Determinantes dos Desvios Orçamentais nos Municípios Portugueses

Abstract

In Portugal, a new Local Finance Law was adopted in 2013. The objective was to involve local governments in the compliance with the supranational fiscal rules of Stability and Growth Pact and with the national budgetary targets set under the Financial Assistance Program. Using panel data models, we investigate the main economic, political and institutional determinants of slippages in total revenue, total expenditure and local government budget, for 278 municipalities of Portugal in the 2010-2012 period. Regarding economic determinants, we conclude that optimistic revenue forecasts, expenditure inertia in the implementation stage, own-source revenues deviations and deficits at the date of forecast publication worsen the budgetary slippages. Most political variables are not significant, but the results suggest that budgetary slippages are higher in 2011, the year of legislative elections, because local governments raise their expenditures. Non-compliance of principles and fiscal rules implies greater budgetary slippages. Finally, we conclude that in municipalities with less than ten thousand inhabitants the largest revenue forecast errors are outweighed by an appropriate expenditure implementation. These results are important, given the need to improve the budgetary process and to ensure compliance of national budgetary targets by all levels of public administration.