BUDGETS OF OTHER COUNTRIES France.—The financial year begins on Jan. 1. The budget con sists of several documents: (i.) The general budget. To this are appended "annexed" bud gets for the national printing office, the gunpowder service, the posts, telegraphs and telephones, the mint, the railways and state factories in Alsace-Lorraine, the state railways, the national sav ings banks, the naval invalidity fund and other special establish ments.
The general budget is, in principle, a gross budget. But only the net surplus or net deficit is carried to the general budget in the case of the printing office, the gunpowder service, the posts, tele graphs and telephones, the mint and the railways and state facto ries in Alsace-Lorraine. Any surplus or deficit of the national savings banks account is carried to its own reserve fund account.
(ii.) Cost of armies of occupation (expenses recoverable).
(iii.) Debt redemption fund.
(iv.) Accounts of autonomous offices attached to various de partments.
(v.) Special Treasury accounts, of which the chief are expendi ture on state railways, interest on advances by the Bank of France, reduction of amounts advanced by the Bank of France, payment of debt service to Great Britain and the United States, and ad vances to foreign governments.
Besides all these there is a special Treasury account of pay ments by various powers in execution of the Peace treaties, to which all reparation recoveries are credited. The receipts are des tined to cover the cost of armies of occupation, sums due to war victims, service of the inter-Allied debt, and redemption of internal debt.
Each department is responsible for the preparation of its own estimates, which are centralized (but not controlled) by the min istry of finance. All revenue and all expenditure is voted for one year only. No taxes are permanent. No charges are laid upon a consolidated fund. Ministers are forbidden to incur liabilities or make payments for purposes not specified in the budget, to over spend the credits granted to them, or to enter into commitments extending beyond the financial year. The hands of the chamber are thus entirely free every year. Each minister is personally and pecuniarily responsible for any breach of financial regularity in these respects.
The budget bill is presented to the Chamber of Deputies with out a speech, and is referred to the finance committee of about 40 members, which is a microcosm of the chamber, based on propor tional representation of the party groups. This committee over hauls both sides of the budget, sends for persons and papers, and reports to the full chamber a budget which often differs con siderably from the original. It follows that the chamber dis cusses, in practice, not the government proposals but the proposals of the finance committee. Such discussions may result in further changes. But no additions may be made to the estimates of ex penditure unless they are simultaneously coupled with proposals for raising an equivalent amount of additional revenue. No limit is imposed upon the number of sittings or upon the speeches.
The budget settled by the chamber is sent to the Senate, which claims equal powers of revision, sets up its finance committee and follows the same procedure as the chamber. Amendments made in the Senate, either by way of increase or reduction, are sent down to the chamber, which may accept, modify or reject them. The budget is then returned to the Senate, and in the last resort differences are settled by conference or compromise, or submission on one part or the other.
The minister of finance is charged with the duty of keeping the departments in funds, within the limits of the credits granted to each of them, but he is not concerned with their use of such funds. The accounts of each department are, at the end of the year, rendered to the ministry of finance, which adds its own account and the accounts of receipts, and prepares a general ac count which is sent to the cour des comptes—a quasi-judicial and extra-parliamentary tribunal. This court examines all the docu ments embraced by the accounts, but does not examine the ac countants or officials concerned in administration. It draws up an annual report to the president of the Republic, enumerating the principal irregularities it has found, and stating the account ing reforms it thinks desirable. Ministers are required to reply to the criticisms of the court, whose observations and the replies are printed and the whole is then presented to parliament.
In each chamber an accounts committee is set up to examine the audited accounts. When the bill based upon their reports (loi de reglement) is passed the accounts are closed. No closed ac count has been published for any year later than 1916.
The year 1926 is the first year since the World War in which the closed account shows a balance of surplus on the general budget.
The general budget is in principle a gross budget, including all receipts except those of certain public undertakings, the posts, telegraphs and telephones, the railways, printing office, etc., and such items as cost of sales by auction, surveys and agency fees. It is divided into two parts, general administration and war charges. These are again subdivided as follows:— General administration—(i.) ordinary revenue; (ii.) ordinary expenditure (a) recurrent, (b) non-recurrent; (iii.) extraordinary revenue and expenditure.
War charges—(i.) ordinary revenue; (ii.) ordinary expendi ture (a) recurrent, (b) non-recurrent ; (iii.) extraordinary revenue and expenditure.
