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Theory of the On what basis shall it be decided to

allocate X dollars to Activity A instead of

Budget: Aaron Wildavsky;

allocating them to Activity B?

V.O. Key Jr;

Allen Schick;
Application to Eric Kohler;
Developing Countries Harold Grooves &
Robert Bish
Verne Lewis
Jose Soberano

American economist, PROFESSOR PHILIP E. TAYLOR (1961), as embracing

Etymology/Definition almost all ideas of term, ancient and modern:

Budget: “The budget is the master plan of

Bowgette; Bouget; Bulga government. It brings together estimates of
anticipated revenues and proposed
expenditures, implying the schedule of
activities to be undertaken and the means of
financing those activities. In the budget,
fiscal policies are coordinated, and only in
the budget can a more unified view of the
financial direction which the government is
going to be observed.”
Theoretical Perspectives in Budgeting
Theoretical Perspectives in Budgeting

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AARON WILDAVSKY viewed budget or budgeting

ALLAN SCHICK views it as a process as an outcome of the struggle of
consisting of a series of activities conflicting preferences.
relating expenditures to a set of goals

Eric Kohler defines budget as a financial plan which

GROOVES and BISH consider budgeting as serves as the pattern for and a control over future
the process through which public Operations and as systematic plan for the utilization
expenditures are made of manpower, material and other resources.

Theoretical Perspectives in Budgeting Theoretical Perspectives in Budgeting

Budget Theory and Budget Practice:

When expenditures exceed revenues, the
How Good the Fit?
government incurs a deficit which may result in
the following situations:
• The go er e t orro s o ey either fro foreig
sources or from the domestic capital market which
increases the debt stock of the NG and its debt
servicing requirements;
• The go er e t orro s o ey fro the Bangko
Sentral ng Pilipinas; or,
• The go er e t ithdra s fu ds fro its ash
balances in the Treasury

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MODERN DIMENSIONS OF BUDGETING

FOR NATIONAL DEVELOPMENT

Budgeting serves as a tool for learning the

relationship of government programs with
economic and financial conditions and trends,
and for designing suitable economic and financial
policies and measures.
Since the budget embodies a national fiscal plan for taxing,
borrowing and spending a significant segment of the
national income, it has a substantial impact on the
ou try’s fiscal soundness and national economy.

*Social Services- P841.8 billion or 37.2 %of the total national budget. (eg.
Conditional Cash Transfer program- P62.6 billion; the construction and repair of TOWARDS A PRACTICAL AND
public school classrooms -P44.6 billion, National Health Insurance Program- P35.3 OPERATIONALTHEORY OF THE BUDGET FOR
billion.
*Economic Services -P593.1 billion or 26.2 % of 2014 budget. ( P94.3-billion DEVELOPINGCOUNTRIES
allocation for paving national roads, P10.7 billion for technical support services that
ill e efit the ou try’s far ers, a d P5.5 illio for touris promotion)
* Debt Burden-16.7 percent (P377.6 billion) and Budgeting is a matter of
* General Public Services corner 16 percent (P362.6 billion)
* Defense services -P89.5 billion.
philosophy
* Disaster preparedness and post-disaster rehabilitation -P13 billion set aside for
the Calamity Fund
as can be gleaned in the
* Rehabilitation and Reconstruction Program- P20 billion diverse interests of the
* Reconstruction projects under the Unprogrammed Fund- P80 billion
present government
Abad noted that the 2014 GAA is the product of improved citizen
e gage e t i the de elop e t of the Ad i ist atio ’s p oposed udget,
as well as in the
as ell as the A ui o go e e t’s a ility to espo d to the ou t y’s interests of the future
ha gi g eeds, i ie of P eside t A ui o’s oade
socio-economic development program. ones

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Each year, national government budget before its

authorization or final legislation, is presented in the A recognition by the national and political leadership that the
allocation of the limited resources of government, which is
form of Appropriation Bill- that expresses social
translated yearly through the GAA.
consensus which sound akin to the mystic doctrine of
the general will. * Does the act embody the general will in the light of
the authorized appropriations for each Sector,
objective of expenditure?
Constantly, in the process of formulating AB,
* Is there a rational allocation?
choices have to be made between the demands of the
* What were the basis for allocation?
different groups and factors, aside from making the
estimates of the relative political strength of And such need is one that is actually felt and
contending groups that frequently enter in the articulated by the target beneficiaries of the
decision. programs and projects.

