Research On The Transformation Of China's Public Budget System

With the completion of the revision of the law of budgeting,the comprehensive implementation of performance management which was proposed in the report of the 19 th National Congress of the Communist Party of China and the introduction of policy of "the comprehensive implementation of budget performance management" as well as other important documents,China is rapidly moving towards the era of performance,and improving the fiscal performance is the key aspect of it.In this context,the pursuit of establishing a performance budget system is increasingly prevailing.However,unlike the mainstream view,this paper argues:considering the inherent defects of input budget cannot be rectified within the framework of the system itself and far from turning to strictly performance budget,such as the output budget or the outcome budget,in the process of promoting to performance budget from the input budget,China needs to have a transition towards the program budget,in order to truly achieve results of institutionalization and reduce the risk of failure.At the same time,the program budget system can bring a number of significant advantages to support performance-oriented budget reform,which include providing the most appropriate micro-basis for performance evaluation,supporting civic participation and transparency in the budget process,enhancing budget review by legislatures and improving the delivery of public services.According to the different basis of resource allocation,the budget system can be divided into input budget,program budget and performance budget.Input budget is a budget system,which is using organization and line-items as the basis for resource allocation,aims to track "money was spent by who and where " and establishes detailed beforehand expenditure control,has the advantages of facilitating compliance control,small information load,but its neglect of performance,fuzzy government's priority,cause the inner defects such as spending on expansion is also very prominent.When the public budget system mainly emphasizes compliant control,the input budget aimed at regulating the "right behavior" of various budget subjects is more appropriate.However,when people focus not only on the "right behavior" but also on whether the expenditure has a "satisfactory result",deficiencies such as the neglect of performance in the input budget will be highlighted,which requires the shift to aperformance-oriented budget system to completely correct the above defects.Especially under the current background of comprehensively deepening reform and comprehensively implementing performance management,it is particularly important to promote the transformation of China's public budget system from input orientation to performance orientation.Both program budget and performance budget belong to performance-oriented budgeting systems,but their resource allocation basements and implementation conditions are different.Strict performance budget,which usually includes output budget and outcome budget,requires budgeting on the basis of specific outputs and linking to specific outcomes,is complex and requires a high threshold for implementation,mainly including: detailed output classification system,strict accrual accounting and cost accounting procedures which are based on outputs,output pricing method,the accountability on base of outputs,clear distinction of role and responsibility between program managers and policy makers,performance contract system on base of outputs,as well as the relevant administrative and technical abilities and so on.At present,only a few developed countries,such as New Zealand and Australia,have implemented such budget systems,and it is difficult for China to fully meet these conditions.Compared with performance budgeting,program budgeting reduces the complexity of reform and the threshold for implementation,where program refers to the collection of a series of activities that aim to the same outcome goal.As a kind of budget system,which is based on the program and links to the outcomes,program budget introduces a performance orientation method into the budget process,thereby avoids the weakness of input budget such as lack of performance.Compared with the performance budget,the expenditure arrangement in the program budget is only linked to the activities connecting the program objectives,rather than to specific outputs and specific outcomes,which significantly reduces the threshold for implementation.Therefore,based on China's reform goal and current reality,the possible direction of public budget system transformation at the present stage should be from input budget to program budget.The experience of global budget reform shows that the reform from input budget to strictly performance budget generally requires the transition of program budget to create a budget structure composed of program,sub-program and activities,guided by the objectives of program.Program budget transfers the policy objectives into clearly definedprogram goals,and designs all kinds of activities,accounts the cost of activities,designing performance indicators,planning capital expenditures and current expenditures in order to achieve a reasonable proportion relationship,forming a program structure which covers the program objectives,activities,budget resources and the performance indicators,and focusing on government policy and all kinds of performance information in the budget process,laying a solid foundation to solve the disconnection between budget management and performance management,improve the operational efficiency and the allocation efficiency of budget.In addition,program budget also provides the most appropriate way to integrate the project expenditure and basic expenditure in the department budget.The program budget is different from the project expenditure budget,which separates the internal connection between expenditure allocation and performance objectives from the basic expenditure budget.Program budget eliminates this defect by integrating all kinds of expenditures and connecting with the program objectives.International practices,including that of many developing countries,had shown that program budget provides feasible,mature and effective management tools for managing the fiscal performance,and accumulates experience for subsequent implementation of higher-level budget reforms.With the treatment of program as a basic unit of the allocation of budget and performance management,transferring the micro-basis of the allocation of budget from the organization and items to program,carrying out the performance evaluation,improving the efforts of the fiscal performance will have the solid foundation,and public expenditure management can be shifted from "how much" to "how good".Only by cultivating good administrative and technical abilities under