Eugenio Anessi-Pessina

Catholic University, Milan, Italy

Mariafrancesca Sicilia
Bergamo University, Milan, Italy

Ileana Steccolini
Bocconi University, Milan, Italy

Budgeting and Rebudgeting in Local Governments:

Siamese Twins?

stance
and
testing
some
The literature on budgeting in the
public sector has traditionally
hypotheses on
focused on the annual budgetary
the
potential
process. Much less attention has
determinants
been paid to rebudgetingthat is,
what governments do to revise and of rebudgeting
update their budg-ets during the
To
fiscal year. Because of its potentially practices.
this end, we
large impact on appropriations,
rebudgeting seemingly deserves
use data for
more attention than it has been
granted so far. This article uses data Italian
municipalities
from a sample of Italian
municipalities to test hypotheses on over five years
the main drivers of budget revisions. (20037).
According to the results,
rebudgeting is strongly aected by
the degree of incrementalism in the
initial budget-ing process, as well as The structure of
the article is as
by several internal and external
follows: The next
determinants, such as political
section reviews
variables, organizational features,
financial conditions, and the local
the relevant
socioeconomic environment.
literature and

develops the
hypotheses.
Then we oer a
public organizations, the main
In most
short
purpose of the budget is to authorize
background on
(i.e., to limit) spend-ing by nature
Italian
and/or purpose (Anessi-Pessina
municipalities,
2000; Caperchione 2000).
their accounting
Traditionally, the litera-ture has
systems, and
focused on the annual budgetary
their rebudgeting
process (Fenno 1966; Lu and Facer
rules. The
2004; Rubin 1990, 2005; Wildavsky
section
1964), investigating such themes as ensuing
data
the players involved, their roles, and specifies
and
methods,
the internal and external factors that followed by a
influence budget characteristics.
presentation of
Approved budgets, however, often
the findings. The
need to be revised during the fiscal
section
year in order to incorporate chang-ing final
some
priorities and face unexpected events draws
conclusions
and
(Caiden and Wildavsky 1974;
for
Wildavsky 1988). Rebudgeting is thus implications
practice
and
allowed in most public organizations
further
research.
world-wide, although within dierent
sets of constraints. Rebudgeting,
moreover, has a potentially large
Previo
impact on appropriations. So far,
however, it has been the subject of
remarkably little research. In addition, us
the
Studie

few existing studies

(Dougherty, Klase,
and Soo 2003;
Forrester and
Mullins 1992) have
pre-dominantly
been exploratory
and descriptive.
The purpose of this
article is to enrich the
existing literature by
adopting an
explanatory

s and
Hypot
hesis
Formu
lation
Compared
withis to
The purpose
ofinitial
this article
the
enrich the budgeting
existing literature by
process, budget
andstance
adopting anexecution
explanatory
rebudgeting
and testing have
some received
hypotheses on
less of
the potentialmuch
determinants
attention.
The
few existing
rebudgeting
practices.
studies
on
rebudgeting,
moreover, have
predominantly
adopted an
exploratory and

Bretschne
ider,
Straussm
an, and
Mullins
1988). In
addition,
governm
ents have
been
shown to
initially
favor a
conservat
ive
underesti
mation of
revenues

descriptive
stance
(Dougherty,
Klase, and Soo
2003; Forrester
and Mullins
1992). They
usually have
investigated the
importance and
magnitude of
budget
revisions, the
players who
initiate the
revision process
or are otherwise
involved, and
the
contingencies,
events, and
reasons that are
more likely to
cause it at the
local and state
levels.

to hedge
against
the risk of
revenue
shortfall
(Bretschne
ider and
Schroeder
1985). This

According to
these studies,
not only does
rebudget-ing
significantly
aect the
original
appropriations
(Hoskins 1983),
but also it
influences future
budget cycles
(Dougherty,
Klase, and Soo
2003; Lauth
1988; Lee and
Plummer 2007).
For example, the
revision of budgeted
revenues during the
fiscal year will

e
c
t
f
u
t
u
r
e
r
e
v
e
n
u
e
f
o
r
e
c
a
s
t
s
(

Her research interests focus on public

sector budgeting, accounting, and
performance measurement.

E-mail:
francesca.sicilia@unibocconi.it

Public

Ileana Steccolini is associate professor of

on Review,

public budgeting and performance

Vol. 72, Iss.

Eugenio Anessi-Pessina is full profes-sor of public and health care management

measurement at Bocconi University in

6, pp. 875

at Catholic University in Milan, Italy. In addition, he is senior fellow at the Wharton

Milan, Italy, and director of the Public

884.

School of the University of Pennsylvania (Department of Health Care Systems) and Management and Policy Department at
editor of Azienda Pubblica (a leading Italian-language public management journal). SDA Bocconi School of Management. Her

Administrati

2012 by
The American

His research interests include public sector budgeting and accounting, health care

research interests include public budgeting,

Society for Public

management, and management control in government and health care

account-ing and accountability, and

organizations.

Administration.

performance measurement in the public

E-mail: eugenio.anessi@unicatt.it

sector.

Mariafrancesca Sicilia is assistant professor of public budgeting at Bergamo

E-mail:
ileana.steccolini@unibocconi.it

University and SDA Bocconi assistant professor of Public Management and Policy.

Budgeting and Rebudgeting in Local

Governments: Siamese Twins? 875

DOI: 10.111/j.15406210.2012.02590.x
.

conservative underestimation, coupled with

economic growth, can

processes, which are considered incremental when

decision makers

produce surpluses that are added to budgetary appropriations

and
may favor the parochial interests of legislators (Lauth 1988),
thus

focus their attention on a relatively small number of

alternatives as
a method of simplifying decision making; and (3)
consideration of

creating a structural framework for

rebudgeting.

both processes and outputs.

Along these lines, Dougherty, Klase, and Soo (2003)

investigated the

Less attention has been paid to the implications of

incrementalism

rebudgeting process in 15 West Virginia cities and found an

increasethen-decrease pattern, with statistically significant mean
dierences
between the original and the revised appropriations and
between the
revised appropriations and the actual outlays, but not between
the
original appropriations and the actual outlays. This pattern
reflects a
conscious strategy adopted by municipalities to ensure a
buer against
unexpected events and to keep expenditures under their
budgeted

for budget execution and the need for rebudgeting. This is

critical because focusing on initial budgeting leaves a large
portion of
the overall, yearlong budgeting process virtually unexplored.
Our
hypothesis is that an incremental approach to budgeting may
not
fully capture the organizations needs and will consequently
require
more rebudgeting during the fiscal year. We thus expect a
positive
relationship between incremental budgeting on the one hand
and

levels.

rebudgeting on the other.

As to the players involved and their roles and

motivations, Forrester
and Mullins (1992) carried out a survey of 91 U.S. central
cities.
According to their results, rebudgeting is generally less visible
than
budgeting to the general public and is driven more by
administrative than political bodies. It can be stimulated by managerial
necessity, political concerns, or environmental pressures, and it
aects the

various government services and functions to dierent

extents.
The purpose of our article is to go beyond the exploratory
perspective and to adopt an explanatory approach. Our starting point
is
that rebudgeting cannot be studied independently of budgeting. Budget approval is the

outcome of a decision-making process,

but
it is also the starting point for a continuous

process of budget execution and revision.

In

Our starting

Hypothesis 2: Rebudgeting is aected by political

variables.

