplementary budget)
- End-year flexibility to avoid wasteful end-year surges
 Audit
- From financial audit to performance audit
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6. Budget reform
 Most reforms are initiated by the executive
- They have more information and responsibility
 Legislative role in budget reform
- Top-down budgeting in Sweden
- The Budget Enforcement Act in the U.S.
- Italy’s budget reform
 Requirements for successful budget reform
- A common objective and co-operative attitude
- Enacting the reform in a law as well as
establishing it as a practice
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7. Issues for discussion
 Tradeoff of more involvement of the legislature
- Negative (Fiscal discipline, Efficiency)
/ Positive (Accountability)
 Issues to consider for strengthening budget process
- Information sharing and collaboration of two bodies
- Simplifying budget classification for transparency
- Enhancing legislative capacity to analyze proposal
- More utilization of performance information
- Ensuring fiscal discipline in preparation for future
fiscal risk (increasing entitlements, population ageing)
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