Extraordinary expenses in the first part include investments and are so widely construed as to include the cost of building cruisers, while the extraordinary revenue comprises loans and receipts from capital sources, etc. The reparations payments (in fulfilment of the Dawes plan) are regarded as extraordinary expenses in the budget of war charges. The corresponding revenue is derived by transfers from ordinary revenue.
Only net figures are shown in the general budget as regards pub lic undertakings mentioned above. Transfers are made from one budget to another and from one vote to another if the votes are independent. In certain special cases unspent credits for non recurrent and extraordinary expenditure may be carried over to another year.
After the revolution of 1918 a new law of the constitution was enacted on Aug. 11, 1919. This law is incomplete so far as bud getary procedure is concerned. To some extent former practice is still in use, and new standing orders have made some modification, but custom has not yet crystallized into a final shape.
The budget takes the form of a law, which, like all other laws, is voted by the Reichstag alone. The budget must be signed and published by the president of the Reich. It is prepared by the government, and after approval by the cabinet is presented by the minister of finance to the Reichsrat, in which the governments of the states are represented. The Reichsrat may adopt or amend the budget proposals, which are then communicated to the Reichstag with the comments of the cabinet. The Reichstag decides by a ma jority upon any difference between the cabinet and the Reichsrat.
The Reichstag refers the budget to a standing budget committee and may reduce the estimates of expenditure or increase them. But over any increase not proposed by the government the Reichsrat has a veto. Failing agreement the president of the Reich may order a referendum.
So far as revenue is concerned further precautions against hasty legislation are taken. All laws proposed must first be presented to the vote of the Reichsrat, but before new taxes are proposed to the Reichstag the Reichswirtschaftsrat or imperial economic council must also be consulted in advance. This advisory body of experts is non-political. Its duty is to sound a note of warning if financial proposals threaten to react unfavourably upon the economic life of the nation. The Reichsrat has a suspensive veto on new taxes proposed by the Reichstag. If it ultimately rejects such proposals, and if the president does not order a referendum the Reichstag may carry the law by a two-thirds majority over the head of the Reichsrat. No government may remain in office if it has lost the confidence of the Reichstag.
The accounts are kept open till May io, and are then closed upon a cash basis of receipts and expenditure for the financial year. The audit court exercises its control after expenditure has taken place and reports to the minister of finance, who lays the reports and closed accounts before the legislature. The closed accounts for 1925-26 were published on Feb. 3, 1927.
The reparation payments under the Dawes plan (London Agree ment of Aug. 1924) amount to 1,75o million gold marks in 1927 28, and thenceforward 2,500 million yearly, subject to increase on a "prosperity index" based on various factors of national capacity to pay.
Italy.—The financial year begins on July T. Before the end of January, the minister presents to the chamber the estimates pre pared by the various ministers embodied in a budget bill for the ensuing year and providing for any modifications, such as supple mentary credits, proposed for the current financial year. The prin ciples of the unity of the budget and of gross budgeting are ob served, with the exception of an autonomous amortization fund which has been created for the reduction of the war debts to Great Britain and the United States. This fund is credited with the whole of the Italian share of reparation payments. Certain special funds and autonomous undertakings including railways are the subject of separate accounts, appended for information, the gross figures being included in the general budget. A certain elasticity is allowed for excess of expenditure over the authorized grants in specified cases.
There are two categories of budget accounts (a) the authorita tive account, including all the revenue and expenditure legally due in the year, whether or not received within the year ; (b) the ar rears account, comprising all outstanding claims and liabilities. A patrimonial account is also submitted, showing assets and liabilities of the State. Any surplus on the budget accrues to the Treasury and is not carried forward to the next budget.
A giro account, published for information, is designed to dis close "veiled" charges upon the public which would not otherwise be disclosed in the accounts. Examples are the rent of State build ings occupied by the State for official purposes, interest on State securities held by the State, taxes due on State property. In all these cases the State is both debtor and creditor for equal amounts and no cash passes.
The budget bill is laid before the Chamber of Deputies, which elects a budget committee of 36 members. Every deputy may nominate 27 members. Those who receive less than one-eighth of the votes are struck out of the list. The committee usually con sists of ex-ministers or other prominent deputies. It appoints sub committees and reports in writing to the chamber. The result, as in France, is to recast the budget. The powers of the Senate are so restricted that it is claimed that the Senate may only correct material errors due to some oversight in the chamber.