An important body of literature suggests that budgeting is

aected
by political variables. Because rebudgeting revises the
budget to
incorporate emerging priorities and needs, our hypothesis is
that
rebudgeting will also be aected by political variables.

Among political variables, the most obvious is the

administrations
political orientation. The literature on political orientation
suggests that left-wing parties will be more likely to raise tax
revenues,
while right-wing parties will prefer to cut
expenditures (see, e.g., Mulas-Granados
point is that
2003;

rebudgeting cannot be studied

independently of budgeting.

other words, budgeting can be viewed as a

yearlong process composed of initial budgeting and

rebudgeting.
As a consequence, when looking at rebudgeting, a fruitful
avenue
may be to test the explanatory potential of those variables
that have
been identified as relevant by the literature on budgeting. This
leads
us to formulate five hypotheses, which are individually stated

Tavares 2004). To the extent that this is

not
incorporated into the initial budget, midyear

adjustments that increase revenues

should
thus occur more frequently under left-wing

administrations, while midyear adjustments that decrease

expenditures should be more likely under right-wing ones.

The description of an administration as being right- or leftwing,

however, is extremely stylized, especially in the Italian

and
explained here.

Hypothesis 1: Rebudgeting is aected by the degree of

incrementalism in the formulation of the initial budget.

The concept of incrementalism has been interpreted in many

dierent ways (Berry 1990), not necessarily involving
budgetary
choices. According to Lindblom (1959), incrementalism is a
way of
simplifying decision making by reducing the number of
alternatives
and their degree of innovativeness from policies presently in
eect,
adopting a sequential consideration of alternatives, ignoring
the full
range of policy consequences, and increasing the dependency
of
ends on means. Wildavsky, on the contrary, defined
incrementalism
with specific reference to the budgeting process: a budget is
incremental when it is based on last years budget, with special
attention

political
context. In reality, majority coalitions can be highly
fragmented, and
this may have an impact on rebudgeting. According to the
economic
and fiscal reform literature (e.g., Alesina and Drazen 1991;
Lora and
Olivera 2004; Mierau, Jong-A-Pin, and De Haan 2007), the
timing of reforms depends on the distributional eects that they
produce. Rebudgeting can be likened to reforms in that it
modifies the
distribution of both benefits and costs among stakeholders.
Alesina
and Drazen (1991) suggested that political fragmentation
hinders
the adoption of reforms: political fragmentation could then
also be
expected to deter rebudgeting. At the same time, however,
highly fragmented majority coalitions may be unable to find a stable
compromise and end up demanding continuous budget revisions.
The impact
of this variable on rebudgeting, therefore, cannot be signed a
priori.

Finally, the political budget cycle literature (e.g., Brender and

Drazen
2005; Mink and De Haan 2006; Persson and Tabellini 2004;
given to a narrow range of increases or decreases (1964, 15). Shi
and Svensson 2006; Tujula and Wolswijk 2007) proposes that
budget
Following Wildavsky, the theory of incrementalism has
choices are aected by electoral cycles. This is further
dominated
reinforced by
budgeting studies for the last 60 years. Boyne, Ashworth, and the budgets symbolic significance (Lu and Facer 2004),
Powell
whereby
(2001) identified three general uses of the term
budget choices are often adopted simply for their outward
incrementalism
symbolism.
Thus, it seems natural to extend the same presumption to
when applied to budgeting process research: (1) description of rebudgetbudgetary outputs, which are considered incremental if
ing, to the extent that such choices are not directly
dierences
incorporated

from the previous year(s) are small; (2) description of

budgetary

into the initial budget. More specifically, the literature

suggests that

876 Public Administration Review November | December 2012

upcoming elections encourage greater

deficits and discourage fis-cal reforms,
which, conversely, will often take place
soon after the election. Therefore, the time
elapsed since the last election can be

expected to aect rebudgeting, with

spending cuts and tax or fee hikes
becoming gradually less likely as the next
election approaches. In addition, unless
elections are held toward the end of the
fiscal year, the incoming administration
must operate for several months within
the budget approved by its predecessors.
Therefore, a new mayor and/or majority
coalition can be expected to make large
changes to the initial budget. This is also
consistent with Forrester and Mullins
(1992), who found that rebudgeting is
encouraged by changed priorities and the

willingness to counteract previous

decisions.
Hypothesis 3: Rebudgeting is
aected by organizational
features.

The impact of organizational features on

budgeting has been investi-gated only to
a small extent. However, these features
can potentially play an important role
(Greenwood, Hinings, and Ranson 1977;
Forrester and Adams 1997; Lu and Facer
2004). On the one hand, budgeting is
associated with organizational structure
and mecha-nisms. On the other, it is part

of the intangible side of organiza-tions

(Giroux el al. 1986), and it is shaped by
the role of the various players and the
configuration of powers, values, rules,
and rou-tines (Bretschneider,
Straussman, and Mullins 1988;
Greenwood, Hinings, and Ranson 1977).
An organizational variable that can be
expected to aect budgeting (and thus,
supposedly, rebudgeting) is size. Bigger
organizations tend to be more complex
and dicult to manage because of the
magnitude and variety of their activities.
As a consequence, they must rely on rules,
procedures, and formal ways of doing
things that may make them slower to
reach the consensus required to revise the
budget. At the same time, however, larger
and more complex governments are more
likely to need midyear adjustments. The
impact of size on rebudgeting, therefore,
cannot be signed a priori.

Another important set of organizational

variables that can aect budgeting (and,
supposedly, rebudgeting) is the power
and influence of the actors involved.
Among them, the Financial Comptroller
Oce (CFO) can be expected to exert a
great influence, owing to its
responsibility for controlling spending
and for reducing uncertainty on the
availability of resources for programs
(Giroux, Mayper, and Daft 1986). Once
again, however, the impact of this
influence on rebudgeting cannot be
signed a priori: powerful CFOs may
stress ex ante programming (thus
reducing the need for midyear adjustments) or, rather, prefer conservative
budgeting (keeping initial appropriations
low and hopefully increasing them
during the fiscal year as revenues are
actually achieved).
Finally,
each
government
will
be
characterized by its own values, beliefs,
rules, and routines for budgeting and
rebudgeting, which may encourage or
discourage midyear adjustments.
Hypothesis 4: Rebudgeting is aected by
the municipalitys financial conditions.
Another set of variables that may aect
rebudgeting relates to the governments
financial position and the availability of slack
resources

(Lu and Facer 2004). In this regard,

governments that have accumu-lated
larger surpluses in previous years should
enjoy greater degrees of freedom during
the initial budgeting process and thus
require smaller midyear adjustments.
The same should hold for govern-ments
(1) whose current revenues exceed
current spending; (2) whose current
revenues include a larger share of own
taxes and fees as opposed to transfers
from higher levels of government; (3)
whose expenditures include a smaller
share of rigid, nondiscretionary items
such as personnel, interest, and loan
repayment; and (4) that resort to
borrowing to a lesser extent.
A peculiarity of budgeting is that it
occurs well before the prepara-tion of
the financial statement for the
previous year. For munici-palities,
therefore, it is not unusual to
experience the emergence of past-year
surpluses or deficits halfway through
the fiscal year. Obviously, the
approximate size of the previous years
surplus or deficit becomes common
knowledge early in the new fiscal year,
but it can be incorporated into the
budget only when formalized
through the preparation and approval of
the previous years financial report. The
emergence of past-year surpluses will
generally stimu-late rebudgeting in
terms of higher capital spending (local
govern-ments usually have a list of
relatively small capital projects awaiting
a source of funding to be implemented),
possibly higher current spending
(although rules often exist that prevent
or limit the use of surpluses to cover
current spending), or lower capital
revenues (as the newly discovered
surplus can replace planned borrowing
or asset sales as a way of funding
investments) (see also Dougherty,
Klase, and Soo 2003). Emerging pastyear deficits, on the other hand, will
have to be covered and, consequently,
will induce budget adjust-ments in terms
of increased revenues and/or reduced
expenditures.
Hypothesis 5: Rebudgeting is aected by
the local socioeco-nomic environment.

