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Introduction
Organizational managers and policymakers use the budget for accountability and decision-making purposes. Budgeting is a process that involves the allocation of resources to the objectives of a given entity or a strategic plan (Brusca & Labrador, 2016). The allocation of resources to a policy can influence various aspects of the policy. The purpose of this paper is to demonstrate how a public budgetary decision process impacts policy and how public policy impacts the public budgetary decision process at the federal level. The paper also discusses the potential complications that can arise when making budgets and policy-related decisions.
How a Public Budgetary Decision Process Impacts Policy
A policy can be defined as a course of action or strategy created to achieve a goal or procedure. Any strategic plan or objective that requires implementation needs a budget. According to Brusca and Labrador (2016), a budget is a financial statement that will help to predict the expenditure and revenues for a course of action or strategy for a given period. The relationship between public policy and policy formulation process emanates from the fact that no public activity can be conducted unless otherwise stipulated by clear objectives and appropriate policies. Professor Rubin’s policymaking concept postulates that public budgets play a role in policy development and advocacy efforts. Budgetary decisions made at the federal level can influence socioeconomic issues such as housing, transportation, police, defense agencies, public education, poverty, and healthcare.
The budget-making process will always consider the needs and wants of the public in determining resource allocation. According to İpek (2018), a budget reflects the needs, preferences, and priorities of the society members that the budget serves. Budgeting provides a platform for the government to decide relevant strategies for meeting the needs of its population. Each budget decision will affect the amount, level, and even the success of each category’s policies. For example, the obesity pandemic has become a significant health concern that has warranted the government’s attention. Given the prevalence of the condition and its debilitating effects, lawmakers and the healthcare department stakeholders have been considering developing new policies to curb the condition. Such policies mainly target health programs, such as Medicare or Medicaid, to address the situation effectively. By influencing the amount of money allocated to the treatment of obesity, the healthcare department stakeholders will be able to achieve their goals of reducing obesity prevalence in the country. In this regard, the government may need to expand funding for treatment opportunities such as weight management, behavioral therapy, and bariatric surgery.
The policymaker’s decision proposed treatment options will have implications for both sides of the budgetary players. For example, if the federal government approves the funding of these treatment opportunities, its federal budget will be affected. On the other side, if the government rejects the proposed policies, the prevalence of the condition may exacerbate, which can have debilitating effects on the population’s health. In 2018, the federal government approved a budget of The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program that helped to protect the vulnerable population’s wellbeing by providing essential nutrition. The government spent approximately $5.3 billion in the fiscal year of 2018 on this program (Hodges and McLauhlin, 2020). According to the Center for Disease Control, the program has managed to reduce obesity incidences amid children aged between two and four years in thirty-one states during 2010 and 2014 (Schwarz and Hamburg, 2016). The approval of this program led to a policy that updated nutritional standards in schools. Because the WIC program’s approval was based on the needs of the public, it can be surmised that the public wants are a mechanism through which the budgetary process can influence policies.
A second mechanism is through the advocacy activities of relevant stakeholders in the healthcare system in the U.S. The WIC program’s data demonstrates how the government budget can result in policies that can significantly improve the country’s socio-economic conditions. The approval process of the WIC budget involves a wide range of stakeholders. A study conducted by Marume (2016) revealed that the politics of political parties, activities of interest groups, and public wants and needs influenced the development of public policy. Marume (2016) demonstrates the role of interest groups and the public’s needs and wants in influencing these policies. From the data shared above, it is clear that people’s demands influence public policies. Policymakers typically recognize the need for availing healthy nutrition to the vulnerable populations to improve their health outcomes and, therefore, approve the budget (Hodges & McLauhlin, 2020; Schwarz & Hamburg, 2016). Advocacy is also a crucial aspect that plays an instrumental role in approving budgets to facilitate policy development.
The socioeconomic and political environment of policy development is critical to the nature and type of procedures that will be formulated. According to Marume (2016), the socioeconomic environment is both a source and a public policy recipient. Competing and conflicting institutions with interest in policy formulation have a role to play in the budgetary process. Civil society refers to the group of people outside the government that have an interest in policy. Collectively, this group has created a mechanism by which different public views can be integrated with the policymaking process. Therefore, civil society creates a link between individual society members and the state, which builds a consensus for an expected budget approval process. Through these organizations’ activities, they hold the government accountable and ensure that the developed policies are relevant, enforceable, and responsive to people’s demands. They have a significant influence on public policy because of the shared information and the individuals they represent in the budget approval process.
While various studies have demonstrated the role of the public’s needs and civil society in the budgetary process and their implication on policymaking, other economists have rejected their stance. In her publication, “Early Budget Theory: The Progressive Theory of Expenditures,” Mabel Walker analyzed two major perspectives of the budgetary process: the judgmental and economic-scientific approach (Egbunike & Nkiru, 2017). The judgmental approach to the budgetary process referred to an approach where the budgetary process was influenced by making appeals and justice claims. Walker rejected these approaches’ importance in influencing the budgetary process. Although she acknowledged its role, Walker asserted that the notion had no meaningful contribution to budget planning and decision-making. In contrast, she rallied behind the economic-scientific approach due to its systematic and rational approach to influencing a budget. This approach involved utilizing an economic theory, systematic analyses, and empirical data to determine and weigh budget allocation decisions.