The audit court is peculiar to Italy in so far as it exercises an terior or preventive control, over (i.) acts and decrees entailing expenditure. All these must be registered by the court, which has the right to refuse registration if they are judged to be contrary to law, or, if not, to refer to parliament the question of maintaining them; (ii.) pay vouchers, which must be not only registered but also endorsed by the court ; and (iii.) the issue of Treasury bills. The audit court also exercises posterior control over (i.) receipts, (ii.) cash transactions and (iii.) the closed accounts.
Australia.—The financial year begins on July 1. The budget estimates are presented to the House of Representatives by a speech of the treasurer, and to the Senate on the same day by a speech of another minister; the procedure throughout, as in most of the self governing parts of the empire, follows very closely that of the British House of Commons.
The government receipts and expenditure are shown in three distinct funds (a) consolidated revenue, (b) loan, (c) trust funds.
The first is credited with all cash receipts of real revenue, but not receipts from loans, and debited with all expenditure to be paid out of such revenue. The loan fund is credited with proceeds of loans and debited with expenditure to be met by loans. All proceeds of the sale of property purchased (or of work produced or paid for) out of the loan fund are credited to that fund. The trust funds are those administered by the State outside the annual budget. Such are the invalid and old age pension fund, the interest (Imperial Government) and war pensions funds. The assets of these trust funds are mainly miscellaneous receipts and budgetary grants.
The accounts of these three divisions of government receipts and expenditure are so closely interwoven that it is hardly possible to obtain a proper conspectus of the finances of the Common wealth without considering them all. Any surplus or deficit on the accounts is carried forward to the next year.
As a provisional arrangement, subsidies are at present paid by the central government to the states at the rate of 25/– per head per annum.
India.—The financial year begins on April 1. As this is before the monsoon falls accurate forecast is made more difficult, and the Chamberlain committee proposed that the date should be altered to Oct. 1. The proposal has not been adopted.
The Government of India Act, 1919, introduced various con stitutional changes, one of which makes each provincial govern ment responsible for its own finances. The Indian States are simi larly responsible. So far as finance is concerned the Indian budget must be regarded as a federal budget. Section 25 of the Act re quires that "the estimated annual expenditure and revenue of the governor general in Council shall be laid in the form of a state ment before both chambers of the Indian legislature in each year"; that "no proposal for the appropriation of any revenue or moneys for any purpose shall be made except on the recommenda tion of the governor general"; and that the Government's pro posal for the appropriation of revenue or moneys relating to : (I.) interest and sinking fund charges on loans, (II.) expenditure of which the amount is prescribed by or under any law, (III.) salaries and pensions of persons appointed by or with the approval of His Majesty or by the secretary of state in Council, (IV.) salaries of chief commissioners and judicial commissioners, and (V.) ex penditure classified by the order of the governor general in Coun cil as (a) ecclesiastical, (b) political, (c) defence, shall not be submitted to the vote of the Legislative Assembly unless the gov ernor general otherwise directs. All proposals relating to headings of expenditure not specified above shall be submitted to the vote of the Legislative Assembly in the form of demands for grants. In cases, however, where the assembly refuses or reduces the demands of the Government relative to any matter which the governor general in Council deems essential to the discharge of his responsi bilities, it is open to him to override the decision of the assembly and act as if the grant asked for had been assented to.
The general budget is divided into two parts : (a) revenue, and expenditure charged to revenue (mainly representing current rev enue and expenditure) ; (b) "receipts and disbursements" (repre senting capital transactions). This part of the budget is often called the "Ways and Means Budget." In addition there is a special railway budget from which the net surplus is transferred to the revenue side of the general budget. Only the net receipts from irrigation works are included. With these exceptions the budget is a gross budget.
The budget is presented to both chambers at the some time— to the Legislative Assembly by the financial member, and to the Council of State by the financial secretary. After an interval of a week for reflection a day or two is allotted for a general discus sion in which details are not to be brought forward. Next comes the voting of supplies for which a maximum of 15 days is allowed. The Council of State does not amend the appropriation bill, deal ing with grants, but discusses in detail the finance bill, dealing with revenue. About one half of the expenditure is non-votable or permanent. The executive government of India is responsible, not to the central legislative in India but to the British parliament. And finally the Constitution of 1919 is professedly experimental and transitional. For all these reasons the relations of financial authorities are by no means settled, and the governor general has been obliged in recent years to certify the budget or legalize it by an act of authority without the consent of the legislature.