Finally, a large body of literature exists on

the external factors that aect
organizational behavior in the public
sector. The demographic and cultural
features of the community, for instance,
can play a significant role (Brudney and
Selden 1995; Forrester and Mullins 1992;
Greenwood, Hinings, and Ranson 1977; Lu
and Facer 2004). Bingham (1978) recalled
that the socioeconomic characteristics of
the community have been studied by
many economists and political scientists as
factors aecting decision making and city
policies.

In the Italian context, significant

regional dierences exist across a wide
range of dimensions, including local
government openness to public sector
reforms (Putnam, Leonardi, and Nanetti
1993) and accounting innovations
(Anessi-Pessina, Nasi, and Steccolini
2008). Local socioeconomic conditions
can thus be expected to aect budgeting and rebudgeting practices.
Budgeting and Rebudgeting in Italian
Municipalities
Italy has four levels of government: the
central government, 20 regions, about 100
provinces, and approximately 8,100
municipali-ties. Each level has jurisdiction
over several policy areas.

With respect to municipalities, each has

a mayor, a municipal executive board, a

city council, and a professional
bureaucracy. The executive structure of
Italian local government is similar to

the U.S. model of mayor-council

government in that the mayor and city
council are separate oces. Both the
mayor and the city councilors

are elected directly by the population.

Elections are held every five years, usually
between April and June.

spending. Past-year surpluses may be

added to budgeted revenues, while pastyear deficits must be added to budgeted
expenditures. The fiscal year coincides
with the calendar year. Revenues are
classified by nature, with titles as the
most aggregate level. Expenditures are
classified by nature and purpose, once
again with titles as the most
aggregate level. The list of titles is
presented in table 1.

Budgeting and Rebudgeting in Local Governments: Siamese Twins? 877

The mayor appoints the members of the

municipal executive board, while the
city council functions with legislative
powers. In the last two decades, the
powers of the executive have been
greatly increased at the councils
expense. The electoral system,
moreover, is designed to generally
provide the mayor with a majority of
seats in the city council. Majorities,
however, are often composed of highly
frag-mented coalitions. Majority city
councilors are technically free to
withdraw their support and side with the
opposition, which may force the mayor
to call an early election. Early elections
may also occur under other special
circumstances, such as the mayors
death, resignation, or removal for major
criminal violations.
In addition to the members of the municipal
executive, the mayor can also choose to
appoint a chief executive ocer (or city
man-ager) with general management
responsibilities. The CFO, on the contrary,
is a career civil servant and so are his or
her subordinates.

Municipalities are allowed to raise local

taxes and charge fees for the services that
they provide, but a significant percentage
of their revenues is still accounted for by
transfers from higher levels of
government, especially in low-income
areas of the country. For municipalities
with populations above 15,000, between
2003 and 2007, own taxes, fees, and
transfers averaged 54 percent, 26 percent,
and 20 percent of cur-rent revenues,
respectively. Current revenues, in turn,
were 70 percent of total revenues, the
other components being capital revenues
(sales of noncurrent assets, capital
transfers from other governments and
private entities, totaling 19 percent) and
borrowing (11 percent). These funds were
used to cover current spending (65
percent), investments
(27 percent), and debt repayment (8 percent).

From an accounting viewpoint,

municipalities still rely predomi-nantly
on cash and commitment-based
budgetary accounting, although they
are technically expected to also publish
an accrual-based financial statement
(Anessi-Pessina and Steccolini 2007).
The budget, which is commitment
based, must be approved by the
council and is required to balance.
Budgeted revenues can include
borrowing, which, however, can only be
used to cover capital

Rebudgeting rules (table 2) require the

budget to remain balanced. Therefore,
increased budgeted expenditures for a
given line item must be oset by (1)
decreased budgeted expenditures for
other line items, and/or (2) increased
budgeted revenues. All revisions must
generally be approved by the council no
later than November 30, although
exceptions do exist. Budget revisions
occur throughout the year, but they are
particularly frequent in two specific
periods: in July, after the publication of
the previous years financial statement,
in order to revise the amount of
surplus/deficit carried over from the
previous year, and in November, just
before the November 30 dead-line, to
make all of the remaining changes that
are deemed necessary.
Methods
To test the hypotheses presented earlier, we
used a panel data set of 657 Italian
municipalities with populations consistently
greater than 15,000 over a five-year period
(20037).

The data set was downloaded from the

Department of the Interiors Web site. For
every year, the data set contains each
municipalitys initial budget, revised
budget, and year-end statement.1 For the
ini-tial budget and the year-end
statement, the data set is very detailed,
with expenditures broken down by both
nature (e.g., personnel, supplies) and
purpose (e.g., education, social services).
For the revised budget, on the contrary,
the data set provides only a very broad
break-down of expenditures by title, that
is, among current spending, capital
spending, debt repayment, and clearing
entries (table 1). As a consequence,
rebudgeting was analyzed separately for
current and capital spending. Debt
repayment was disregarded because its
rebudgeting is entirely dependent on
external circum-stances such as changing
interest rates, and clearing entries were
disregarded because of their purely
technical nature. For each of the two
titles, the dependent variable was defined
as the percentage change between the
revised and the initial budget.

Table 1 Titles for Italian Municipal Budgets

Municipalities
Revenues
Surplus from previous year, if any
Title 1Tax revenues
Title 2Current transfers from other governments
Title 3Current nontax revenues
Title 4Disposal of fixed assets, capital transfers from other governments and private entities
Title 5Borrowing
Title 6Clearing entries (by definition identical to their expenditure counterparts)
Note: Current revenues include Titles 1, 2, and 3.

Table 2 Rules for

Rebudgeting in Italian

Types of Adjustments

Definition

Virement
Funds are transferred between spending items; total budgeted expenditures remain unchanged
Use of new or larger than Budgeted revenues are increased; budgeted expenditures can be increased by the same
expected revenues
amount
Use of reserve funds
Funds are moved from the reserve fund item to other spending items; total budgeted expenditures remain unchanged

878 Public

Body Responsible for Approval

Deadline

Council
Council

Nov. 30
Nov. 30

Municipal Executive Board

Dec. 31

Administration Review November | December 2012

Following the hypotheses presented

earlier, the independent variables
were classified as internal and
external, with the for-mer including
the degree of incrementalism in the
initial budget formulation, as well as
another three sets of variables
reflecting the municipalitys political
situation, organizational features, and
financial conditions.
The degree of incrementalism in the
initial budget formulation was measured
by the variable BUDGET_CHANGE,
defined as the percentage change
between the initial budget and the previous years actual expenditures. This is
because an administration can
incorporate its policies into the initial
budget or pursue them through
rebudgeting. The more a policy has been
incorporated into the initial budget, the
less it usually will need to be pursued
through rebudgeting. The variable
BUDGET_CHANGE, however, only
captures the average budgeted increase
(or decrease) from the
previous year. To measure the degree of
incrementalism in the initial budget
formulation, it seems important to verify
whether any such increase was uniformly
applied to all items or, alternatively,
whether dierent items were treated
dierently. As a consequence, the
variables
SPENDING_CATEGORY_CHANGES and
SPENDING_ PURPOSE_CHANGES were
introduced to reflect the variance of the
percentage change between the initial
budget and the previous years actual
expenditures across dierent items, by
nature and by purpose, respectively.
These two variables, however, were
included only in the analysis of current
spending. For capital spending, they were
excluded because of extensive variability
in nature and purpose over time,
especially in smaller municipalities, which
tend to iden-tify few capital projects per
year.