the program budget,can we pave the way for the transformation to the higher level of budget reform,such as strict performance budget.Therefore,this paper chooses the transformation from input budget to program budget as the content of the research,including six chapters:First chapter introduces the background and significance,research ideas and methods,the core idea is: under the background of the implementation of performance management,China's current preferred orientation in the transformation of public budget should be from the input budget to program budget,taking the program as a "micro basis" of budget management and the basic unit of the allocation of budget resources.In the literature review section,the literature related to this study is reviewed,and two weaknesses in the existing literature areproposed.Firstly,the research on the transformation of China's public budget system is rarely focused on the theme of "program budget".Secondly,the literature on program budget does not focus on the "Chinese background",which interprets how to introduce and implement program budget under the budget environment of China.The second chapter expounds the definition and characteristics of program budget,as well as basic elements,development process and theoretical basis,analyzes the difference between program budget and input budget as well as performance budget,and concludes the importance and necessity of transition to program budget.The third chapter mainly studies the basic content and operation process of program budget.From the perspective of operation,the basic content of program budget includes four elements: program objectives,program structure,program performance and management information system,which also constitute the foundation of program management.The operational process of program budget includes four steps: budget preparation,budget review,budget implementation and budget evaluation.The fourth chapter mainly analyzes the international experience and lessons of program budget and its enlightenment to China.At present,most OECD countries and some developing countries have turned to the program budget system or even the strict performance budget system.The reform progress and implementation effect of different countries are different,and experience and lessons coexist.This chapter summarizes the program budget reform of three typical countries,such as France,South Korea and Malaysia,and focuses on studying the experience,lessons and enlightenment of existing cases,in order to provide reference for China's next reform.The fifth chapter focuses on the integration of expenditures in the program budget.In order to promote performance-oriented budget management objectives,it is essential to realize the integration of capital expenditure and current expenditure under a specific program.There is no logical correspondence between the classification of "project expenditure" and "basic expenditure" in the current budget system,and it reflects the allocation of expenditure based on purpose,thus separating the internal relationship between public expenditure and performance objectives.The separation of expenditure decision-making procedures and the absence of relevant coordination mechanisms leads to the bias against current expenditure,the neglect of costs,the damage to financial sustainability and other problems,which furtherhinder the realization of performance objectives.Only under the program budget system,capital expenditure in accordance with the current expenditure,and form a reasonable proportion relations between above two expenditure,and establish the unified decision making but separate reporting and reviewing procedures,as well as the effective coordination mechanism between internal and departments,the good performance orientation can be formed,which is the meaning of program budget.Based on the international experience and China's national conditions,the sixth chapter identifies the basic strategies,four key aspects and relevant suggestions for establishing and implementing the program budget.The reform of program budget involves a major transformation of the public budget system,which should follow the strategy of "first experiment,then expansion,first easy,then difficult" and promote reform at different levels,areas and stages.On this basis,key aspects of the reform should be carefully planned and implemented,including the establishment of effective program management system,introducing program classification system,improving the relevant administrative and technical abilities and gradually establishing relevant legal framework,access to senior politician's strong support,strengthening the supervision of legislature.The main innovations of this study include:Firstly,it studies and demonstrates that the transition from input budget to program budget is the focus and priority of the current public budget reform in China,and the program budget is regarded as the "bridge" between input budget and performance budget.This provides a new idea and feasible path for public budget reform in China,which has certain practical significance.Secondly,this paper sorts out the theoretical basis,basic content,operation process and international experience and lessons of program budget,and put forward the reform strategy,sequence and key aspects of China's transition to program budget system,which to some extent fills the research gap of domestic program budget.Thirdly,this paper studies and demonstrates the advantages of program budget for expenditure integration.Current project expenditure and basic expenditure in the budget system conflicts with a performance orientation of classification,separation mechanism of expenditure decision-making procedures and responsibilities also interfere with the implementation of the performance objective,which need under the program budget system,unifying the capital expenditure and current expenditures according to the program objective,which is crucial to the performance orientation of establishing budget process.Deficiencies of this study include:Firstly,there are few studies and literature on program budget reform in China,while many foreign countries had implemented program budget,it is difficult to collect all information in relevant countries.Therefore,this paper has the problem that the collection of research data is not comprehensive enough.Secondly,due to no practical case about program budget in China,this study mainly focuses on qualitative research and comparative analysis,and lacks of empirical research and case study.Thirdly,based on the reform experiences and lessons from foreign countries and the actual situation of China at the present stage,suggestions on program budget reform which are put forward in this study still lack of support from the practical level as well as need to be further tested and demonstrated in the reform pilot process.