class: bottom, left, inverse, title-slide # Public Budgeting ## IES Public Economics BA course: Guest Lecture ### Petr Bouchal ### March 30, 2021 --- class: large, inverse # This lecture Motivation Concepts Data ↔ Examples ↔ Empirical questions *Examples are micro- & local-level but hopefully stimulate and illustrate* --- class: large, inverse, middle # Key takeaways --- class: large, inverse, center, middle What use are budgets and accounts Public money = not just cash flowing More budgets than just the central state's Data offers multiple ways of looking at public money --- class: large, left, middle, inverse # Why care about budgets? --- class: left, top, large 0. What is a budget good for? (Concepts) -- 1. How do we understand public money? (Data) -- 2. Where does public money come from? (Revenue) -- 3. How is public money spent? By whom? (Spending) -- 4. Why is that so? (Political economy) -- 5. How is public money managed? (Rules, institutions) -- --- class: large, inverse, middle # What is a budget? --- class: large, middle A plan An expression of collective decisions A solution to collective action problems An accountability tool ??? Someone writes the plan, someone has influence over it Collective decisions: both between institutions, between state and society, and between groups of citizens/voters (=> intergenerational and other equity and distributional effects) Collective action problems: public money = common pool resource Acctounability for following the plan --- class: inverse, middle # What else can we know about public money? --- class: large # Think *stocks and flows* .center[ Budgets / P&L × balance sheets = What is raised/spent × what is owned and owed *Reflected in different data published* ] --- class: large # Think *principals and agents*: who accounts to whom Spenders (public orgs) → finance ministry Executive → legislature (Supreme Audit Institutions) Member states ↔︎ EU State → voters? ??? Related information asymmetries and attempts to alleviate them The data you see is often a by-product of these processes --- class: large # Think *ex ante* and *ex post* accountability Budgets as plans × accounts as records of what happened Accounting and economics concepts/language can clash Accountability → data is generated! ??? Data often a reflection of budgeting and accounting processes To work with some parts of it, you need some familiarity with accounting concepts and with the rules around budgeting and accounting in the public sector --- class: inverse, middle # Where does money come from? --- class: large, middle Money = what we get each year? Or: what we own? Tax or another means? What kind of tax? Who pays it? Who collects it? Who sets the rates? (tax autonomy?) Who gets to spend it? ??? - Tax or something else: some revenue sources are similar to tax (insurance, fees etc.) - Using own assets (property, investments) to generate income - Tax on what? Wealth x income x consumption => efficiency and equity consequences --- class: center, middle ## Aside: credits and data sources Data: - [Státní pokladna MF ČR (State Treasury)](https://monitor.statnipokladna.cz/) via own [R package](https://petrbouchal.xyz/statnipokladna/) combined with [CZSO data](https://www.czso.cz/csu/czso/otevrena_data) via own [R package](https://petrbouchal.xyz/czso/) - [WOFI SNG database](http://www.sng-wofi.org/data/) via [OECD R package](https://cran.r-project.org/web/packages/OECD/index.html) Analysis: - mostly own/colleagues at IPR Praha (publication in [CZ](http://www.iprpraha.cz/uploads/assets/dokumenty/chude_mesto_prazske.pdf) and [EN](http://www.iprpraha.cz/uploads/assets/dokumenty/ssp/analyzy/ekonomika/chude%20mesto%20aj/ipr_chude_mesto_prazske_sazba_en.pdf)) - with Petr Janský, [work