From Mabel Walker, the stance that civil groups or public wants have any importance in influencing the budgetary process is to be questioned. Even though civic society and society members, play a role in the budget-making process, the approval decision will ultimately be based on empirical data that will support the budget’s financial viability. A study conducted by Egbunike and Nkiru (2017) confirmed Mabel Walker’s stance. According to the articles’ authors, performance evaluation based on empirical data significantly influenced budget costs and controls (Egbunike & Nkiru, 2017). From an economist’s perspective, limited public resources can be wasted if they are concerned with satisfying infinite human wants. Therefore, a logical criterion such as performance evaluation, empirical data, and economic theories should be used as a basis to guide decision making.
The personal views of the political office in the budgeting process can also influence policies. Public budgeting in the U.S. is based on accounting and financial management principles and accountability and governance. A core tenet of the American system is that governance is based on the separation of powers. Each branch of the government has a role to play in the budgetary process. For example, the legislature’s executive is responsible for preparing and submitting budgets in the public sector, especially the government. Once sanctioned by the legislature, the federal budget is typically distinguished as a licit documentation. The executive branch of the government highlights the objectives and policy priorities for every fiscal year.
In collaboration with the executive budget office, public agencies prepare departmental budgets, which are compiled and submitted to the legislature for appropriation. Upon submission, the legislature will hold hearings, and stakeholders or individuals, interest or advocacy groups, and businesses will provide testimonials towards the legislature. This approach fosters transparency and accountability in the budgetary procedure. Throughout the fiscal period, typically one year, the budget can be modified depending on the circumstances. A performance review is conducted for control purposes and future improvement initiatives. Negotiations and collaborations occur during each step of the budgeting process. For example, at the planning stage, stakeholders will lobby the executive in a bid to influence its decision on priority. Before the legislature’s appropriation, the executive and legislature have to debate and reach a compromise that will provide direction to the budget.
Critical decisions on the execution, contracts, and programs are executed through negotiation. Different disciplines view public budgets differently, e.g., a politician might view it as a means of attaining a political motive. A public administrator might view it as a means through which public policies are implemented. In contrast, an economist might view it as a process of allocating limited resources to satisfy unlimited human needs. Regardless of an individual’s view, budgeting is more of a political process than a technical process (Oyakojo, 2015). In her publication, “In Public Administration: Concepts and Cases,” Professor Irene Rubin identified critical conceptualizations of the budgetary process’s politics, including policymaking (Oyakojo, 2015). From this perspective, it can be deduced that public policies are politically motivated strategies.
It is important to note that states are differently structured when it comes to governance of the budgetary process. For example, in states such as Connecticut, Georgia, Idaho, Kentucky, and Minnesota, the governor is charged with the central authority of making critical decisions in the budgetary process. In states such as Utah and Mississippi, the legislature has a substantial amount of power in the budgetary process. In contrast, the executive is the main budgetary decision-maker in Ohio, Illinois, and California. However, some economists have argued that this power division will not maximize government interventions in society. According to the critics, the power divisions emphasize the federal program’s economic impact and the expense of the intangible benefits.
How Public Policy Can Impact the Public Budgetary Decision Process
The public budgeting process has undergone a significant evolution since its inception. Traditionally, the budget was solely an instrument used to indicate or highlight a states’ earning. However, following the enactment of the Magna-Carta Law during the 17th century, the public’s entitlements to be involved in the budgetary process were developed (İpek, 2018). After the economic depression, the theory of a functional state led to the transformation of the budget into a tool that could be used by the government to meet its fundamental roles and responsibilities to the public in a cost-effective manner. Accountability is now a key concept and the central tenet of modern budget systems.
Policies have been enacted to allow relevant individuals to assume and fulfill the roles in financing public services, with regards to the benefits delivered to the whole society. The new approach in the budgetary systems’ primary goal is to increase oversight on the impact of the budget in financing public services and rationalize the decision-making process. Since the current budget system focuses on cost-effectiveness and cost-efficiency, it is imperative that an investigation is conducted to determine how the target society members will benefit from the program. This approach calls for collaboration with various stakeholders to comprehensively understand the scope of the problem.
The budgetary process in the traditional context only required an analysis of the program’s actual cost; hence, only a handful of stakeholders participating in the budgetary process are required. Since novel policies emphasize accountability and transparency, public participation is warranted. The assumption is that public participation has a value proposition that can enhance decision-making, transparency, and accountability. This stance is supported by a study conducted by Abdullah (2016). This survey that engaging individuals during this particular procedure fosters good governance, minimizes the likelihood of corruption and misrepresentation of the budget. At each stage of the budgetary process, public participation opportunities are created.
