Administrative Discretion: Its Use in Budgetary Analysis

Article excerpt


The foundation of this research applies the following definition of discretion: the use of individual judgment to make decisions. The literature surrounding budgetary analysis within the public budgetary process, particularly the first two stages, does not explicitly discuss discretion. Therefore, using the definition above coupled with the limited research surrounding discretion, we demonstrate how agencies, budget offices, executives, and legislative bodies use discretion when analyzing the budget. Overall, agencies and departments maintain discretion when they are assertive, politically astute, and when the budget format promotes flexibility. Effective communication and executive support are two factors that seem to result in agency and department budget growth. Agencies are more likely to witness spending decreases, however, when the legislature is dissatisfied with agency performance. In the end, the presence of politics overshadows, and hence limits, discretion.


Discretion is easy to define: the use of individual judgment to make decisions. Discretion is difficult to research and measure, however, especially when analyzing the budgetary process for the public sector. The literature surrounding the budgetary process does not explicitly discuss discretion.

Some research makes a distinction between discretionary and mandatory budgets. Other research explains the successes (and failures) of the budget advocates and guardians, but discretion is not at the forefront. Little research explores the idea of individual discretion in the decision making process. Therefore, using the definition coupled with the limited research surrounding discretion, we hope to demonstrate how agencies, budget offices, executives, and legislative bodies use discretion in the budgeting process. We believe it is important to organize the existing literature in such a way that allows discretion to be at the forefront of the discussion. The first two phases of the budgeting processpreparation (and submission) and approval are the focus of this research. The intention here is not to suggest that the execution and auditing stages are without a decision making process or even discretion, they have both, however, each is limited compared to the first two stages where decision making focuses on budgetary analysis.

To do this, we begin by providing a general overview of the public budgetary process. Next, a review of the literature researching, implicitly and explicitly, the use of discretion is discussed. Finally, conclusions are drawn about the use of discretion in the budgetary process.


In the most simplistic sense, the budget process consists of four stages: preparation and submission, approval, execution, and audit. In a given fiscal year, all four stages are occurring simultaneously. For example, say a community's fiscal year operates from July 1 to June 30 and currently they are approaching the end of fiscal year three (FY3); that is they are executing the approved budget for FY3. At the same time, fiscal year four's (FY4) budget is in the approval stage; fiscal year five (FY5) is in the very beginnings of the preparation phase, and fiscal year two is in the process of being audited, if not complete. Figure 1 demonstrates the phases and overlap of the budget cycle:

Preparation begins with the executive-mayor, governor, president-and his/her budget team. This team conducts a budgetary analysis using fiscal and economic data, demographic information, program needs and assessments, and public welfare information to predict or forecast future expenditures and revenues. For example, in the beginning of the preparation stage, the executive asks the agency heads to assess program needs. At the same time, the executive's team assesses the financial stability of the economy, the current needs of the people, and the consequences of action or inaction. Based on economic projections and personal or political philosophies, the executive issues budget guidelines to the agencies and departments. …


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