As to political variables, political

orientation was defined as a dummy
variable (POLITICAL_ORIENTATION) for
the adminis-trations right- or left-wing
orientation. Because Italy has traditionally been characterized by a very large
number of political parties, however,
coalition government is the norm, and
the reference to right- or left-wing
administrations becomes an
oversimplification. To capture the
administrations political fragmentation,
we intro-duced the variable
POLITICAL_FRAGMENTATION, defined as
the number of political parties in the
majority coalition or, more specifically,
the number of parties with at least one
member serving on the municipal
executive board. Finally, the electoral
cycle was operationalized through a set
of dummy variables (0_YRS_SINCE_
LAST_ELECTION,
1_YR_SINCE_LAST_ELECTION, 3_YRS_
SINCE_LAST_ELECTION,
4_YRS_SINCE_LAST_ELECTION)
reflecting the number of years since the
last local election, with year 4 as the
maximum (as mentioned earlier,
elections are scheduled every five
years, although early elections may be
called under par-ticular circumstances)
and middle-of-the-cycle year 2 as the
baseline.
For organizational features, the
municipalitys total spending on sta
(STAFF) was used as a proxy for size and
complexity. This was supplemented by two
more specific variables. CFO_OFFICE_SIZE

is the municipalitys spending on its

Financial Comptroller Oce, scaled by the
municipalitys population. The purpose of
this vari-able was to verify whether a
larger (and supposedly more powerful)
Financial Comptroller Oce reduces the
need for rebudgeting (e.g., because it can
devote more resources to planning) or
rather increases it (e.g., because it can
induce politicians to be more conservative
in the initial budget formulation and to
increase authorized spending

through rebudgeting only when

expected revenues are actually recognized).
REBUDGETING_ON_OTHER_TITLE is the
percent-age change between the
revised and the initial budget for the
title not used as the dependent variable
(i.e., capital spending when the
dependent variable is rebudgeting for
current spending, and vice versa). As
mentioned earlier, governments will be
characterized by dierent values,
beliefs, rules, and routines for budgeting
and rebud-geting, which may encourage
or discourage midyear adjustments. The
specific assumption behind the variable
REBUDGETING_ ON_OTHER_TITLE is that
municipalities may be characterized by
a certain inclination or aversion to
rebudgeting that cuts across dierent
types of expenditures.
The last set of internal variables was
intended to reflect the munici-palitys
financial conditions and presence of slack
resources. All of these variables were
scaled by current revenues to control for
the municipalitys size.
ACCUMULATED_SURPLUS is the municipalitys accumulated surplus from
previous years; CURRENT_ SURPLUS is
the budgeted excess of current revenues
over current expenditures;
FINANCIAL_AUTONOMY is the
municipalitys degree of financial
autonomy, measured by the share of
current rev-enues accounted for by own
taxes and fees (as opposed to transfers
from higher levels of government);
EXPENDITURE_RIGIDITY is the
municipalitys degree of expenditure
rigidity, measured by the share of current
revenues needed to cover personnel and
interest expenditures; and
NET_BORROWING is budgeted borrowing,
net of budgeted debt repayment. The
additional variable REVISION_
OF_PAST_SURPLUS was introduced so as
to control for the mid-year emergence of
past-year net surpluses or deficits, which
clearly can be expected to encourage
rebudgeting.

As for the external variables,

LOCAL_GDP reflects provincial per capita
gross domestic product (GDP) (GDP data
are not available at the municipal level,
and provinces are the equivalent of
counties) and was selected to capture
the communitys overall economic conditions; SOUTH is a dummy variable for
whether the municipality is located in
northern or southern Italy and was
expected to serve as a more general
proxy for the cultural, social, political,
and economic configuration of the
municipalitys environment (e.g., AnessiPessina and Steccolini 2007; AnessiPessina et al. 2008; Nasi and Steccolini
2008; Putnam, Leonardi, and Nanetti
1993).
Table 3 lists all of the variables with their
specific definitions and data sources.
The data were analyzed using both a
between-eects and a fixed-eects
model. The between-eects model
assumes that the unobserved variables
dier over time but are constant across
cases for the same time period.
Conceptually, this is the same as tak-ing
the mean of each variable for each case
across time and running a regression on
the collapsed data set. It consequently
required the exclusion of the dummies
reflecting the electoral cycle: because
elec-tions are usually held every five
years, the five-year average of each
dummy was nearly identical across all
municipalities. The fixed-eects model,
on the other hand, controls for omitted
variables that dier between cases but
are constant over time. It consequently
required the exclusion of the variables
that are time-invariant (SOUTH) or
changing very slowly over time (STAFF).
Fixed eects were chosen over random
eects on the basis of the Hausman test
(Wooldridge 2009). Further tests were
performed for

Budgeting and Rebudgeting in Local Governments: Siamese Twins? 879

Table 3 Variables* and Data Sources

Variable

Measure

Source of Data

Internal variables
Degree of incrementalism in the initial budgeting process
Budget change: extent to which initial budgeted amounts differ (Initial budgeted amount, Title j, year t)/(Actual legal commitments, Title
from the previous years actual amounts (BUDGET_CHANGE)
j, year t 1 ) 1, j = current or capital expenditures, t = 20037
Budget changes by purpose and nature of spending (SPENDING_ Variance of budget change by destination and by nature of spending
PURPOSE_CHANGES; SPENDING_CATEGORY_CHANGES)
Political variables
Political orientation (POLITICAL_ORIENTATION)
Political fragmentation (POLITICAL_FRAGMENTATION)
Years since the last election (t_YRS_SINCE_LAST_ ELECTION)

Dummy for left (1) or right (0) wing

Number of parties with at least one member serving on the Municipal
Executive Board
Number of years elapsed since the last local election

Department of the
Interior, 20027

Department of the
Interior, 20037

Organizational features
Size (STAFF)
Personnel expenditures
Department of the
Relative size of Financial Comptroller Office (CFO_OFFICE_SIZE) Per capita spending on Financial Comptroller Office
Interior, 20037
Rebudgeting for the title not used as the dependent variable
Revised budget/Initial budget for current (capital) spending when capital
(REBUDGETING_ON_OTHER_TITLE)
(current) spending is the dependent variable 1
Financial conditions
Accumulated surplus/deficit (ACCUMULATED_SURPLUS)
Current surplus/deficit (CURRENT_SURPLUS)
Financial autonomy (FINANCIAL_AUTONOMY)
Expenditure rigidity (EXPENDITURE_RIGIDITY)
Net borrowing (NET_BORROWING)
Revision of past-year surplus/deficit included in the budget (REVISION_OF_PAST_SURPLUS)
External variables
Local socioeconomic conditions
Local economic conditions (LOCAL_GDP)
Geographic area (SOUTH)