The law requires that the public are informed, and their input and opinion be sought before critical decisions are made. For example, in Mexico, a law has been passed that mandates the involvement of citizens in the planning, development, and implementation process of the budget (Marchessault, n.d.). The new regulation requires that the executive promotes citizen participation in the public expenditure process. Through availing relevant information to the public, the members can track, evaluate, and give feedback on the budgetary process. In South Africa, a consultative process has been established by the national treasury that engages citizens during the budgetary process’s planning phase (Marchessault, n.d.). The treasury then ensures that budgetary priorities are aligned with the needs of stakeholders. In South Korea, citizens are involved in budget formulation to help the government develop and enforce budget ceilings (Marchessault, n.d.). Policies that mandate public participation has gained widespread recognition in the budgetary process in various countries.
Complications Encountered When Making Budget and Policy-Related Decision
The budgeting process, whether private or public, is based on making choices between expenditures. In this regard, a comparison of relevant categories becomes a critical issue to determine which one is more important. As long as there is a consensus between the major stakeholders on desired goals, the decision-making process can be straightforward. However, budgeting sometimes involves comparing two incomparable elements. For example, policymakers may need to weigh the significance of providing shelter to the homeless and buying more supplies for the navy. In hindsight, budgeting decisions cannot be achieved unless some form of consensus or compromise in decision-making is made. When a common comparison point is not achieved by necessary stakeholders, reaching a consensus may be difficult.
Another complication that may emerge relates to balancing budgets and borrowing. Complications can arise when the expenditure plan does not have a reasonable plan of paying back the borrowing. Although there are some critical differences between the budgetary process in the public and private sectors, unsatisfactory budgetary processes will trigger similar effects. A study conducted by Pimpong and Ghana (2016) showed that budgeting had a long-term impact on a firm’s financial outcomes. Similarly, substandard budgetary processes can have long-term financial effects on the government’s budget. This stance can be illustrated by a budgetary gaffe made by President Regan in 1981. The head of state approved a budget that was based on faulty and inconsistent numbers. Months after the budget was signed into law, the annual deficits started to spike. By the time the budget was balanced, the country had amassed considerable debt. During that period, the deficits incurred constrained policy development initiatives, increased partisan conflict, and significant interference with the country’s budget institution and process.
In institutions that have adopted the traditional budgeting approach, the lack of an in-depth analysis may lead to limited oversight of the real ROI of any line of business. There is also a risk of the budgetary process focusing on satisfying competing stakeholders’ needs at the expense of long-term goals and the organization’s vision. While public participation is vital during the policymaking and budgetary process, over-emphasis on the same can increases the risk of basing budgetary decisions on inaccurate assumptions.
Conclusion
Policymaking depends on the people who formulate alternatives between procedures, those who need to administer the policy, and those likely to be impacted by it. Everyone in society has a collective role to play in the policy formulation process. By contributing to the policymaking process through dialogue, individual members of the society can influence the budgetary process. Budget is a financial statement that will help to predict the expenditure and revenues for a course of action or strategy for a given period. The mechanism through which the budgeting process affects policies includes activities of political parties and interest groups, and the public’s wants and needs. The socioeconomic and political environment of policy development is critical to the nature and type of procedures that will be formulated. Budgeting decisions cannot be achieved unless some form of consensus or compromise in decision-making is made.
States are differently structured when it comes to governance of the budgetary process. Recently developed laws demand that the executive promotes citizen participation in the public expenditure process. Since the budgetary process exists to serve the people’s demands, the budgeting process will focus on how it will improve such outcomes. This approach leads to the creation of people-centered policies. Blueprints that mandate transparency and accountability in the budgeting process have allowed civil society to contribute to policy development processes.
References
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Brusca, I., & Labrador, M. (2016). Budgeting in the public sector. Springer Publishing.
Egbunike, A., & Nkiru, U. A. (2017). Budgeting, budgetary control and performance evaluation: Evidence from hospitality firms in Nigeria. Studies and Scientific Researches: Economics Edition, 26, 23–31.
Hodges, L., & McLauhlin, P. W. (2020). WIC program. United States Department of Agriculture. Web.
İpek, E. A. S. (2018). New approaches in public budgeting. In B. Açıkgöz (Ed.), Public budgeting, public economics and finance (pp. 712–784), IntechOpen.
Marchessault, L. (n.d.). Public participation and the budget cycle: Lessons from country examples. Global Initiative Fiscal Transparency. Web.
Marume, B. S. (2016). Public policy and factors influencing public policy. International Journal of Engineering Science Invention, 5(6), 6–14. Web.
Oyakojo, M. (2015). The political dynamics behind government budgeting process. American Society for Public Administration. Web.
Pimpong, S., & Larryea, H. (2016). Budgeting and its impact on financial performance: The case of non-bank financial institutions in Ghana. International Journal of Academic Research and Reflection, 4(5) 12–22. Web.
Schwarz, D. F., & Hamburg, R. (2016). Encouraging progress on the state of obesity in the United States. Robert Wood Johnson Foundation. Web.
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