Riin Savi

Cutback management literature in the 1970s and 1980s: taking stock

The main purpose of this article is to take stock of the literature on public sector cutback management in the 1970s and the 1980s, with a specific focus on cutback strategies and the contents of cutbacks. Both theoretical and empirical studies, focusing either on the central or local government level or different policy fields, have been reviewed. The study shows that when governments face cutbacks, they need to address the fundamental choice between across-the-board and targeted cutback strategies. Cutbacks do not occur as one-off single actions but are usually carried out in a number of cutback rounds. The longer-lasting and the more severe is fiscal stress, the more likely it is that the governments will start imposing targeted cuts rather than implementing across-the-board strategies. Looking at the patterns of cutback management in the past is expected to provide useful insights for systematizing the approaches to cutback management and for researching the current crisis. Points for practitioners This article provides an overview of cutback management practices in the 1970s and the 1980s with the expectation that it will contribute to addressing the current fiscal crisis. The pros and cons of targeted versus across-the-board cutback strategies are discussed. The article also looks at various cutback measures including operational cuts (hiring freeze, pay freeze, lay-offs), programme and capital cuts. The study shows that the longer-lasting and the more severe the fiscal stress, the more likely it is that the governments will begin to impose targeted rather than across-the-board cuts. It is found that personnel costs are cut rather reluctantly, and hiring freeze is a dominant measure compared to salary cuts or lay-offs.

Politics of fiscal consolidation in Europe: a comparative analysis

The aim of the article is to comparatively describe and explain consolidation measures and political decision-making processes in 14 European countries. The consolidation measures followed a similar pattern. Hiring and pay freeze occurred almost everywhere, whereas more radical cutback measures were introduced only in a limited number of countries. Cutback decision-making was not a one-off event, but consisted of a series of stages, beginning with temporary and small measures and gradually evolving into more serious cutbacks, sometimes arriving at targeted cuts and political priority-setting. The political decision-making was moderate and gradual rather than drastic and swift. Exceptions to this general pattern were the Baltic states as well as those European countries which received financial assistance on the condition of swift and severe cutbacks. Economic factors and supra-national influences primarily explained the size of consolidation measures, whereas domestic political factors turned out to have limited explanatory power. Points for practitioners The comparative analysis of fiscal consolidation in 14 European countries showed that the consolidation measures followed a similar pattern. Hiring and pay freeze occurred almost everywhere, whereas more radical cutback measures were introduced only in the later stages of fiscal consolidation. At the beginning of the crisis, the severity and duration of the crisis were denied and the necessity for serious cutbacks was recognized only later. Exceptions to this general pattern were the Baltic States as well as those European countries which were bailed out on condition of swift and severe cutbacks. The article argues that the political will and capacity of governments to take drastic and targeted measures based on political priority-setting is still a serious need.

Fiscal Crisis and Expenditure Cuts: The Influence of Public Management Practices on Cutback Strategies in Europe

The Great Recession resulted in fiscal crises for governments across the Western world. Significant cuts in government programs and in public administration itself were initiated as many governments scrambled to reduce their growing budget deficits. We are interested in how European governments have reacted during the most recent crisis. In particular, our article explores whether rationally oriented management approaches are associated with targeted and efficiency cuts rather than across-the-board cuts. The theoretical part of the article outlines the predictions about how the use of rational approaches will affect the types of cuts used by public agencies. In the empirical part of the article, we use the survey of 7,077 senior government officials in 19 European countries, undertaken within the framework of the Coordinating for Cohesion in the Public Sector of the Future (COCOPS) project. We find that several rationally oriented approaches—use of strategic planning, focusing on outcomes and results, rewarding goal achievement, and increased relevance and use of performance measures—are positively associated with the use of targeted and efficiency cuts. These findings suggest that rational management techniques adopted by governments over recent decades might be used by managers to help them make strategic decisions, even during times of crisis.