The accounts, kept on a cash basis, are closed on Oct. 1o. Any surplus on the revenue account is applied to the reduction of debt unless the Government and the legislature otherwise determine.
Great Britain. The detailed figures appear in the annual Finance Accounts. The history of British budgets may be followed in S. Buxton, Finance and Politics, 1786-1855 ; S. Northcote, Twenty Years of Financial Policy, 1842-1861 (1862) ; Sir B. Mallet, British Budgets, 1887-1912 (1913) ; F. W. Hirst, and J. E. Allen, British War Budgets (1914-1924), (1926). For descriptions of the system see H. Higgs, The Financial System of the United Kingdom (1914) ; Sir H. J. Gibson, Fifty years of the Exchequer and Audit Departments Act (1916) ; A. J. V. Durell, Principles and Practice of the System of Control over Parliamentary Grants (1917) ; Willoughby and Lindsay, Financial Administration of the United Kingdom (1917) ; H. Higgs, A Primer of National Finance (1919) ; Harvey Fisk, English Public Finance (1920) ; R. G. Hawtrey, The Exchequer (1921) ; Sir Hilton Young, The System of National Finance (1924) ; G. Locker Lampson, An Outline of the Financial Procedure of the House of Commons (1924) ; J. W. Hills, The Finance of Government (1925).
France. The above-mentioned works of Stourm and Jeze ; P. Leroy Beaulieu, Traite de la Science des Finances (1876) ; Leon Say, Les Finances de la France (1896) ; E. Besson, Le controle des budgets en France et a l'etranger (1899) ; Harvey Fisk, French Public Finance (1922) ; G. Jeze, "Finances of France" in Palgrave's Dictionary of Political Economy (1925).
Germany. Max von Heckel, Das Budget (1898) ; 0. Schwarz, Formelle Finanzverwaltung in Preussen and im Reich (19o7) ; W. Utz, Finanzwissenschaft (1917) ; J. Hatschek, Deutsches and Preussiches Staatsrecht (1923) ; "Finances of Germany," in Palgrave's Dictionary of Political Economy (1926) ; Schulze-Wagner, Reichshaushaltsord nung (1926).
Italy. E. Gagliardi, Il bilancio dello Stato (1908) ; G. Vitagliano, Il contenuto giuridica della legge del bilancio (191o) ; De Cupis, Legge sull amministrazione del patrimonio dello Stato (191o) ; E. Bruni, Contabilita generale dello Stato (1925) .
India. G. F. Shirras, Science of Public Finance (1924), specially detailed in its treatment of Indian financial procedure. (H. HI.) The financial or fiscal year in the United States begins on July I. Until 1921, the United States had no centralized budget. Congress was called upon to vote annually the appropriations necessary to cover the estimates of expenditures of the various departments and independent establishments. Several committees in the two houses of Congress framed the bills, without any co-ordination of effort.
Appropriation Bills.—With the establishment of the bureau of the budget, the House of Representatives centred all of the authority in framing the major appropriation bills in the com mittee on appropriations. This committee is composed of 35 members. The committee is divided into 13 sub-committees of five members each. Each sub-committee frames one of the major appropriation bills, but each bill must be acted upon by the full committee on appropriations before it is reported to the House. Through practice, all of the major appropriation bills originate in, the House. The committee on appropriations has a rule that no appropriation may be considered by it which has not been recommended by the bureau of the budget, and, if considered, may not be increased. Further no official is allowed to oppose a reduction of his estimate before the committee. Hearings are held by the sub-committees and sometimes by the full com mittee, at which the director of the budget and other witnesses, with documents and explanations, may be required to assist the committee. The annual appropriation bills which are framed as the result of the division of the budget into 13 items are for: (I) the agricultural department ; (2) labour department ; (3 ) District of Columbia; (4) executive office and independent of fices, commissions, etc. ; (5) interior department ; (6) legislative branch; (7) navy department; (8) post office department; (9) state department; (I o) treasury department; (I i) war depart ment ; (I 2) commerce department and (I 3) justice department. Deficiency appropriation bills may cover one or more of these divisions.