Accumulated surplus or deficit from previous year/Total current revenues

(Budgeted current revenues Budgeted current expenditures Budgeted
loan repayments)/Budgeted current revenues
(Tax revenues + Fee revenues)/Total current revenues
(Personnel + Interest expenditures)/Total current revenues
(Budgeted borrowing Budgeted debt repayment) / Budgeted current
revenues
(Past-year surplus or deficit included in the revised budget Past-year
surplus or deficit included in the initial budget)/Revised budgeted current revenues

Department of the
Interior, 20027

Provincial per capita GDP

Dummy for north (0) or south (1)

National Statistical Institute (Istat), 20037

* Some variables were transformed to better approximate a normal distribution (log for P_GDP and reciprocal of square root for STAFF).

much greater than for

current spending. Upward
heteroscedasticity (modified Wald test), serial
revisions within 5 percent of
appropriations
correlation (Lagram-Multiplier test), and cross-sectional initial
only in 23 percent
dependence (Pasaran test). For both current and capital occurred
of municipalities, while 29.2
spending, these tests did not reject the absence of
percent of municipalities
serial correlation and cross-sectional dependence, but increased their

rather con-firmed the presence of heteroscedasticity.

This was taken into account by using robust standard
error estimates. Another issue was multicol-linearity,
which stemmed to a large extent from the strong
negative correlation between SOUTH on the one hand
and LOCAL_GDP and FINANCIAL_AUTONOMY on the
other. The issue was consequently solved by dropping
SOUTH from all specifications.

Results
From a descriptive viewpoint (table 4), rebudgeting is
generally used to increase spending appropriations. The
average increase was 4.4 percent for current spending and
16.4 percent for capital

spending. Table 5 shows that, over the period 2003

7, 92.1 percent of municipalities adjusted current
spending upward, while the remaining 7.9 percent
adjusted it downward. For most municipali-ties (63.5
percent), the revision did not exceed 5 percent of
the initial amount. For capital spending, upward
revisions occurred in 81.4 percent of the
municipalities, with the other 18.6 perform-ing
downward revisions. The size of capital spending
revisions was
Table 4 Percentage Change between Revised and Initial Budget
Title

Mean

Std. Dev.

Title 1Current expenditures

Title 2Capital expenditures

4.4%
16.4%

4.7%
37.8%

initial appropriations by
more than 20 percent.
Similarly, downward
revisions within 5 percent
of initial appropriations
occurred only in 6.4
percent of municipalities,
while 6.9 percent of
municipalities reduced
their initial appropriations
by more than 20 percent.
From an explanatory
viewpoint, tables 6 and 7
report the regression
coecients and the
significance thresholds for
the between-eects and
the fixed-eects models,
respectively.

Hypothesis 1that
rebudgeting is aected
by the degree of incrementalism in the
formulation of the initial
budgetis generally

880 Public Administration

Review November |

supported, in that
BUDGET_CHANGE is
negative and strongly
significant (p < .01)
across all specifications.
This is consistent with
rebudgeting being a
complement to the initial
budget formula-tion and
playing a smoothing role
that increases the
incremental nature of the
yearlong budgeting
process. The more a
policy has been
incorporated into the
initial budget, the less it
needs to be pursued
through rebudgeting. In
fact, rebudgeting can be
a way to repeal some
policies that the
administration
introduced in the initial
budget and,
consequently, to realign
the budget to the
previous years situation.
Contrary to expectations,
however, the variable
SPENDING_CATEGORY_CHAN
GES is never significant,
while the variable
SPENDING_PURPOSE_CHAN
GES is insignificant in the
fixed-eects model and
significant but positive in the
between-eects model. In
other words, governments
that formulate the
December 2012

Table 5 Distribution of Municipalities by Sign and Magnitude of Percentage Change between Revised and Initial Budget, 20037
2003

2004

2005

2006

2007

Average, 20037

Current Capital
Current Capital
Current
Capital
Current
Capital
Current
Capital
Current Capital
Spending Spending Spending Spending Spending Spending Spending Spending Spending Spending Spending Spending
Upward
revisions

0%5%
5%10%
10%15%
15%20%
> 20%

Downward
revisions

0%5%
5%10%
10%15%
15%20%
> 20%

55.9%
28.2%
6.0%
2.9%
1.1%
94.2%

4.7%
0.7%
0.2%
0.2%
0.0%
5.8%

22.4%
14.8%
11.7%
5.6%
33.0%
87.4%

4.6%
1.6%
0.7%
1.6%
4.0%
12.6%

59.5%
23.5%
4.9%
2.1%
0.8%

24.6%
12.5%
10.8%
6.4%
30.5%

90.7%

84.8%

7.2%
1.1%
0.4%
0.0%
0.6%

55.2%
28.0%
7.4%
2.2%
1.3%

21.5%
12.1%
8.1%
7.6%
31.6%

94.0%

4.7%
0.4%
0.4%
0.0%
0.5%
6.0%

3.0%
2.5%
1.9%
1.7%
6.1%

9.3%

15.2%

Current Spending

Capital Spending

.27
.001

.19
.010

R2
Cons

Degree of incrementalism in the initial budgeting process

BUDGET_CHANGE
.209***
SPENDING_CATEGORY_CHANGES
.053**
SPENDING_PURPOSE_CHANGES
.006

.044***

Political variables
POLITICAL_ORIENTATION
POLITICAL_FRAGMENTATION

.002
.006

.002
.001

Organizational features
STAFF_TSF
CFO_OFFICE_SIZE
REBUDGETING_ON_OTHER_TITLE

.079
.001***
.006**

Financial conditions
ACCUMULATED_SURPLUS
CURRENT_SURPLUS
FINANCIAL_AUTONOMY
EXPENDITURE_RIGIDITY
NET_BORROWING
REVISION_OF_PAST_SURPLUS

.018
.083***
.009
.040
.031***
.290***

Local socioeconomic conditions

LOCAL_GDP_TSF

.011**

23.0%
13.0%
10.7%
5.3%
24.2%

60.3%
26.1%
5.7%
1.7%
1.3%

23.7%
12.9%
7.9%
6.1%
26.8%

57.1%
25.7%
6.0%
2.3%
1.0%

23.0%
13.1%
9.8%
6.2%
29.2%

81.0%

86.8%

76.3%

95.0%

77.4%

92.1%

81.4%

5.1%
4.0%
3.1%
2.2%
4.7%

10.3%
2.0%
0.7%
0.2%
0.0%

6.1%
3.2%
1.8%
0.7%
11.9%

4.8%
0.2%
0.0%
0.0%
0.0%

5.9%
3.0%
2.8%
3.1%
7.8%

6.4%
0.9%
0.3%
0.1%
0.2%

4.9%
2.9%
2.0%
1.9%
6.9%

19.0%

13.2%

23.7%

5.0%

22.6%

7.9%

18.6%

processall the more so

in the election year, the
budget for which will
have been prepared by
theSpending
outgoing
Variable
Current
administration. The
other political variables
R2
(POLITICAL_ORIENTATIO
Cons
N and
POLITICAL_FRAGMENTA
Degree of incrementalism in the initial budgeting
process
TION) are
never
BUDGET_CHANGE
significant. A posSPENDING_CATEGORY_CHANGES
sible explanation is that
SPENDING_PURPOSE_CHANGES
the key functions and
Political variables
issues that municiPOLITICAL_ORIENTATION
palities must deal with
POLITICAL_FRAGMENTATION
are not dictated by
0_YRS_SINCE_LAST_ ELECTION
political ideology but by
1_YRS_SINCE_LAST_ ELECTION
basic service
3_YRS_SINCE_LAST_ ELECTION
expectations.
4_YRS_SINCE_LAST_ ELECTION
Table 7 Coefficients for Fixed-Effects
Model