in progress](https://obce-covid19.netlify.app/) Apologies for Czech/inadequate labels; will try to explain as I go. --- ## Who gets to spend it: income by level of gov't  .small[source: IPR Praha calculations based on SNG/WOFI database] ??? See variation in extent of public spending Fiscal federalism != actual political federalism: large variation in role of local spending even in unitary states (Denmark...) --- ## Where money comes from: sources of income by region (CZ)  ??? One chart exposing multiple issues of budgeting in the modern state A version of fiscal federalism Spatial and socioeconomic patterns Own resources x what a city/region can raise Automatic transfers (share of tax) vs. subsidies to regions Subsidies from state can come with strings (current/investment) Only small share of wealth tax, and smaller in Prague => distributive and efficiency issues --- ## Property income = sell vs. maintain an asset  ??? Lesson = top-level budgets can hide detail. It can look good that a budget contains a lot of "own-source" income - but are we selling things, or using our assets to generate sustainable income? Very different long-term consequences Highlights link between asset income and investment/maintenance cost --- ## What kind of tax? (Local income)  ??? Surprising variation: large property taxes in France and US Czechia way down there --- ## Impact of shocks  --- class: inverse, middle # How is public money spent? --- class: middle, large By whom? Capital vs. current? Own activity vs. outsourced? Where? In what sector? --- class: large ## Capital spending by level of govt  --- class: large ## Capital spending → assets  ??? Again, linkage between stocks and flows Invest => own an asset => generate income & maintenance cost One of the hardest practical questions in managing public money - account for future income and cost - have processes for linking stocks and flows, not planning just cash --- class: inverse, middle # How is public money managed? --- class: large, middle ## "The *administrative economy* of public spending" The *political* problem: how not to spend too much / spend wisely × the *administrative* problem of (not) implementing spending plans properly Institutions, rules, incentives --- ## Investment funding + cycles (Prague)  ??? A large chunk of investment spending even in a rich city funded by EU This money has its own cycles Election cycles visible in overall spending - different for EU and Prague money Very little state money subsidising Prague investments - less than in other regions. Could compare with benefit? Tells you st about the financial relationships between the different levels of govt --- ## Implementation gap (Prague)  ??? tl;dr: - spending plans get revised upwards but then not even the initial plan is spent. - the problem is bigger for investment - similar patterns at national level Highlights issue of practical implementation: budgeting is meaningless if we cannot actually execute on plans This is not just because of admin capacity - also incentives --- class: large, middle → Public Financial Management - how to achieve efficiency? - how to run budgeting as a planning process? - how to budget for results? (link spending to policy outcomes) - how to understand impacts (and on whom) --- class: large, inverse, middle # How to get and use the data If you like lots of data and work in R... --- class: medium ## {statnipokladna} On CRAN. Documentation at [petrbouchal.github.io/statnipokladna](https://petrbouchal.github.io/statnipokladna) also explains how to use and understand the data. <img src="images/sp.png" alt="drawing" width="250"/> Provides data published at [monitor.statnipokladna.cz/](https://monitor.statnipokladna.cz/). --- class: medium ## Also