Citizen Participation and Budget Variance: How Does Local Government Make Better Fiscal Accountability?
DOI:
https://doi.org/10.4335/10.4335/20.2.369-392(2022)Keywords:
citizen participation, budget variance, democratic governance, local governmentAbstract
We explore how citizen budget participation influences the difference between the original and final versions of local government budgets. Our findings based on 1,506 city and county governments in the U.S. show that localities with a higher level of citizen participation tend to increase any budget gap between original and final expenditures but decrease the gap on the revenue side of the budget. Citizens appear to be reluctant to modify revenues due to the lack of flexibility in allocating the tax burden. Alternatively, citizens may have more willingness to exploit the uncertainty of how expanded services will ultimately be funded over time. Our analysis provides insights into how public participation mechanisms influence the fiscal accountability of the presiding government budget decision makers.
References
Amiel, L., Deller, S., Stallmann, J. & Maher, C. (2014) Does the Restrictiveness of State Tax and Expenditure Limitations Affect State Revenues and Expenditures?, International Journal of Public Administration, 37, pp. 237-248.
Anessi‐Pessina, E., Sicilia, M. & Steccolini, I. (2012) Budgeting and rebudgeting in local governments: Siamese twins?, Public Administration Review, 72(6), pp. 875-884.
Arnstein, S. (1967) A Ladder of Citizen Participation, Journal of the American Institute of Planners, 35, pp. 216-224.
Arvate, P. R., Avelino, G. & Tavares, J. (2009) Fiscal conservatism in a new democracy:“Sophisticated” versus “naïve” voters, Economics Letters, 102(2), 125-127.
Banker, R. D. & Patton, J. M. (1987) Analytical agency theory and municipal accounting: An introduction and an application, Research in governmental and nonprofit accounting, 3(Part B), pp. 29-50.
Banks, J. S. & Weingast, B. R. (1992) The political control of bureaucracies under asymmetric information, American Journal of Political Science, pp. 509-524.
Bevir, M. (2010) Democratic governance (Princeton, N.J.: Princeton University Press).
Blume, L., Müller, J. & Voigt, S. (2009) The economic effects of direct democracy—a first global assessment, Public Choice, 140(3-4), pp. 431-461.
Box, R. C. (1999) Running Government Like a Business: Implications for Public Administration Theory and Practice, The American Review of Public Administration, 29(1), pp. 19-43, doi:10.1177/02750749922064256.
Bretschneider, S., Straussman, J. J. & Mullins, D. (1988) Do revenue forecasts influence budget setting? A small group experiment, Policy Sciences, 21(4), pp. 305-325.
Carrell, J. J. (1969) Citizen Participation and Decentralization, The American Review of Public Administration, 3(1), 3-12, doi:10.1177/027507406900300102.
Chapman, J. I. (1981) Proposition 13 and land use: A case study of fiscal limits in California (Lexington, Mass: Lexington Books).
Citrin, J. (1979) Do People want something for nothing: Public opinion on taxes and government spending, National Tax Journal, 32(2), pp. 113-129.
Cleveland, F. A. (1915) Evolution of the budget idea in the United States, The Annals of the American Academy of Political and Social Science, 62(1), pp. 15-35.
Courant, P. N., Gramlich, E. M. & Rubinfeld, D. L. (1980) Why voters support tax limitation amendments: The Michigan case, National Tax Journal, 33(1), pp. 1-20.
Dalehite, E. G. (2008) Determinants of Performance Measurement: An Investigation into the Decision to Conduct Citizen Surveys, Public Administration Review, 68(5), pp. 891-907, doi:10.1111/j.1540-6210.2008.00930.x.
Dougherty, M. J., Klase, K. A. & Song, S. G. (2003) Managerial necessity and the art of creating surpluses: The budget‐execution process in West Virginia cities, Public Administration Review, 63(4), pp. 484-497.