Table 6 Coefficients for Between-Effects Model

Variable

54.7%
22.6%
6.1%
2.7%
0.7%

159.204
.001
.041**
.039
.359
.178**
.161
.001
1.804***
.067

** Significant at 5%; *** significant at 1%.

Organizational features
CFO_OFFICE_SIZE
REBUDGETING_ON_OTHER_TITLE
Financial conditions
ACCUMULATED_SURPLUS
CURRENT_SURPLUS
FINANCIAL_AUTONOMY
EXPENDITURE_RIGIDITY
NET_BORROWING
REVISION_OF_PAST_SURPLUS

Hypothesis 3that
organizational features
will aect rebud-geting
is supported only in
the between-eects
model, by

Local socio-economic conditions

LOCAL_GDP_TSF

initial budget by applying uniform increases to the

previous years figures, with no dierentiation
across types of expenditures, do not feel a greater
need to adjust their appropriations during the fiscal
year. This result is somehow counterintuitive, as the
lack of sophis-tication in the formulation of the
initial budget could reasonably be expected to
require greater adjustments during the fiscal year.
A possible explanation is that the municipalities that
apply uniform increases are those that prefer to keep
the status quo, do not feel any need to revise this
choice during the fiscal year, and consequently have
little need for rebudgeting.
Hypothesis 2that political variables will aect
rebudgeting is supported only with respect to the
electoral cycle and espe-cially for current spending.
More specifically, rebudgeting will be greater both at
the beginning of an administrations term of oce
(0_YRS_SINCE_LAST_ELECTION and 1_YR_SINCE_
LAST_ELECTION are positive and strongly significant
for current spending) and toward its end
(4_YRS_SINCE_LAST_ ELECTION is positive and
strongly significant for both current

** Significant at 5%; *** significant at

1%.

and capital spending;

3_YRS_SINCE_LAST_ELE
CTION is positive and
significant for current
spending). Toward the
end of the term,
rebudgeting is probably
a way for the
administra-tion to
increase political
consensus and, as a
consequence, its own
chances of reelection. At
the beginning of the
term, a pos-sible
explanation is that a
newly elected
administration will use
rebudgeting to gradually
incorporate its policies
into the budget-ing

Budgeting and Rebudgeting

in Local Governments:

Siamese Twins? 881

the positive and statistically significant coecients

for CFO_

The descriptive part of our results indicates that

upward revisions to

the budget are more frequent than downward adjustments,

especially for current spending. This probably reflects a
ON_OTHER_TITLE. Size, as captured by the variable STAFF, is
conservative
never significant. The positive coecient for
approach to the formulation of the initial budget, whereby
CFO_OFFICE_SIZE
initial
expenditure appropriations are defined solely on the basis of
seems to suggest that a larger Financial Comptroller Oce will those
use its power to impose fiscal conservatism in the initial
revenues whose occurrence is viewed as suciently certain.
budget
During
formulation and to authorize increased spending through
the fiscal year, as extra revenues are recognized, spending
rebudappropriageting only when expected revenues are actually recognized.
The
tions are increased through rebudgeting.
positive coecients for REBUDGETING_ON_OTHER_TITLE
apparently confirm the presence of cross-organizational
Given that overspending the budget is illegal, but
dierences
underspending
in the propensity toward rebudgeting, even after controlling
is not, it is in fact surprising that the budget should ever be
for
revised
downward. In the presence of decreases in revenues, the
financial conditions.
administration
could simply require the departments to contain spending
without
asking the city council to formally approve a downward
Hypothesis 4that the municipalitys financial conditions will
revision of the
aect rebudgetingis generally confirmed, even after
budget. Possible explanations for the presence of downward
controlling
revisions
include the following: (1) underspending may be perceived
for the midyear emergence of past-year net surpluses or defi- by stakecits, which was found, unsurprisingly, to encourage
holders as an indicator of poor performance, and downward
rebudgeting
revisions
may be an eective way of concealing it; (2) if budgeting is
(REVISION_OF_PAST_SURPLUS > 0 and strongly significant
incremenacross all specifications). More specifically, municipalities in
tal, downward revisions may be used to set a lower baseline
better
for the next
years budget; (3) if actual revenues fall short of budgeted
financial conditions seemingly require smaller midyear adjust- ones, downments, presumably because they enjoy greater degrees of
ward revisions may be the only eective way of forcing
freedom
departments to
reduce their spending plans, thus preventing the emergence
during the initial budgeting process. This is consistent with the of deficits.
negative and statistically significant coecients for
CURRENT_
SURPLUS (for current spending in the between-eects model), The reference to incrementalism leads to the explanatory
the
part of the
negative and statistically significant coecients for
article. In this regard, all of the hypotheses were supported,
FINANCIAL_
although
not for all variables and across all specifications, and
AUTONOMY (for capital spending in both models), the positive obviously with
direct reference only to the period and governments under
and statistically significant coecients for EXPENDITURE_
study.
RIGIDITY (for current expenditure in the fixed-eects specificaFirst and foremost, rebudgeting was confirmed to be a
tion). The only partial anomaly is NET_BORROWING, whose
complecoecient is significantly positive for current expenditure in
ment to the initial budget formulation. The more a policy has
the
been
between-eects specification and significantly negative for
incorporated into the initial budget, the less it needs to be
capital
pursued
OFFICE_SIZE (current spending only) and REBUDGETING_

expenditures in the fixed-eects specification.

through rebudgeting. In fact, rebudgeting

A possible explanation is that, in the

presence
of extensive borrowing, municipalities will
initially be very conservative in their current

The more a policy has been

incorporated into the initial

appropriations, only to increase them during

budget, the less it needs to be

the fiscal year to the extent that it is

pos-

pursued through rebudgeting.

can be a way to repeal some

policies that the
administration introduced in the initial
budget and, consequently, to realign the
budget to
the previous years situation.