The use of performance information in cutback budgeting

This paper explores the use of performance information in budgetary decision-making during fiscal crisis. The theoretical part of the paper explains the markedly different predictions produced by the main theoretical approaches: agency theory, incrementalism, and interactive-dialogue theory. The empirical study of the Estonian case demonstrates that, in a fiscal crisis, performance information will not be used for making budgetary decisions due to time pressure, the political nature of the budgetary process, and limited analytical capacities. Lessons are given for international practice and future research.

Decision-making in time of crisis: cutback management in Estonia

The article investigates the Estonian governments response to the fiscal crisis by looking at the dynamics of the decision-making processes during cutback management from 2008 to 2013 from the dichotomy of centralization–decentralization. The study explores the cutback decision-making by pinpointing the main actors and contextual variables shedding light on the management of fiscal crisis. It is demonstrated that, in general, the fiscal crisis contributed to increasing levels of centralization in governmental decision-making. The crisis decision-making was dominated by centralized political decisions and non-inclusion of the opposition and interest groups. Still, achieving urgent solutions was facilitated by decentralized decisions at the ministerial level, the empowerment of budgetary institutions and the intensive engagement of the civil servants. It has been indicated that the initially short-term procedures to enable cuts and resultant changes in decision-making processes are mostly in effect still in 2014 and thereby influence public administration practices in the long run. Points for practitioners The study shows that cutback management may lead to urgency in governmental decision-making, where centralization facilitates quick decisions. It is also demonstrated that a minority government is able to achieve fiscal adjustment even in a context of high political conflict. The crisis context sets new requirements to the competencies of public servants, as cutback management obliges them to cope with new and very complicated tasks. The article indicates that short-term cuts and changes in decision-making processes intended to alleviate the acute phase of crisis may remain in effect considerably longer than initially planned and thereby influence public administration practices in the long run.

Payment systems and incentives in primary care: implications of recent reforms in Estonia and Romania

Since the early 1990s, major reform in healthcare has been adopted in former communist countries in Central and Eastern Europe. More than 20 years after, reform in healthcare still draws much interest from policy makers and academics alike. One of the dynamic components of reform has been the reform of payment systems in primary care. This article looks at recent developments in payment systems and financial incentives in Estonia and Romania. We conclude that finding the appropriate mix in paying and incentivizing primary care providers in a transitional context is no easy solution for healthcare policy makers who need to carefully weigh in the advantages and inherent problems of various payment arrangements. In a transitional, rapidly changing healthcare system and society, and a context of financial stringency, the theoretical effects of payment mechanisms may be more difficult to predict and manage than it is expected.

Central Decisions, Decentralized Solutions: Comparing the Implications of Central Cutback Policy for the Agency Level in Estonia and Latvia

Abstract The paper investigates the implications of governmental cutback strategies related to the recent fiscal crisis at agency level in Estonia and Latvia. For this purpose, the article applies a comparative case study approach, through a purposeful selection of five agencies – three in Estonia and two in Latvia – to map the maximum possible variation of before-and-after effects of the crisis on organizational responses and individual-level coping. The selected agencies represent a range of regulatory and social policy domains directly and severely affected by the crisis through budget cuts and increased demand for services, and therefore most affected by the crisis. The study demonstrates that the budget cuts imposed by the cabinets of both countries and widely praised internationally actually left agency-level actors in an extremely difficult situation. Centrally imposed across-the-board cuts resulted in diverse public service gaps, leading to a range of hardships for the citizens, and therefore turning out to be neither equal nor fair for the target groups. The study concludes that centrally decided cutbacks shifted the burden to street-level bureaucrats, who in turn took on the role of key policy actors by ensuring the delivery of public services during the fiscal crisis.

The Impact of Greater Centralization on the Relevance of Performance Information in European Governments During the Fiscal Crisis

The Great Recession resulted in fiscal crises for governments across the Western world. Our article explores whether, as a result of the crisis, the relevance of performance information in organizational decision-making increased. Furthermore, we examine how centralizing shifts in governmental decision-making processes influenced the shifts in the relevance of performance information for public sector organizations. Using a survey of senior government officials in 19 European countries, we find that, in line with the predictions of rationalistic decision-making and principal–agent models, the increase in the relevance of performance information in organizational decision-making was positively associated with our measures of greater centralization.