Budget as an Verne Lewis Principles:

Economic Theory and Political Philosophy
Principle 1:
• Value Preferences
• Judgments
Since Resources are scarce in relation to demands,
• Determining Priorities the basic economic test which must be applied is that
THE RETURN FROM EVERY EXPENDITURE MUST
1. Who finally sets and decides on priorities?
2. What are the bases/criteria for the prioritization? BE WORTH ITS COST in terms of sacrificed alternatives.
3. To What extent and how do citizens participate in this area?
4. What are the techniques employed in the prioritization? Budget analysis, therefore , should be basically a
5. How is the social desirability of the approved programs measured? comparison of the relative Merits of alternative
6. What happens if the programs w/c were deprioritized, turn out uses of funds.
to be the Program really needed by the general will?
Will there be reallocation of resources?

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RELATIVE VALUE (Economics: UTILITY THEORY)

Project A
Health
Project B
Community *some programs
Development
X Project C
maybe sacrificed
X Project D
Military *Comparison of the relative value of results
To be obtained from alternative uses of funds
Peace Process Social Services
Education
The analyst must be justifiable in his choices;
Scientific Research aki g the MO“T ADVANTAGEOU“ use of resour es
Infrastructures
Environmental The returns from the chosen activity must be more desirable/more necessary
Than any other alternative use of funds
Protection

Verne Lewis Principles:

Project A
Health
Project B Principle 2:
Community
X Project C Incremental analysis (ie. Analysis of the additional values
Development
X Project D To be derived from an additional expenditure)
Military Social Services Is necessary because of the phenomenon of
Education diminishing utility.
Peace Process
Scientific Research
Analysis of increments is necessary and useful only at or
Near the margin, this is the point of balance at which
Infrastructures Environmental An additional expenditure of any purpose would yield
Protection The same return.

Budget analysis: THE RESULT MUST BE WORTH THEIR COSTS

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Maximum results/returns can be obtained only if

Expenditures are distributed among different purposes Verne Lewis Principles:

May e fi a ed ALL the progra s… Principle 3:

Expenditures for several Programs
will then be reduced Comparison of relative merits can be made only in
Terms of relative effectiveness in achieving a common
Is it worthy to LOWER the
standards of Quality? Objective.

The method: Comparison

of values I the ase of the Philippi es,
Evaluation in terms of relative effectiveness
in achieving A common objective
& their
Relative
while our technical expertise is on par
effectiveness with those of industrialized countries,
* Evaluation in terms of the common purpose
A single flood, a prolonged drought,
EXAMPLE: budget allocations for Education an earthquake or internal security problems
can throw the most well-planned budget
Salaries Facilities Maybe allocating out of gear and set carefully formulated
Capital More money on
priorities i to disarray. –Jose Soberano
Outlays infrastructures
Operating will enhance
greater To him, the problem is not so much a question of theory and
Expenses
Infrastructures RETURNS technique, But the very problem of poverty itself.

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Dr. Jose “o era o’s Theory on Budget (as applied in public fiscal ad) Dr. Jose “o era o’s Theory on Budget (as applied in public fiscal ad)

Requirements towards a normative theory of the budget: Requirements towards a normative theory of the budget:

1. A Positive Government- 2. Scientific Policies-

This is committed to actively formulate programs in This is able to ascertain in popularly understood terms
fulfillment of societal balance necessary for the good life. The requisites for the good life, the delimitations of the
It is a govt that is established and sustained according to public interest, and the nature of the societal balances
its Performance in preserving the public interest For which it is organized.
(underscoring supplied) and dedication to the These are the policies which have operations and processes
cause of public service. Open to precise verification and validation in every
Significant aspect of performance

Dr. Jose “o era o’s Theory on Budget (as applied in public fiscal ad) Dr. Jose “o era o’s Theory on Budget (as applied in public fiscal ad)

Requirements towards a normative theory of the budget: Requirements towards a normative theory of the budget:

3. An Abundant Economy 4. A Responsive Society-

This assures everybody the optional level of welfare This is directed towards the propagation of the Common
Consistent with resources availability, techno progress, Good, keen awareness of rights and entitlements amidst
Population policy, and ultimate human creativity. The possibilities of organized life.
No artificial scarcities are imposed on account of doctrine It is responsible for its performance according to the rules
Other than the logical necessities governing production and Of civility and is knowledgeably prepared to reciprocate
Civilized social living. Benefits received with services rendered.

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CONCLUSIONS
Analysis in budgeting must be seen as part of public
administration, not only as an economic and political process

1. Examinations of the key actors in exec and legis branches

1. The balance of legis-exec powers in budgeting,

rules, procedures and Budgetary processes

3. Changing budgetary norms and Values

4. Examining the scope of policy making in budgeting

5. Examining the nature and consequences of budget reforms.