Under a first type of complementarity,

rebudgeting is a way for the municipality to fill
unlikely to further increase capital spenda gap
in its initial programming or to adapt its resource allocation
ing through rebudgeting because borrowing cannot be further to changincreased and because other capital funds becoming available ing political priorities. Thus, when initial appropriations are
duronly
ing the year (e.g., sale of fixed assets, capital transfers from
marginally dierent from the previous years, they are less
higher
likely to
levels of government) will be used to replace budgeted
match the dynamic evolution of needs and thus more likely
borrowing
to require
rather than to fund additional capital
midyear revisions. In addition, newly elected administrations
projects.
will
make a greater use of rebudgeting because they must
operate within
the budget approved by the outgoing administration and
Hypothesis 5that the municipalitys external
environment will
because they
aect rebudgetingfinally, is confirmed by the negative and
need some time to fully finalize their policies. Similarly, in the
statistipoorer
cally significant coecient of LOCAL_GDP in the betweenareas of the country, where public management skills are, on
eects
average,
weaker than elsewhere (see, e.g., Anessi-Pessina and
model for current expenditures and the fixed-eects model for Steccolini 2007;
capital expenditures. In other words, poorer municipalities
Anessi-Pessina et al. 2008; Giordano, Tommasino, and
(generCasiraghi
ally located in the south) show a greater propensity to revise
2009; Nasi and Steccolini 2008; Putnam, Leonardi, and
upward
Nanetti
their budgeted expenditures during the fiscal
1993), municipalities will be less likely to frame the initial
year.
budget
within a comprehensive programming eort and
consequently will
use rebudgeting to a larger extent.
Discussion and Conclusions
The existing literature on budgeting has traditionally focused
on the
formulation of the initial budget. In contrast, this article argues Under a second type of complementarity, rebudgeting is a
that
way for
budgeting is a yearlong process composed of initial budgeting politicians to pursue opportunistic goals. In particular, as
and
elections
rebudgeting. Our focus, therefore, is on rebudgeting, using
approach, politicians will use rebudgeting to increase their
five-year
chances
sible to do so. At the same time, they will be

data from Italian municipalities to test our hypotheses.

882 Public Administration Review November | December 2012

of reelection.

Under a third type of complementarity, rebudgeting

is a way for

programs into a new budget. Another relevant

policy implication

powerful Financial Comptroller Oces to enforce fiscal

conservatism in the formulation of the initial budget. Because
underspending the budget is always an option, while overspending is not,
if
rebudgeting were not allowed, initial budgets would have to
ensure
the presence of slack resources to face unexpected events
and new
issues emerging during the year. Thanks to rebudgeting, on
the
contrary, the formulation of the initial budget can be
conservative
and spending limits can be gradually relaxed as revenues are
actu-

is that rebudgeting should be made more transparent. At

present, rebudgeting is a much less visible process than
budgeting,
also because it is often composed of several small
amendments
to the initial budget, whose total amount is nevertheless
important. Consequently, legislation could provide for city councils
to
devote one or two midyear sessions to budget revisions in
order to
eectively keep rebudgeting under control and ensure its
overall
consistency.

For practitioners, our results call

for increased

ally recognized.
Under a fourth type of complementarity,
rebudgeting is a way for municipalities in
dire financial conditions and disadvantaged
socioeconomic environments to meet changes

in the constraints they face.

Municipalities

For practitioners, our results call

for increased attention to rebudgeting, which clearly emerges as

attention to rebudgeting, which clearly

emerges as a politically charged,
yearlong
process rather than a purely technical
matter.
As such, the key question is how rebudget-

a politically charged, yearlong

ing can be used to improve the

governments

serving wealthier constituencies and

character-

process rather than a purely

performance rather than favor the

pursuit of

ized by comparatively larger surpluses,

own

technical matter.

revenues, and discretionary expenditures will

opportunistic goals. Two considerations

stand
out.

have more leeway in the formulation

of the
initial budget and are less likely to revise it in the presence of
changing constraints.

Finally, two further points are worth highlighting. On the one

hand, rebudgeting seems to be a consequence of specific
organizational cultures, in that governments seemingly have
dierent
propensities toward it. On the other hand, the determinants of
rebudgeting are partially dierent for current and capital
expenditures. One major dierence is that CFO conservatism in the
formulation of the initial budget is apparently stronger for current spending. This is not surprising, for at least two reasons:
(1)
once authorized in the budget, current spending usually can
take
place without further constraints, while capital spending must
go through a more complex process (the sources of funding
must

First, rebudgeting cannot be a one-size-fits-all process. Each

organization must develop its own approach and culture to
budgeting and
rebudgeting and translate it into rules and routines that are
consistent with its specific contextual and political conditions.

Second, in doing so, the organizations main concern should

be
how to manage and steer the flexibility that rebudgeting
oers.
If properly used, rebudgeting allows the organization to
revise its
goals and priorities in order to keep them aligned with
changing
internal and external conditions. Under dire financial circumstances, more specifically, it can be a powerful tool to initially
impose strict spending constraints, which can gradually be
relaxed
as uncertain revenues actually materialize. The risk is for
these
changes to be decoupled from the organizations overall
planning

actually be obtained; a project must be prepared and

approved; a
contractor must be identified, etc.), and consequently it is
easier to
cancel or postpone; (2) current spending, even for items other
than
personnel and interest, sets a baseline that is dicult to
reduce in
the following years.

and control system. In an overly simplistic approach, a

government would align its planning and control system with the
initial
budget: the initial budget presents the spending implications
of the
organizations goals and programs; what cannot be funded in
the
initial budget is excluded from the organizations goals and
programs for the current year. As a consequence, the
organization will
From a research viewpoint, this article sheds some light on the have no plans for the use of additional resources that may
materirelationship between budgeting and rebudgeting. Moreover, it alize during the fiscal year, so that it will be easier to funnel
these
makes a contribution to the traditional studies on
resources toward the parochial interests of politicians and
incrementalism,
bureauwhich have paid little attention to the implications of
crats. Alternatively, should resources prove lower than
incremental
expected, no
budgeting for budget execution. Future research should try to plans will exist for where to focus the cost containment
better
eorts, so
disentangle the determinants of budgeting and rebudgeting. It that the axe will naturally fall on new initiatives put forward
could
in the
also analyze the roles played by politicians, managers, and
initial budget.
other

stakeholders in the rebudgeting process.

In conclusion initial budgeting and rebudgeting

must be viewed as

From a policy viewpoint, because elections and changes in

political orientation aect rebudgeting, one may wonder whether
the
current election timing is consistent with the budget cycle. In
Italy,
for instance, elections are usually held between April and June.

the components of a yearlong process; they take on specific

features
in each organization; they must be designed and managed in
an integrated fashion, as their interactions must be aligned with the
organizations planning and control system and other managerial
tools.

The incoming administration thus has to wait six to nine

months
before it can formulate its first budget. In the meantime, it has
to
Acknowledgments
operate within the constraints set by the previous
The authors wish to acknowledge the anonymous reviewers
administrations
for their
choices and will resort to rebudgeting to modify such
very helpful comments. We would also like to acknowledge
constraints.
funding
An alternative would be to hold elections in the autumn,
by the Public Management Department, SDA Bocconi School
allowing
of

the incoming administration to translate immediately its

electoral

Management.

Budgeting and Rebudgeting in Local Governments: Siamese Twins? 883

Note

1. The year-end statement includes the actual amounts of

revenues and expendi-tures under the commitment basis of

accounting, that is, the establishments of amounts
receivable and the legal commitments. The definitions of
revenues and expenditures under the commitment basis of
accounting are similar to the European Unionssee Council
regulation (EC, Euratom) no. 1605/2002 of June 25, 2002, on
the financial regulation applicable to the general budget of
the European Communities. For revenues, the establishment
of an amount receivable is the act by which the authorising
ocer [ . . . ] (a) verifies that the debt exists; (b) determines
or verifies the reality and the amount of the debt; (c) verifies
the conditions in which the debt is due. For expenditures,

the legal com-mitment is the act whereby the authorising

ocer enters into or establishes an obligation which results
in a charge.

