Daniel R. Mullins

Local Budgeting and Finance: 25 Years of Developments

This article traces developments in budgeting and finance at the local government level over the past 25 years. In doing so, it uses the 290 related articles published in Public Budgeting & Finance over this period as its foundation and as a sieve for topic selection. Specific attention is directed to intergovernmental finance, financial management, budgeting and budget reform, alternative service delivery, and capital budgeting. The intent is to sift through important developments in each area, highlight their significance at the time and their importance to the present and future.

Do revenue forecasts influence budget setting? A small group experiment

This article reports on the results of a small group experiment relating the effects of situational and psychological factors to the use of revenue forecast information on budgetary decision-making. The results suggest ‘objective’ information is not completely ignored because of conditions in the budgetary environment and that ones role in the budget process influences how ‘objective’ information is used. The results also indicate that some useful insights for budget theory are possible from small group experiments.

Popular processes and the transformation of state and local government finance

State and Local Finances under Pressure explores the future of state and local government fiscal systems given the numerous pressures they face from economic, legal, technological, demographic and political forces. It explores how these multiple forces play out in terms of the changes state and local governments should and are likely to make.

Changing demographics and state fiscal outlook: the case of sales taxes.

Broad-scale demographic changes have implications for state and local finance in terms of the composition of the base of revenue sources and their yields. This article examines the effect of such changes on the potential future yield of consumption-based taxes. The effect of household characteristics and composition on the con sumption of selected groups of goods subject to ad valorem retail sales taxes is estimated, generating demographic elasticities of consumption. These elasticities are applied to projected demographic changes in eight states through the year 2000. The results show rather wide variation in expected consumption shifts and potential tax bases across the states, with income growth having the greatest effect, as expected. Excluding the effects of income and population change, the expected real growth in the consumption base is varied over states. It remains to be seen whether state and local tax structures can or will adjust to capitalize on their potential and whether this growth will be sufficient to offset expenditure pressures likely associated with these demographic shifts.

Reforming Budget Systems in Countries of the Former Soviet Union

Seventy years of central planning by authoritarian government distorted the economies of the countries of the former Soviet Union (FSU) almost beyond belief and left them unprepared for a smooth transition to market economies.(1) Factories placed in economically unviable locations produced items unsalable because of poor style, sloppy workmanship, unreliability, or hopelessly high production costs. People were distributed around the countries, often without consideration for where they might want to live and with minimal attention to where their presence might yield economic value. The contribution that management, finance, and organizing services make to the value of businesses and to society was dismissed. It was no wonder that opening these countries to democratic choice, to economic freedoms, and to international markets brought economic collapse. However, markets will develop on their own--even in Soviet times, people survived by informal exchange and, while unaccustomed to many elements of modern marketing, finance, and business management, they did understand trade, as any visit to a FSU country today will quickly confirm. Given a modicum of economic freedom, even with ambiguous property rights and doubtful enforceability of contracts, markets emerged in response to individual demands for goods and services. Government budget processes and procedures--the systems for making public sector resource allocation decisions --do not freely emerge like markets.(2) The fiscal system consistent with Soviet times was not compatible with markets, free choice, personal and economic freedom, and democratic decision making. The old system must stop and a new system--a framework of laws and human and physical resources appropriate to new tasks--must be created by conscious and concerted actions. Early successes with the development of markets in some FSU countries, notably the Russian Federation, mislead many observers into believing that fiscal reforms were working. Continuing evidence, however, including the great Russian crisis of 1998--a collapse emerging from unsustainable budget deficits and default on federation and regional debt issues--shows how wrong that observation would be.(3) Absence of restructuring and reform in the public sector are easily apparent throughout the FSU. Examples include contentious and confused fiscal relationships between tiers of government in the Russian Federation; budget processes unable to constrain fiscal deficits or to manage allocation of scarce resources among governmental programs; inability to pay wages, pensions, and other public obligations as they come due; unreformed tax systems that seem more designed to punish enterprise than to raise revenue; tax collectors and government agencies that work with barter instead of money; and tax administration that thinks in terms of collection by brute force rather than voluntary compliance.(4) The following sections, based on several years of direct field work including extensive discussions with senior government officials in several FSU countries, explore critical problems in the budget systems and procedures of these countries that have complicated or prevented their contribution to the normal expectations of what these systems must do: (1) maintain aggregate fiscal discipline, (2) assure direction of public resources to areas of greatest national need, and (3) encourage efficient use of resources in public agencies (Campos and Pradhan 1996, 1997; Schiavo-Campo and Tommasi 1999). Even though public budgeting is a planning process in both centrally planned and market economies, the budget environment and the expectations for the budget are considerably different in these systems and the transition in process has been difficult. In spite of the years elapsed since the collapse of the Soviet Union and the independence of these states and considerable progress in developing effective and accountable systems in some countries, most of the budget systems have many changes ahead if they are to assure that government services will be within the actual available government revenues and will be appropriate to the needs of the public. …