Theme 9 – Public Budgets

Public Economics
The Public Sector Budgets of the
Czech Republic
• The Budget System
– LEGAL FRAMEWORK
– Constitution of B. proposal
– B. process (dates and subjects, examples)
– mid-term framework

• Two Fiscal Statistical Systems

– Cash flow
– Accrual basis

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The Budget system - Legal
Framework

• The budget process of the central government, which covers

– the state budget and
– extra-budgetary state funds,

• is set by the act on

– Budgetary Rules (period, define + and -, )
– special acts on extra-budgetary state funds.

• Extra-budgetary state funds are…. State Agricultural

Intervention Fund, State Cultural Fund, State Fund of the
Czech Cinematography, State Fund of Transport Infrastructure,
State Environmental Fund, State Fund for Housing
Development, Estate Fund of the Czech Republic
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 •Just one example… State
Cinematography Fund:.
•The Fund shall, in particular:
a) administer audiovisual charges, charges for broadcast advertising  and
administrative fees in accordance with this Act;
b) maintain records in the audio/video sphere; 
c) provide support for cinematography; 
d) exercise ownership rights, including copyright and the ownership rights
of performing artists, which pass to the state in accordance with another legal
regulation;
e) exercise the audiovisual work producer rights that have passed to its legal
predecessor in accordance with another legal regulation and the audio/video
recording producer rights pertaining to it in accordance with another legal
regulation;
f) grant the co-producer status in accordance with the Convention or under any
other international agreement on film co-production;
g) provide film incentives, 
h) perform activities defined by other legal regulations.

•Fee – 1 % of the „ticket price“

•http://fondkinematografie.cz/english/ 4
The Public Sector Budgets of the
Czech Republic
• The Budget System
– Legal Framework (done)
– CONSTITUTION OF B. PROPOSAL
– B. process (dates and subjects, examples)

• Two Fiscal Statistical Systems

– Cash flow
– Accrual basis

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Constitution of Budget
Proposal
• Budget is a law – must be approved by…
• Unlike other laws Budget acts are presented to the
Lower House (Chamber of Deputies) only (not to
the  the upper chamber of the 
Parliament of the Czech Republic - Senate)
• There are no other details in the Constitution (no
balanced budget rule – Problem? – Keynes vs
Smith/Ricardo)

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The Public Sector Budgets of the
Czech Republic
• The Budget System
– Legal Framework (done)
– constitution of b. proposal (done)
– B. PROCESS (DATES AND SUBJECTS, EXAMPLES)

• Two Fiscal Statistical Systems

– Cash flow
– Accrual basis

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Budgetary proces – central b.
• Budgetary year = calendar year
• Important dates –
• 31st of August (Draft of Budget act must be presented to the
Government by August 31)
• 1st of October (Draft of Budget act must be presented to the
Lower House of Parliament)
• 31st of December – problem…

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Budgetary process – bodies –
who to whom
• Budget proposal is prepared by the Ministry
of Finance (with the support of other
ministries)
• It must be presented to the Government by
August 31
• Then the Government presents its proposal
to the Lower House of the Parliament

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Provisional Budget

• If the Parliament does not approve the

budget by December 31, the
expenditures of ministries must
correspond to the budget approved for
the previous year

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 • State Budget Act, 2016 – short
text, only 2-3 pages

•Revenue – 1,18*1012
Deficit
(trillion)
financing

•Expenditures – •For illustration – 120 000

1,25*1012 CZK per capita (4-5 mountly
wages)
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Balance sheet…

+
-

Deficit

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Ministry of Defence - balance
sheet - chapters

+Revenues
-Expenditures

Detailed
structure
of + and -

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The Public Sector Budgets of the
Czech Republic
• The Budget System
– Legal Framework
– Constitution of B. proposal
– B. process (dates and subjects, examples)
– MID-TERM FRAMEWORK

• Two Fiscal Statistical Systems

– Cash flow
– Accrual basis

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Budgetary process – mid-term
(multiannual) framework

• Together with the budget proposal the

government must present the mid-term
Framework to the Parliament (partly
corresponds to Keynes balanced budget
theory)
• Budget proposal includes „expected“
revenues and „estimated“ expenditures
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Medium-term expenditure frameworks
• The medium-term expenditure frameworks for years n, n+1,
n+2 were included into the Act on Budgetary Rules
– in connection with the decreasing of the general government deficit and
– fulfilment of the commitments towards the EU.

• The medium-term expenditure frameworks involve :

state budget expenditures,

extra-budgetary state funds.

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Summary… The Schedule of the
Budget Process
• The schedule of the budget process starts in February and
finishes at the end of the year and is obligatory according to the
Act on Budgetary Rules.
• The 1/state budget act and 2/medium-term expenditure
frameworks for years n, n+1,n+2 as well as the limits of
expenditures and revenues for the chapters` (e.g. line
ministries – example for the ministry of defence) budgets are
approved annually.
• The draft state budget, medium- term expenditure
frameworks and limits of expenditures and revenues for the
chapters` budgets are drawn up by the Ministry of Finance
followed by the approval of the government and the House of
Deputies.

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The Budget Process - phases
The budget process has four main phases:
• Formulation of the draft state budget and medium- term
expenditure frameworks for years n, n+1, n+2 by the
Ministry of Finance
• Government`s approval
• Parliamentary scrutiny and approval
• Implementation and control

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2013 2014 2015 2016 2017 2018 Budg.
Year
2017

2016

2015

2014

Minist. and govern. (August) Chamber of Deputies (31th Dec.)

Fiscal (budgetary) year follow-up inspection 19

The Public Sector Budgets of the
Czech Republic
• The Budget System
– Legal Framework
– Constitution of B. proposal
– B. process (dates and subjects, examples)
– mid-term Framework - done

• TWO FISCAL STATISTICAL SYSTEMS

– Cash flow
– Accrual basis

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Two Fiscal Statistical Systems

There are two fiscal statistical systems monitoring the general

government/ public budgets from the different points of view:
•The European System of National and Regional Accounts
ESA 95 (accrual-based)
•National Methodology – Fiscal Targeting (cash-based)

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Comparison of Fiscal Statistical
Systems I – the extend of coverage

• National Methodology – Fiscal Targeting (cash-

based) = The Fiscal Targeting includes just so-
called public budgets involving the central, regional
and municipal governments as well as regional
councils of cohesion regions.
• The ESA 95 covers the ENTIRE Government sector,
in other words, public health insurance companies,
government agencies, subsidiaries, funds, state
universities and other set allowance organizations.

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Comparison of Fiscal Statistical
Systems II – accrual vs. cash

• In accrual system (ESA 95), recognition occurs with the

exchange of liabilities and /or assets, which is usually before
the cash flow and closer to actual economic impact of the
transaction.
• In contrast, the cash basis (Fiscal Targeting ), which is used
in most traditional budget systems, records outlays and
receipts only when they involve cash transactions.

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Debt in Selected Countries

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End … notes…

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