References
Alesina, Alberto, and Allan Drazen. 1991. Why Are Stabilizations
Delayed? American Economic Review 81(5): 117088.
Anessi-Pessina, Eugenio. 2000. La Contabilit delle Aziende Pubbliche
[Government Accounting]. Milan, Italy: Egea.

Anessi-Pessina, Eugenio, Greta Nasi, and Ileana Steccolini. 2008.

Accounting Reforms: Determinants of Local Governments
Choices. Financial Accountability and Management 24(3): 32142.
Anessi-Pessina, Eugenio, and Ileana Steccolini. 2007. Eects of
Budgetary and Accruals Accounting Coexistence: Evidence
from Italian Local Governments.

Financial Accountability and Management 23(2): 11331.

Bretschneider, Stuart I., and Larry Schroeder. 1985. Revenue

Forecasting, Budget Setting, and Risk. Socio-Economic Planning
Sciences 19(6): 43139.

Bretschneider, Stuart I., Jerey J. Straussman, and Daniel

Mullins. 1988. Do Revenue Forecasts Influence Budget
Setting? A Small Group Experiment. Policy Sciences 21(4):
30525.
Berry, William D. 1990. The Confusing Case of Budgetary
Incrementalism: Too Many Meanings for a Single Concept.
Journal of Politics 52(1): 16796.

Bingham, Richard D. 1978. Innovation, Bureaucracy, and Public

Policy: A Study of Innovation Adoption by Local Government.
Western Political Quarterly 31(2): 178205.
Boyne, George, Rachel Ashworth, and Martin Powell. 2001.
Testing the Limits of Incrementalism: An Empirical Analysis
of Expenditure Decisions by English Local Authorities,
19811996. Public Administration 78(1): 5173.
Brender, Adi, and Allan Drazen. 2005. Political Budget Cycles in
New versus Established Democracies. Journal of Monetary
Economics 52(7): 127195.

Brudney, Jerey L., and Sally Coleman Selden. 1995. The

Adoption of Innovation by Smaller Local Governments: The
Case of Computer Technology. American Review of Public
Administration 25(1): 7186.
Caiden, Naomi, and Aaron Wildavsky. 1974. Planning and
Budgeting in Poor Countries. New Brunswick, NJ: Transaction.

Caperchione, Eugenio. 2000. Trends and Open Issues in

Governmental Accounting Systems: Some Elements of
Comparison. In Comparative Issues in Local Government
Accounting, edited by Eugenio Caperchione and Riccardo
Mussari. 6986. London: Kluwer Academic.
Dougherty, Michael J., Kenneth A. Klase, and Geun S. Soo.
2003. Managerial Necessity and the Art of Creating
Surpluses: The Budget-Execution Process in West Virginia
Cities. Public Administration Review 63(4): 48497.

Fenno, Richard F. 1996. The Power of the Purse: Appropriations Politics in

Congress.

Boston: Little, Brown.

Forrester, John P., and Guy B. Adams. 1997. Budgetary Reform

through Organizational Learning: Toward an Organizational
Theory of Budgeting.

Administration & Society 28(4): 46688.

Forrester, John P., and Daniel R. Mullins. 1992. Rebudgeting: The

Serial Nature of Municipal Budgetary Processes. Public
Administration Review 52(5): 46773.

884 Public Administration Review November | December 2012

Giordano, Raaella, Pietro Tommasino, and Marco

Casiraghi. 2009. Le Determinanti dellEcienza del
Settore Pubblico: Il Ruolo della Cultura [The
Determinants of Public Sector Eciency: The Role of
Culture]. In

Mezzogiorno e politiche regionali [The South and Regional

Policies], edited by Luigi Cannari, 25378. Rome: Bank of Italy.

Giroux, Gary A., Alan G. Mayper, and Richard I. Daft. 1986.

Organization Size, Budget Cycle and Budget Related
Influence in City Government: An Empirical Study. Accounting,
Organizations and Society 11(6): 499519.
Greenwood, Royston, Christopher R. Hinings, and Stewart Ranson.
1977. The Politics of the Budgetary Process in English Local
Government. Political Studies

25(1): 2547.

Hoskins, Ronald B. 1983. Within-Year Appropriations Changes in

Georgia State Government: The Implications for Budget
Theory. PhD diss., University

of Georgia.

Lauth, Thomas P. 1988. Mid-Year Appropriations in Georgia:

Allocating the Surplus. International Journal of Public
Administration 11(5): 53150.
Lee, Tanya M., and Elizabeth Plummer. 2007. Budget Adjustments in
Response to Spending Variances: Evidence of Ratcheting of Local
Government Expenditures.
Journal of Management Accounting Research 19(1): 137
67. Lindblom, Charles E. 1959. The Science of Muddling
Through. Public

Administration Review 19(1): 7988.

Lora, Eduardo, and Mauricio Olivera. 2004. What Makes
Reforms Likely: Political Economy Determinants of Reforms
in Latin America. Journal of Applied Economics 7(1): 99135.
Lu, Haoran, and Rex L. Facer II. 2004. Budget Change in Georgia
Counties: Examining Patterns and Practices. American Review
of Public Administration

34(1): 6793.

Mierau, Jochen O., Richard Jong-A-Pin, and Jakob de Haan. 2007. Do

Political Variables Aect Fiscal Policy Adjustment Decisions?
New Empirical Evidence.

Public Choice 133(3): 297319.

Mink, Mark, and Jakob de Haan. 2006. Are There Political Budget
Cycles in the Euro Area? European Union Politics 7(2): 191211.

Mulas-Granados, Carlos. 2003. The Political and Economic

Determinants of Budgetary Consolidation in Europe.
European Political Economy Review 1(1): 3167.
Nasi, Greta, and Ileana Steccolini. 2008. Implementation of
Accounting Reforms: An Empirical Investigation into Italian
Local Governments. Public Management Review 10(2): 17394.
Persson, Torsten, and Guido Tabellini. 2004. Constitutional Rules and
Fiscal Policy Outcomes. American Economic Review 94(1): 2545.
Putnam, Robert D., with Robert Leonardi and Raaella Y. Nanetti.
1993. Making Democracy Work: Civic Traditions in Modern Italy.
Princeton, NJ: Princeton

University Press.

Rubin, Irene S. 1990. Budget Theory and Budget Practice: How Good
the Fit? Public Management Review 50(2): 17989.

. 2005. The State of State Budget Research. Public Budgeting

and Finance
25(4): 4667.
Shi, Min, and Jakob Svensson. 2006. Political Budget Cycles: Do They
Dier across Countries and Why? Journal of Public Economics
90(8): 136789.
Tavares, Jos. 2004. Does Right or Left Matter? Cabinets,
Credibility and Fiscal Adjustments. Journal of Public Economics
88(12): 244768.
Tujula, Mika, and Guido Wolswijk. 2007. Budget Balances in OECD
Countries: What Makes Them Change? Empirica 34(1): 114.
Wildavsky, Aaron B. 1964. The Politics of the Budgetary Process.
Boston: Little, Brown.
. 1988. The New Politics of the Budgetary Process. Glenview,
IL: Scott, Foresman.
Wooldridge, Jerey M. 2009. Introductory Econometrics: A Modern
Approach. 4th ed. Mason, OH: South-Western/Cengage.