Municipal revenue over-budgeting: a dynamic analysis of its determinants

Abstract

This paper investigateswhich factors affect revenue over-budgeting in the local government,considering budgetary, political, and institutional determinants. It appliesdynamic panels analysis to data from Portuguese municipalities between 2005 and2017. Regarding budgetary arrangements, over-budgeting has implications forseveral years, taking up to three years to dissipate. The difference between budgetedrevenues and the ones collected in the previous year is a good predictor thatrevenue is overestimated. The ratio of own-source over total revenue isdirectly related with over-budgeting; however, this effect comes from the municipality'swealth. About political factors, municipal Executives with political majoritiesand in electoral years are more prone to over-budget; however, ideology does not seem to be important. Asfor institutional arrangements, participationin any debt restructuring program is inversely related to over-budgeting, whileexcessive debt does not seem to play any role. Overall, the only mechanismwhich reduces over-budgeting misbehavior is external control.

Does the Average Payment Period Play a Relevant Role in Explaining the Portuguese Municipalities’ Financial Distress?

“…The financial stability of municipalities is an important starting point for long-term sustainable development and over-debt can create risks for their proper functioning. The growing increase in the debt held by the subnational levels of government has raised the need to understand and monitor the causes (Jorge et al 2022).…”

“…For assessing the H1, since deficit budget and debt burden have been stressed by the literature as relating to the government's financial distress (e.g., Jorge et al 2022;Letelier 2010;Ma and Brixi 2002), the following financial variables are included within the model for control purposes in addition to APP: balance (BAL) (the difference between the revenues and expenses) and debt service (DS) (interest and debt amortization). Furthermore, the Portuguese municipalities' inhabitants (POP) are also used for control purposes (Benito et al 2015).…”

“…Events such as the 2008 financial crisis, the COVID-19 pandemic, as well as the latest Russian invasion of Ukraine, among others, stressed the need to assess how to monitor the over-indebtedness of governments worldwide and ensure the government's financial sustainability (Bolívar et al 2014(Bolívar et al , 2016Navarro-Galera et al 2016;Jorge et al 2022;Shon and Kim 2019;Turley et al 2015;World Bank 2022;Zafra-Gómez et al 2009;Zhao et al 2022).…”

Reflexos Da Imprecisão Das Receitas Orçamentárias Nos Governos Locais Brasileiros

“…A estimação das receitas e despesas no orçamento não pode ser visto apenas como um exercício de previsão de valores por analistas financeiros, baseados em pressupostos e parâmetros econômicos (Jorge, Cerqueira & Furtado, 2022). Isso porque a imprecisão do orçamento pode trazer efeitos diretos no financiamento das políticas públicas, podendo deixar efeitos duradouros por gerações, que deverão suportar o endividamento causado (Jorge, Cerqueira & Furtado, 2022).…”

“…Já a superestimação das receitas no orçamento gera um excesso de previsão, em que durante a execução, as receitas reais ficarão aquém das orçadas, obrigando a um contingenciamento ou causando um déficit a ser coberto nos anos seguintes (Anessi-Pessina & Sicília, 2015, 2020, autorizando realização de despesas mesmo sem a perspectiva de recursos financeiros para suportá-las (Ríos et al, 2018). Isso reduz a capacidade de funcionamento dos municípios no futuro, além de constituir um fardo para as gerações futuras (Jorge, Cerqueira & Furtado, 2022). Boukari e Veiga (2018) discutem que o bem-estar social dos cidadãos pode ser afetado em decorrência da estratégia de superestimação das receitas.…”