The Political Dynamics Behind Government Budgeting Process

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Michael Oyakojo
February 17, 2015

Generally, a government budget is a plan that outlines the programs, goals and objectives to be achieved over a period of time and the monetary value of the projected revenues and expenditures to be incurred at a future determinable time. A government budget becomes a legal document once it is approved by the legislature. At the federal level, the budget influences fiscal, social, administrative and economic policies and their collective impacts on the economy.

Different disciplines have different perspectives on government budgeting. In their book Public Budgeting in America, Robert Smith and Thomas Lynch suggested a politician views the government budget as a tool through which political objectives could be accomplished. To a public administrator, a budget is an instrument by which public policy objectives are implemented. An accountant’s perspective is centered on accountability and the variance between the projected and the actual resources expended on programs and public policy. To an economist, a budgetary process entails alternatives forgone and the rational allocation of limited public resources to satisfy unlimited societal needs.

Despite all these views, government budgeting is more political than technical. The technical aspect of government budgeting involves the preparation of the budget in line with the applicable laws, regulatory and government standards. In Public Administration: Concepts and Cases, Professor Emeritus Irene Rubin analyzed five concepts of the politics of government budgeting. These include reformism, incrementalism, interest group determinism, process and policymaking.

First, the reformist posits that budgetary decisions should be based on efficiency as opposed to politics. The actions and the decisions of the politicians and lobbyists are mostly influenced by political considerations. These might not be rational and are less efficient. As such, there is a constant conflict between the bureaucrats (public administrators and technocrats) and the politicians (including political appointees). On incrementalism, budgetary decisions are made based on bargaining and consensus among stakeholders. Minor adjustments are made on existing policies and practices. The incrementalist views public budget as a negotiation tool for compensation and to reach agreement on a common resolution among by political actors.

Similarly, Rubin’s third concept, the interest group determinism, concur that the outcome of government budgeting is significantly influenced by interest groups. The interest group is one of the powerful stakeholders in government budgeting and policy development (the iron triangle policymaking model). Wealthy and popular interest groups hire strong lobbyists and public sector consultants to influence the legislature and executive and skew the budgetary process for their benefits.

Fourth, the budgetary process is the focal point of budget politics. Branches of governments contend for the control of the budgetary power to influence the process for desired results and political gains. The fifth view of the politics of budgeting is policymaking. The role of the budget is debated with the aim of policy development and advocacy. Policy debates are held among competing stakeholders with the view to sorting out differences during budget deliberations.

The process of policy formulation, program selection, resource allocation and spending, borrowing, balancing and budget implementation and performance review entails interactions and compromise among stakeholders and political gladiators. The executive branch of government sets the tone and the direction of the budget by highlighting policy priorities and objectives to be achieved in the next fiscal year. Based on these instructions, heads of government agencies and bureau chiefs prepare their departmental budgets in consultation with the budget officers from the Executive Budget Office. These completed budgets are consolidated and submitted to the legislature for appropriation.

Stakeholders (like institutions, businesses, individuals, bureaucrats, interest groups and the general public) testify at legislative hearings and town hall meetings. This allows for openness, transparency, and public accountability in the budgetary process. As the fiscal year unfolds, the budget is amended (if necessary) to reflect current realities for effective execution. Year-end audits and evaluations are conducted for control and to measure performance. Feedback is provided to correct any anomalies observed during the budget cycle for future improvement.

Each step of the budgetary process involves negotiations and interactions among the political actors and stakeholders: the politicians (and appointed public officials), the bureaucrats (public administrators and civil servant) and the public (including the interest groups). At the planning stage of the budget cycle, the public, interest groups, bureaucrats and institutional stakeholders lobby the executive in the quest to set and influence the budget priorities, programs, and agenda for next fiscal year. Before legislative appropriation, the legislature and the executive branches of government bargain and reach compromise on direction and the focus of the budget. Decisions on how the budget will be executed, the strategies, the contracts, and the programs are reached through negotiation and consensus.

In conclusion, the budgetary process and system is more political than technical. Hence, it is imperative for public administrators and top management of public institutions and agencies to understand the political dynamics of government budgeting. Also, there is need for cordial relationships, seamless communication, and effective coordination among the stakeholders. This would provide a favorable political environment for negotiation and consensus building, and formulation and implementation of budget for the betterment of the society.

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Author: Michael Oyakojo is an economist, chartered accountant, structured financier and policy analyst with cognate experience in private and public sectors on three continents. He can be reached at: [email protected].

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