useful [<img src="images/czso.png" alt="drawing" width="250"/>](https://petrbouchal.xyz/czso) [<img src="images/vsezved.png" alt="drawing" width="250"/>](https://petrbouchal.xyz/vsezved) Czech statistical data // school register {[CzechData](https://jancaha.github.io/CzechData/)} {[RCzechia](https://cran.r-project.org/package=RCzechia)} for Czech geospatial data and metadata, also geocoding {[eurostat](https://cran.r-project.org/package=eurostat) {[wbstats](gshs-ornl.github.io/wbstats/)} {[oecd](https://cran.r-project.org/package=OECD)} for accessing data from these orgs --- class: inverse, bottom, right, large layout: false .left[[petrbouchal.xyz/ies2021](https://petrbouchal.xyz/ies2021)] <a href="https://twitter.com/petrbouchal"><svg style="height:0.8em;top:.04em;position:relative;fill:white;" viewBox="0 0 512 512"><path d="M459.37 151.716c.325 4.548.325 9.097.325 13.645 0 138.72-105.583 298.558-298.558 298.558-59.452 0-114.68-17.219-161.137-47.106 8.447.974 16.568 1.299 25.34 1.299 49.055 0 94.213-16.568 130.274-44.832-46.132-.975-84.792-31.188-98.112-72.772 6.498.974 12.995 1.624 19.818 1.624 9.421 0 18.843-1.3 27.614-3.573-48.081-9.747-84.143-51.98-84.143-102.985v-1.299c13.969 7.797 30.214 12.67 47.431 13.319-28.264-18.843-46.781-51.005-46.781-87.391 0-19.492 5.197-37.36 14.294-52.954 51.655 63.675 129.3 105.258 216.365 109.807-1.624-7.797-2.599-15.918-2.599-24.04 0-57.828 46.782-104.934 104.934-104.934 30.213 0 57.502 12.67 76.67 33.137 23.715-4.548 46.456-13.32 66.599-25.34-7.798 24.366-24.366 44.833-46.132 57.827 21.117-2.273 41.584-8.122 60.426-16.243-14.292 20.791-32.161 39.308-52.628 54.253z"/></svg></a> <a href="https://github.com/petrbouchal"><svg style="height:0.8em;top:.04em;position:relative;fill:white;" viewBox="0 0 496 512"><path d="M165.9 397.4c0 2-2.3 3.6-5.2 3.6-3.3.3-5.6-1.3-5.6-3.6 0-2 2.3-3.6 5.2-3.6 3-.3 5.6 1.3 5.6 3.6zm-31.1-4.5c-.7 2 1.3 4.3 4.3 4.9 2.6 1 5.6 0 6.2-2s-1.3-4.3-4.3-5.2c-2.6-.7-5.5.3-6.2 2.3zm44.2-1.7c-2.9.7-4.9 2.6-4.6 4.9.3 2 2.9 3.3 5.9 2.6 2.9-.7 4.9-2.6 4.6-4.6-.3-1.9-3-3.2-5.9-2.9zM244.8 8C106.1 8 0 113.3 0 252c0 110.9 69.8 205.8 169.5 239.2 12.8 2.3 17.3-5.6 17.3-12.1 0-6.2-.3-40.4-.3-61.4 0 0-70 15-84.7-29.8 0 0-11.4-29.1-27.8-36.6 0 0-22.9-15.7 1.6-15.4 0 0 24.9 2 38.6 25.8 21.9 38.6 58.6 27.5 72.9 20.9 2.3-16 8.8-27.1 16-33.7-55.9-6.2-112.3-14.3-112.3-110.5 0-27.5 7.6-41.3 23.6-58.9-2.6-6.5-11.1-33.3 2.6-67.9 20.9-6.5 69 27 69 27 20-5.6 41.5-8.5 62.8-8.5s42.8 2.9 62.8 8.5c0 0 48.1-33.6 69-27 13.7 34.7 5.2 61.4 2.6 67.9 16 17.7 25.8 31.5 25.8 58.9 0 96.5-58.9 104.2-114.8 110.5 9.2 7.9 17 22.9 17 46.4 0 33.7-.3 75.4-.3 83.6 0 6.5 4.6 14.4 17.3 12.1C428.2 457.8 496 362.9 496 252 496 113.3 383.5 8 244.8 8zM97.2 352.9c-1.3 1-1 3.3.7 5.2 1.6 1.6 3.9 2.3 5.2 1 1.3-1 1-3.3-.7-5.2-1.6-1.6-3.9-2.3-5.2-1zm-10.8-8.1c-.7 1.3.3 2.9 2.3 3.9 1.6 1 3.6.7 4.3-.7.7-1.3-.3-2.9-2.3-3.9-2-.6-3.6-.3-4.3.7zm32.4 35.6c-1.6 1.3-1 4.3 1.3 6.2 2.3 2.3 5.2 2.6 6.5 1 1.3-1.3.7-4.3-1.3-6.2-2.2-2.3-5.2-2.6-6.5-1zm-11.4-14.7c-1.6 1-1.6 3.6 0 5.9 1.6 2.3 4.3 3.3 5.6 2.3 1.6-1.3 1.6-3.9 0-6.2-1.4-2.3-4-3.3-5.6-2z"/></svg></a> <a href="https://linkedin.com/in/petrbouchal"><svg style="height:0.8em;top:.04em;position:relative;fill:white;" viewBox="0 0 448 512"><path d="M416 32H31.9C14.3 32 0 46.5 0 64.3v383.4C0 465.5 14.3 480 31.9 480H416c17.6 0 32-14.5 32-32.3V64.3c0-17.8-14.4-32.3-32-32.3zM135.4 416H69V202.2h66.5V416zm-33.2-243c-21.3 0-38.5-17.3-38.5-38.5S80.9 96 102.2 96c21.2 0 38.5 17.3 38.5 38.5 0 21.3-17.2 38.5-38.5 38.5zm282.1 243h-66.4V312c0-24.8-.5-56.7-34.5-56.7-34.6 0-39.9 27-39.9 54.9V416h-66.4V202.2h63.7v29.2h.9c8.9-16.8 30.6-34.5 62.9-34.5 67.2 0 79.7 44.3 79.7 101.9V416z"/></svg></a> petrbouchal [petrbouchal.xyz](https://petrbouchal.xyz) pbouchal@gmail.com