Ebdon, C., & Franklin, A. (2004) Searching for a Role for Citizens in the Budget Process, Public Budgeting & Finance, 24(1), pp. 32-49, doi:10.1111/j.0275-1100.2004.02401002.x.
Ebdon, C., & Franklin, A. L. (2006) Citizen Participation in Budgeting Theory, Public Administration Review, 66(3), pp. 437-447, doi:10.1111/j.1540-6210.2006.00600.x.
Evans III, J. H., & Patton, J. M. (1983) An economic analysis of participation in the municipal finance officers association certificate of conformance program, Journal of Accounting and Economics, 5, pp. 151-175.
Forrester, J. P. & Mullins, D. R. (1992) Rebudgeting: The serial nature of municipal budgetary processes, Public Administration Review, pp. 467-473.
Frank, H. A., & Zhao, Y. (2009) Determinants of local government revenue forecasting practice: Empirical Evidence from Florida, Journal of public budgeting, accounting & financial management, 21(1), pp. 17-35.
Franklin, A. L. & Ebdon, C. (2005) Are we All Touching the Same Camel?: Exploring a Model of Participation in Budgeting, The American Review of Public Administration, 35(2), pp. 168-185, doi:10.1177/0275074005275621.
Franklin, A. L., Ho, A. T. & Ebdon, C. (2009) Participatory Budgeting in Midwestern States: Democratic Connection or Citizen Disconnection?, Public Budgeting & Finance, 29(3), pp. 52-73, doi:10.1111/j.1540-5850.2009.00936.x.
Funk, P. & Gathmann, C. (2013) How do electoral systems affect fiscal policy? Evidence from cantonal parliaments, 1890–2000, Journal of the European Economic Association, 11(5), 1178-1203.
Giroux, G. & Shields, D. (1993) Accounting controls and bureaucratic strategies in municipal government, Journal of Accounting and Public Policy, 12(3), pp. 239-262.
Guo, H. & Neshkova, M. I. (2013) Citizen Input in the Budget Process: When Does It Matter Most?, The American Review of Public Administration, 43(3), pp. 331-346, doi:10.1177/0275074012443588.
Gupta, N., Fischer, A. & Frewer, L. (2015) Ethics, Risk and Benefits Associated with Different Applications of Nanotechnology: a Comparison of Expert and Consumer Perceptions of Drivers of Societal Acceptance, Nano Ethics, 9(2), pp. 93-108, doi:10.1007/s11569-015-0222-5.
Handley, D. M. & Howell-Moroney, M. (2010) Ordering Stakeholder Relationships and Citizen Participation: Evidence from the Community Development Block Grant Program, Public Administration Review, 70(4), pp. 601-609, doi:10.1111/j.1540-6210.2010.02181.x.
Hou, Y. (2006) Budgeting for fiscal stability over the business cycle: A countercyclical fiscal policy and the multiyear perspective on budgeting, Public Administration Review, 66(5), pp. 730-741.
Irvin, R. A. & Stansbury, J. (2004) Citizen Participation in Decision Making: Is It Worth the Effort?, Public Administration Review, 64(1), pp. 55-65, doi:10.1111/j.1540-6210.2004.00346.x.
Jimenez, B. S. (2013) Strategic planning and the fiscal performance of city governments during the Great Recession, The American Review of Public Administration, 43(5), pp. 581, doi:10.1177/0275074012451051.
Jimenez, B. S. (2014) Raise Taxes, Cut Services, or Lay Off Staff: Citizens in the Fiscal Retrenchment Process, Journal of Public Administration Research and Theory, 24(4), pp. 923-953, doi:10.1093/jopart/mut018.
Jordan, M. M., Yan, W. & Hooshmand, S. (2017) The role of state revenue structure in the occurrence and magnitude of negative revenue variance, The American Review of Public Administration, 47(4), pp. 469-478.
Kearns, P. S. (1994) State budget periodicity: An analysis of the determinants and the effect on state spending, Journal of Policy Analysis and Management, 13(2), pp. 331-362.
Larkey, P. D. & Smith, R. A. (1989) Bias in the formulation of local government budget problems, Policy Sciences, 22(2), pp. 123-166.
Lauth, T. P. (1988) Mid-year appropriations in georgia: allocating the “surplus”, International Journal of Public Administration, 11(5), pp. 531-550.
Levine, C. H., Rubin, I. S. & Wolohojian, G. G. (1981) Resource scarcity and the reform model: The management of retrenchment in Cincinnati and Oakland, Public Administration Review, 619-628.
Lewis, C. & Hildreth, B. (2013) Budgeting: Politics and Power (Oxford University Press).
Light, P. C. (1993) Monitoring Government: Inspectors General and the Search for Accountability (Washington, DC: Brookings Institution).
Malm, E., & Plante, G. (2014) Annual State-Local Tax Burden Rankings FY2011 (Washington, D.C.: Tax Foundation)
Maxwell, J. W. & Reuveny, R. (2000) Resource Scarcity and Conflict in Developing Countries, Journal of Peace Research, 37(3), pp. 301-322, doi:10.1177/0022343300037003002.
Mayper, A. G., Granof, M. & Giroux, G. (1991) An analysis of municipal budget variances, Accounting, Auditing & Accountability Journal, 4(1), pp. 29-50.
Mehiriz, K. & Marceau, R. (2014) The Flypaper and Asymmetric Effects of Intergovernmental Grants to Quebec Municipalities, Public Budgeting & Finance, 34(1), pp. 85-102, doi:10.1111/pbaf.12026.
Moynihan, D. P. & Ingraham, P. W. (2003) Look for the Silver Lining: When Performance‐Based Accountability Systems Work, Journal of Public Administration Research and Theory, 13(4), pp. 469-490, doi:10.1093/jpart/mug032.
Neshkova, M. I. (2014) Does Agency Autonomy Foster Public Participation?, Public Administration Review, 74(1), pp. 64-74, doi:10.1111/puar.12180.
Neshkova, M. I. & Guo, H. (2012) Public Participation and Organizational Performance: Evidence from State Agencies, Journal of Public Administration Research and Theory, 22(2), pp. 267-288, doi:10.1093/jopart/mur038.
Olson, M. (1965) The Logic of Collective Action (Cambridge, MA: Harvard University Press).
Park, J. H. (2019) Does Citizen Participation Matter to Performance-Based Budgeting?, Public Performance & Management Review, 42(2), pp. 280-304, doi:10.1080/15309576.2018.1437050.
Pestoff, V. (2014) Collective action and the sustainability of co-production, Public Management Review, 16(3), pp. 383-401.
Peltzman, S. (1992) Voters as fiscal conservatives, The Quarterly Journal of Economics, 107(2), 327-361.
Riedel, J. A. (1972) Citizen Participation: Myths and Realities, Public Administration Review, 32(3), pp. 211-220, doi:10.2307/975275.
Robbins, M. D., Simonsen, B. & Feldman, B. (2008) Citizens and Resource Allocation: Improving Decision Making with Interactive Web-Based Citizen Participation, Public Administration Review, 68(3), pp. 564-575, doi:10.1111/j.1540-6210.2008.00891.x.
Romer, T. & Rosenthal, H. (1979) Bureaucrats versus voters: On the political economy of resource allocation by direct democracy, The Quarterly Journal of Economics, 93(4), pp. 563-587.
Rubin, I. (1996) Budgeting for accountability: Municipal budgeting for the 1990s, Public Budgeting & Finance, 16(2), pp. 112-132.
Schillemans, T. & Busuioc, M. (2015) Predicting public sector accountability: From agency drift to forum drift, Journal of Public Administration Research and Theory, 25(1), pp. 191-215.
Simonsen, W., & Robbins, M. D. (2000) Citizen Participation in Resource Allocation (New York: Westview Press).
Stock, J. H., Wright, J. H. & Yogo, M. (2002) A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments, Journal of Business & Economic Statistics, 20(4), pp. 518-529.
Thomas, J. C. (1995) Public participation in public decisions : new skills and strategies for public managers (1st ed.) (San Francisco: Jossey-Bass Publishers).
Touchton, M., Wampler, B. & Peixoto, T. (2021) Of democratic governance and revenue: Participatory institutions and tax generation in Brazil, Governance, 34(4), 1193-1212.
Tyer, C. B. (1993) Local government reserve funds: Policy alternatives and political strategies, Public budgeting & finance, 13(2), pp. 75-84.
Vigoda, E. (2002) Administrative Agents of Democracy? A Structural Equation Modeling of the Relationship between Public-Sector Performance and Citizenship Involvement, Journal of Public Administration Research and Theory, 12(2), pp. 241-272, available at: http://jpart.oxfordjournals.org/content/12/2/241.abstract (October 20, 2021).
Wampler, B. (2004) Expanding accountability through participatory institutions: Mayors, citizens, and budgeting in three Brazilian municipalities, Latin American Politics and Society, 46(2), 73-99.
Wang, X., & Wan Wart, M. (2007) When Public Participation in Administration Leads to Trust: An Empirical Assessment of Managers’ Perceptions, Public Administration Review, 67(2), pp. 265-278, doi:10.1111/j.1540-6210.2007.00712.x.
Wichowsky, A., & Moynihan, D. P. (2008) Measuring How Administration Shapes Citizenship: A Policy Feedback Perspective on Performance Management, Public Administration Review, 68(5), pp. 908-920, doi:10.1111/j.1540-6210.2008.00931.x.
Willer, R. (2009) Groups reward individual sacrifice: The status solution to the collective action problem, American Sociological Review, 74(1), pp. 23-43.
Williams, D. W. (2012) The politics of forecast bias: Forecaster effect and other effects in New York City revenue forecasting, Public Budgeting & Finance, 32(4), pp. 1-18.
Williams, D. W., & Calabrese, T. D. (2016) The status of budget forecasting, Journal of Public and Nonprofit Affairs, 2(2), pp. 127-160.
Williams, D. W., & Kavanagh, S. C. (2016) Local government revenue forecasting methods: Competition and comparison, Journal of Public Budgeting, Accounting & Financial Management. 28(4), pp. 488-526.
Wolman, H., McManmon, R., Bell, M., & Brunori, D. (2010) Comparing local government autonomy across states, In: Bell, M. E., Brunori, D. & Youngman, J. M. (eds.) The property tax and local autonomy (Cambridge: Lincoln Institute of Land Policy).
Wooldridge, J. M. (2010) Econometric Analysis of Cross Section and Panel Data (Cambridge, Massachusetts, London, England: The MIT Press).
Woolum, J. (2011) Citizen Involvement in Performance Measurement and Reporting, Public Performance & Management Review, 35(1), pp. 79-102, https://doi.org/10.2753/PMR1530-9576350104.
Yang, K. & Kathe, C. (2007) Citizen Involvement Efforts and Bureaucratic Responsiveness: Participatory Values, Stakeholder Pressures, and Administrative Practicality, Public Administration Review, 67(2), pp. 249-264, https://doi.org/10.2307/4624562.
Yang, K., Hsieh, J. Y. & Li, T. S. (2009) Contracting Capacity and Perceived Contracting Performance: Nonlinear Effects and the Role of Time, Public Administration Review, 69(4), pp. 681-696, https://doi.org/10.1111/j.1540-6210.2009.02017.x.
Yang, K., & Pandey, S. K. (2011) Further dissecting the black box of citizen participation: When does citizen involvement lead to good outcomes?, Public Administration Review, 71(6), pp. 880-892.
Zhang, Y. & Liao, Y. (2011) Participatory Budgeting in Local Government, Public Performance & Management Review, 35(2), pp. 281-302, available at: http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=73319812&site=ehost-live (October 20, 2021).
Zimmerman, J. L. (1977) The municipal accounting maze: An analysis of political incentives, Journal of Accounting Research, pp. 107-144.
