Carry-overs or leftovers? Tackling year-end spend-downs at the central government level

Austerity and budget execution: control versus flexibility

“…(Cain et al, 2004;. The time-frame rules in the horizontal dimension refer to whether the appropriated funds have to be spent in a discrete time-period or can be carried JPBAFM 34,2 over to the next one(s) (Douglas and Franklin, 2006;Alford, 2016, 2017;Korac et al, 2019). An important constraint on flexibility is annuality, a widespread principle in budget execution which requires allocations to be spent during a specific fiscal year, with underspent funds lost to the line ministry (Di Francesco and Alford, 2016).…”

“…A greater horizontal flexibility has the potential to enhance spending efficiency by enabling managers to avoid the end-of-year spending crunch (Di Francesco and Alford, 2016). In principle, giving the line ministries the authority to carryover unspent balances from one fiscal year to another can help to prevent the end-of-year surge in expenditures (Hyndman et al, 2007;Korac et al, 2019), which can be particularly desirable in the context of austerity. Such "December fevers" or "spending sprees" are driven by use-it-or-lose-it attitudes of the spenders and the fear that underspending may signal to the guardians that future budgets can be reduced (Di Francesco and Alford, 2016;Douglas and Franklin, 2006;Korac et al, 2019;Tarschys, 2002;Wildavsky, 1988).…”

“…In principle, giving the line ministries the authority to carryover unspent balances from one fiscal year to another can help to prevent the end-of-year surge in expenditures (Hyndman et al, 2007;Korac et al, 2019), which can be particularly desirable in the context of austerity. Such "December fevers" or "spending sprees" are driven by use-it-or-lose-it attitudes of the spenders and the fear that underspending may signal to the guardians that future budgets can be reduced (Di Francesco and Alford, 2016;Douglas and Franklin, 2006;Korac et al, 2019;Tarschys, 2002;Wildavsky, 1988). This, in turn, can lead to potentially wasteful spending: purchasing unnecessary or low-priority goods or services and paying higher prices (Di Alford, 2016, 2017;Hyndman et al, 2007;Korac et al, 2019) which is particularly detrimental in the context of austerity.…”

“…Such "December fevers" or "spending sprees" are driven by use-it-or-lose-it attitudes of the spenders and the fear that underspending may signal to the guardians that future budgets can be reduced (Di Francesco and Alford, 2016;Douglas and Franklin, 2006;Korac et al, 2019;Tarschys, 2002;Wildavsky, 1988). This, in turn, can lead to potentially wasteful spending: purchasing unnecessary or low-priority goods or services and paying higher prices (Di Alford, 2016, 2017;Hyndman et al, 2007;Korac et al, 2019) which is particularly detrimental in the context of austerity.…”

“…In 2009, Austria embarked on a major overhaul of its budgeting system, which included the introduction of performance budgeting, accrual budgeting, a medium-term expenditure framework (MTEF), and increased flexibility in budget execution (Downes et al, 2018;Korac et al, 2019;Steger, 2012). The implementation of the reform was divided into two parts: the MTEF and unlimited carryovers were enacted in 2009 and the remaining changes in 2013 (Downes et al, 2018).…”