When the bill has been reported to the House amendments may be made. Upon passage by the House it goes to the Senate, where it is referred to the committee on appropriations and in turn to a sub-committee of that body. Two members of the com mittee of the Senate having particular interest in the department or establishment included in the appropriation sought may sit with the committee in considering the bill there. Any differences between the two houses of Congress are settled by one or the other accepting the bill as passed by the other body, or through conference committees of both houses by which compromises are effected. The appropriation bills generally are larger after passage by the Senate.
Accounting of Funds.—Receipts and expenditures are ac counted for in: (I) a general fund; (2) a loan fund; (3) special accounts, as the post office account; and (4) revolving funds. The general fund embraces all ordinary receipts, including, e.g., proceeds of Government sales and loans (repayment of interest or principal by foreign Governments), and all ordinary expendi tures, including capital expenditures, interest on the debt, re demption of the debt, etc. It is in principle a gross budget and a unified budget. The loan fund accounts for credit operations in connection with the principal of the public debt. Revolving funds are allotted to some departments as working capital. In these cases net expenditure is shown in the budget. At the end of the fiscal year, cash receipts and expenses of the general fund and the loan fund are published, as also accounts of warrants issued but not cashed. If there is a deficit in the receipts, the president is obliged to recommend to Congress new taxation, new loans, etc. A surplus or deficit balance is not carried from one budget to another, but is accounted for in the Treasury cash statement.
State Budgets.—All of the States have made provisions for a budget. In six, California, Louisiana, Maryland, Massachusetts, Nebraska and West Virginia, the procedure is provided for in the State constitution. In Maryland, the plan directs the governor to require estimates from the different divisions of the govern ment and he may revise the same, except those relating to the legislature, judiciary and school system. He submits his estimates in the form of two budgets and two accompanying bills for one year each, for the use of the legislature at its biennial session. The legislature may not increase those relating to the branches of government other than the legislature and judiciary, but may reduce the others with the exception of certain constitutional limitations as to the public school system and also salaries for officers for the terms for which appointed. The Massachusetts budget plan is similar except that the legislature may make increases, subject to the authority of the governor to veto indi vidual items in appropriation bills. The Nebraska budget is alsc similar, except that by a three-fifths vote of both houses the legislature may, without subjecting the item to veto, increase particular provisions. In Louisiana the tax commission is the budget-making authority. The legislature there may not pass an appropriation bill within five days of the end of the session. The governor in California is required to submit a budget plan with a bill. Before the budget bill is enacted, no appropriation bill, unless for legislative expenses, may be passed without the approval of the governor. The governor may reduce or eliminate items, but the legislature by a two-thirds vote may override his action.
Under legislative enactment, a department of finance has been created in Illinois, whose head is appointed by the governor. The legislature may increase the appropriations over his recommenda tions, but under the centralized control which the governor exerts over the non-constitutional officers, a partial executive budget is in effect. Utah has a legislative act similar to the Maryland plan, whereby the legislature will not make increases over the guber natorial recommendations and will not consider any appropriations not so recommended to it. A similar plan in effect in New Mexico also permits the governor and executive and administrative heads to appear and be heard by the legislature. The secretary of State, appointed by the governor, is the budget officer in Penn sylvania. The legislature is not limited in its action on the budget but the governor may veto particular items of appropriation bills. The governors of Vermont and Tennessee also submit budgets to the legislatures. In Wisconsin a board of affairs controls the budget-making. It is composed of the governor as chairman, three of his appointees, the secretary of State, the president pro tern pore of the senate, the speaker of the house and the chairmen of the two legislative finance committees. In the remaining States, such budgets as exist are largely the result of legislative rather than executive supervision. They comprise hearings by legislative committees on appropriations desired by State depart ments, agencies and institutions and submitted by them in indi vidual estimates. New York State also has a budget plan.
Municipal Budgets.—Budget plans also have been adopted by many cities. In New York the responsible municipal heads submit estimates to the city council. This is followed by the adoption by the board of estimate and apportionment, composed of the mayor, controller, president of the city council and the presidents of the five boroughs, of a tentative and then a proposed budget for submission to the city council, after hearings have been held. The council may not increase items but may reduce them, subject to the veto of the mayor, which veto may be over-ridden only by a three-fourths vote.
In Detroit and Philadelphia the head of each department is given a specified sum to spend, along with a uniform classification of accounts.