Czech Republic

II - Changes to the Budgetary Process

II       Changes to the budgetary process  

Budgetary process   
Describe the main characteristics of the budgetary process (cycle, actors, instruments, etc.) in the Czech Republic.

This and the two subsequent questions will be answered with regard to the current legislative state. That means that the Fiscal Constitution Bill and its draft implementing laws will not be taken into account (there is a little chance that they will be adopted in the current version or that they will be adopted anytime soon).

With a draft of annual budget bill, the Government prepares medium-term expenditures frameworks. The Chamber of Deputies of the Parliament issues a resolution on the medium-term expenditures frameworks, where the expenditures for the two years following the upcoming budgetary year are set (that is a draft law of annual budget bill for 2014 will be accompanied with the medium-term expenditures frameworks for 2015 and 2016). The Chamber of Deputies consents to the expenditures for those two years following an annual budget by single amounts in the form of a regulation. These expenditures limits are binding for the preparation of the next annual budget. The medium-term expenditures frameworks are based on Government political programme – that is they work with a scenario that the Government policies for three upcoming years will be implemented.

A draft of annual budget bill (for central government) is prepared by the Ministry of Finance (MF) in cooperation with administrators of individual chapters of the budget, territorial self-governments, associations of municipalities, Regional Councils of Cohesion Regions and state funds.[1] Regions and the capital Prague submit data for municipalities upon request of MF within 30 days. Other legal and physical persons submit their requests for the state budget by April 30 of a current year.[2]

Preliminary results of macroeconomic forecasts are published in January and March of a current year. On their basis medium-term expenditure frameworks are prepared and updated. MF submits to the Government a preliminary draft of medium-term expenditures frameworks by April 15 of a current year; the Government discusses the draft and adopts changes by April 30 of a current year. In April, the Office of the Government prepares and submits the Convergence Programme and National Reform Programme to the Commission and the Council. MF subsequently prepares a draft of revenues and expenditures structured according to individual chapters for the purposes of annual budget; single amounts of medium-term expenditures frameworks for the purposes of the draft Chamber of Deputies resolution; draft revenues and expenditures of state budget and state funds for the purposes of the draft medium-term expenditures frameworks. MF submits these drafts to the Government by May 31 of a current year and the Government discusses the drafts and adopts changes by June 20 of a current year. MF announces the amounts (expenditures and revenues) and other binding numerical characteristics to the administrators of individual chapters of the central government budget by June 30 of a current year. The administrators of individual chapters (ministries and other central institutions of central government such as the Office of the Government, state security agencies, the Energy Regulation Office, competition authority, etc.) act accordingly towards organizations and state funds under their supervision. Based on these binding numerical characteristics, the administrators of individual chapters of the central government budget prepare draft budgets of their chapters and draft medium-term outlook and submit the drafts to MF by July 31 of a current year. MF prepares and submits to the Government draft annual budget and draft medium-term expenditures frameworks by August 31 of a current year.[3]

Meanwhile, during July, the Ministry of Finance evaluates the recommendations of the Council in reaction to the Convergence Programme in line with the Government approved limits on budget expenditures and revenues. In August, the Ministry preliminary incorporates the recommendations into the draft budget, so that the Government may discuss and approve a draft budget bill including the expenditures frameworks and medium-term outlook. At this time the Government and Ministry of Finance are given an opportunity to react on the Council recommendations, whether they are beneficial and acceptable. Subsequently, the Ministry of Finance works with the recommendations in detail, assesses their feasibility, and incorporates them into a draft budget bill in September.[4]

The Government shall submit annual budget bill and draft medium-term expenditures frameworks to the Chamber of Deputies of the Parliament three months before the start of a new budgetary year; that is by September 30 of a current year. The Chamber of Deputies is the only chamber of the Parliament that discusses and passes annual budget bill. Albeit in ordinary legislative procedure, the Senate does not have any competences over annual budget bill. Also, the President lacks, in comparison with ordinary legislative procedure, a competence to return annual budget bill. Three readings take place. The President of the chamber assigns budget bill to the Budgetary Committee. In the first reading, the Minister of Finance presents the budget. Only the overall revenues and expenditures, deficit and its financing, and relationship to territorial self-governments’ budgets (basic characteristics) are discussed. The Chamber of Deputies may adopt changes to the basic characteristics and set the deadline (20-30 days) for the Government to submit a revised budget bill. If basic characteristics are agreed to, they cannot be changed in the subsequent readings. Budget bill is assigned to competent Committees, which adopt their resolutions (after requesting an opinion of the competent administrator of the budgetary chapter) and submit them to the Chamber. The resolution may be accompanied by an opponent report. The Budgetary Committee may react to any part of the budget bill, while other Committees acts only within their specialization. In the second reading, Committees’ resolutions are discussed and amendments to the budget bill may be submitted. In the third reading, only technical, grammatical, and similar changes can be made. However, a proposal to repeat the second reading is admissible. All proposals from the second (content based) and third (technical) readings are voted individually and subsequently a vote on the amended budget bill takes place. The law on annual budget is published in the State Gazette. If the law on annual budget is not adopted, provisional budget procedure is activated – MF prepares indicators of provisional budget in cooperation with administrators of individual chapters. The administrators then prepare monthly budgets in the sphere of their competences. The maximum amount of expenditures for each month cannot surpass one twelfth of the overall expenditures of the previous budgetary year.[5]

The Government prepares and submits to the Chamber of Deputies a mid-year report on the performance of economy and observance of the state budget and an evaluation of the observance of territorial self-governments’ budgets, associations of municipalities, Regional Councils of Cohesion Regions, and the development of state assets, state guarantees, state debt, including their detailed analysis and outlook on observation of the budget in the second half of budgetary year, and in case of deviation from the agreed budget, an information on steps taken to ensure stability of budget management. MF surveys closely budgetary performance and informs the Government about it in the first and third quarters; the Government submits a report to the Budgetary Committee of the Chamber of Deputies the month following first and third quarters. The mid-year report and quarterly reports are published. All the participants in central government budget must submit data for these reports. Failure to do so results in suspension of budgetary funds.[6]

After the end of the budget year, MF prepares a draft central government final account, which is discussed by the Government and submitted to the Chamber of Deputies of the Parliament by April 30. The Chamber issues a resolution on the central government final account. It also decides on the financing of deficit or use of surplus in case these differ from the agreed budget.[7]

General change         
How has the budgetary process changed since the beginning of the financial/Eurozone crisis?

The timeline of a budget preparation changed (the first phase) with the introduction of the European Semester (see question VIII.8) and preparation and observance of medium-term expenditures framework was detailed.

Institutional change         
What institutional changes are brought about by the changes in the budgetary process, e.g. relating to competences of parliament, government, the judiciary and independent advisory bodies?

No substantial changes in the competences of central government institutions were made in reaction to the Euro-crisis. Some changes had been introduced before or independently of the Euro-crisis legislation (such as binding resolution of the Chamber of Deputies of Parliament on medium-term expenditures framework), other changes have been drafted (the Fiscal Constitution Bill and its implementing laws – see further).

Change of time-line
How has the time-line of the budgetary cycle changed as a result of the implementation of Euro-crisis law?

See question VIII.8.

What other information is relevant with regard to the Czech Republic and changes to the budgetary process?

Not applicable            .

[1] Sec. 8 of the Law No. 218/2000 Coll. on Budgetary Law as amended.

[2] Sec. 2 of the by-law of the Ministry of Finance of the Czech Republic No. 133/2013 Coll. setting the extent and structure of data for preparation of draft law on annual budget and draft medium-term outlook of state budget and the deadlines for submissions.

[3] