BUDGET ANALYSIS PROJECTQUEENSLAND STATE, AUSTRALIA

PUBLIC BUDGETING AND RESOURCE MANAGEMENT(SA 6302) MAPPM 2012-13:• CHEN GuanChi “Jerry” 52893803• CHEN Yi “ChenYi” 52870513• HOU RunZe “Ivy” 52774931• LI Dapeng “Zelig” 53952860• LUJAN ANAYA Raul “Alex” 52915639

CITY UNIVERSITY

OF HONG KONG

Introduction: About Queensland

STATE OF AUSTRALIA;

The second LARGEST; The third MOST

POPULATED…

Located NORTHEAST of the country;

Total population: 4’580,700…

IVY & CHENYI

Budget at a Glance

http://www.budget.qld.gov.au/index.php

FOUR PILLAR ECONOMY:

Annual Revenue from Transactions

TAXATION revenue;GRANTS revenue;SALES of goods and

services;INTEREST income;DIVIDEND and INCOME

TAX equivalents, and;

OTHER revenue…

http://www.budget.qld.gov.au/current-budget/at-a-glance/index.php

Annual Expenses from Transactions

EMPLOYEES’ expenses;

SUPPLIES and SERVICES;

SUPERANNUATION expenses;

GRANTS expenses, and;

OTHER expenses…http://www.budget.qld.gov.au/current-budget/at-a-glance/index.php

Financial Aggregates

http://www.budget.qld.gov.au/current-budget/at-a-glance/index.php

About Budget Process

FISCAL YEAR in Australia runs from JULY 1 to JUNE 30, one year to the next one;

WHOLE BUDGETING PROCESS runs from OCTOBER until MAY next year, when Australian Congress approves;

STEPS in budgeting procedure:1. ALL GOVERNMENT must develop and approve budget

STRATEGY based on the State’s fiscal position;

2. ALL GOVERNMENT must develop budgeting PROCESS;

3. ALL GOVERNMENT must UPDATE CBRC on the State’s fiscal position based on forward estimates;

4. AGENCIES must PREPARE and develop their PRIORITIES…

About Budget Process

5. ALL GOVERNMENT must submit their budget priorities;

6. AGENCIES’ portfolio ministers must advocate requests with the CBRC;

7. AGENCIES must prepare allocation decisions and advise outcomes;

8. AGENCIES must update their forward estimates;

9. AGENCIES must prepare, finalize and table all State budget papers;

9. AGENCIES must submit forward estimates to Committee Hearings;

10. ALL GOVERNMENT must consider appropriation bills;

11. AGENCIES must undertake allocation processes…

About Format & Info. Management

Budgeting Period: ANNUAL;Budget classification: Focused mainly on ECONOMIC and

FUNCTIONAL criteria; TWO RELEVANT SECTIONS: Abstract of ECONOMIC (and

fiscal) planning; and REVENUE/ EXPENSE outlook;TWO APPROACHES: Both PROGRAMMING (mainly in

economic planning) and PERFORMANCE (mainly in revenue/ expense outlook) focused formats;

Considers comparisons between LAST YEAR (actual) vs. INCOMING YEARS (incoming estimate and projections), as well as SHIFTING patterns;

Performance information is mostly focused on measuring OUTCOMES…

ALEX

Format: Two Sections/ Approaches

ECONOMIC PLANNING: PROGRAM-FOCUSED,

according to:

1. Fiscal STRATEGIES;

2. Previous year OUTCOME;

3. ANALYSIS of conditions and economic outlook;

4. FORECAST and projections for incoming year;

5. PERFORMANCE summary;

6. Prospects and CHALLENGES...

REVENUE/ EXPENSE:PERFORMANCE-FOCUSED,

according to:

1. COMPARISON in revenue outcomes and estimates;

2. CHANGES in revenue behavior for last 2 years;

3. COMPARISON in efficiency vs. operation expenses;

4. DETAILS of revenue and expense: charts, statements and balance sheets…

Changes in Budget Format?

Format has (substantially) kept UNCHANGED within the last 10 YEARS (since 2001-02);

NOT NECESSARY TO CHANGE substantially the format, for it seems transparent, reliable, understandable;

UNLIKELY the State government would have the need or CAPACITY to change format, since the CURRENT one seems FUNCTIONAL, however it has improved in adding references about programs implemented and continuously monitoring outcomes;

Anyway, the format has gradually IMPROVED in measuring OUTCOMES (including and comparing SUCCESS INDICATORS within the last 5 YEARS)…

Major Funds and Appropriations

Relevant FUNDING concepts which represent most of public expenditure in the State:

1. OPERATING expenses: Health (24.8%) and Education (22%); Transport and Comms. (14%);

2. GRANTS on Welfare (13%): Schools (A$2.28B), community services (A$1.83B) and NGO’s (A$1.80B);

Major APPROPRIATIONS to public dependencies:1. HEALTH : From A$10.55B (2010-11) to A$11.04B (2011-12);

2. EDUCATION: From A$7.58B (2010-11) to A$8.12B (2011-12);

3. TRANSPORT: From A$4.05B (2010-11) to A$4.50B (2011-12);

4. COMMUNITY: From A$3.98B (2010-11) to A$4.48B (2011-12).

Forecasts and Info. Handling

Revenue FORECASTING carried out by STATE TREASURY OFFICE, in charge of gathering data, study the public finances and publish the yearly reports regarding the actual performance of finances balance, on the official website of State government;

FORECASTS for INCOMING YEAR (fiscal) are included in BOTH economic planning, and revenue/ expense outlook SECTIONS;

FURTHER forecasts (PROJECTIONS) are also considered: extensive to UP TO THREE YEARS in advance;

Forecasts used to CALCULATE: operating balance and cash flow, revenue collections and liabilities, public debt, foreign trade, wage prices, GDP growth; departmental efficiency…

Format Strengths and Weaknesses

As communication tool, document seems TRANSPARENT and DESCRIPTIVE: regarding performance in public finances; challenges and conditions the government has to face; as well for outcomes achieved yearly;

Document content is EXTENSIVE, in fact TOO LONG;On the other hand, the PRACTICAL EFFECTIVENESS of the

format can be questioned, considering the budget seems to be TOO OPTIMISTIC (very much focused on positive outcomes and expectations) but doing little reference to shortcomings and downgrades;

NEEDS to be more CLEAR on justifications and specific measures to be taken in relation to planned PROGRAMS…

Effective Control/ Evaluation?

“MOODY’S DOWNGRADE JUSTIFIES CUTS…” (26/11/12)http://finance.ninemsn.com.au/newsbusiness/aap/8570470/moodys-downgrades-qld-outlook

Downgrade from Aa1: STABLE to Aa1: NEGATIVE;Rise in INFRASTRUCTURE costs;Rise in PUBLIC DEBT;Lack of EXPENDITURE DISCIPLINE (uncertainty in tightness

for appropriations and discresion control);Economic RECOVERY PACKAGES proposed after 2011

floods (size of France and Germany, 75% of State’s area as disaster area) seemed too optimistic;

Public finance must RETURN TO SURPLUS BY 2014-15 (deteriorating financial performance since 2007-08)…

Total Expenditure 2010-11 (A$ Billion)

Annual Leave Central Scheme; Total Expenditure

2010-2011(Billion);

1.27; 29%

Superannuation Benefit payments; Total Expenditure

2010-2011(Billion);

1.14; 26%

Borrowing costs; Total Expenditure

2010-2011(Billion);

0.93; 21%

Long service leave reim-

bursements; To-tal Expenditure

2010-2011(Billion);

0.315; 7%

Grants & sub-sidies; Total Expenditure

2010-2011(Billion);

0.221; 5%

All other ex-penses; Total Expenditure

2010-2011(Billion);

0.185; 4%

Supplies & services; Total Expenditure 2010-

2011(Billion); 0.159; 4%

Benefit payments; Total Ex-penditure 2010-2011(Billion);

0.124; 3%

Annual Leave Central Scheme

Superannuation Bene-fit payments

Borrowing costs

Long service leave re-imbursements

Grants & subsidies

All other expenses

Supplies & services

Benefit payments

ZELIG

Total Expenditure 2011-12 (A$ Billion)

Annual Leave Central; Total Expenditure

2011-2012(Billion);

1.43; 22%Superannuation

Benefit Payments; Total Expenditure

2011-2012(Billion);

2.12; 33%

Borrowing costs; Total Expenditure

2011-2012(Billion);

1.43; 22%

Long service leave reim-

bursements; To-tal Expenditure

2011-2012(Billion); 0.4;

6%

Grants & Subsi-dies; Total Ex-

penditure 2011-2012(Billion);

0.39; 6%

All other ex-penses; Total Expenditure

2011-2012(Billion); 0.2;

3%

Supplies & services; Total Expenditure 2011-

2012(Billion); 0.16; 3%

Benefit payments ; Total Expenditure 2011-

2012(Billion); 0.24; 4%

Annual Leave Central

Superannuation Benefit Payments

Borrowing costs

Long service leave re-imbursements

Grants & Subsidies

All other expenses

Supplies & services

Benefit payments

Expenses Comparison: Two Years

2010-2011; Ex-pense; 4,363,451

2011-2012; Ex-pense; 6,368,034

2010-20112011-2012

Expenses Comparison: By Detail

Expenditure Trend

2007-2008

Total Revenue 2011-12 (A$ Billion)

Commonwealth grants; Total

Revenue; 19587340; 51%

Taxes,fees,fines&levies; Total Rev-enue; 9358255;

24%

Royalties,property income&other terri-torial revenue; Total Revenue; 2977567;

8%

Interest; Total Revenue; 33781;

0%

Administered item revenue; Total

Revenue; 6363548; 17%

Other revenue; Total Revenue; 132462; 0%

Commonwealth grants

Taxes,fees,fines&levies

Royalties,property in-come&other territorial revenue

Interest

Administered item revenue

Other revenue

Total Revenue: By Detail

Revenue Trend

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

Revenue Trend

Duties

Payroll tax

Land tax

Other tax

Fuel subsidy

First home owner grant

Queensland huilding boost

Royalties

Conclusion: SWOT Analysis

JERRY

OPPORTUNITIES

STRENGTHS

WEAKNESSES

THREATS

Conclusion: Final Recommendations

Make an effort and implement measures enough to ADOPT A SURPLUS POLICY:

Creating MORE JOBS by altering the style of economic INCREASE;

MOVE part of RESOURCE-consuming and ENVIRONMENT-affecting INDUSTRIES to other developing countries for cheaper natural resources and labor resources;

Keeping cutting down governmental expenditure by TIGHTENING APPROPRIATIONS and restricting discresion CONTROL;

Explore NEW FORMATS for budgeting, try to be a bit of LESS OPTIMISTIC…

THANK YOU FOR YOUR ATTENTION!

CITY U MAPPM 2012/ 13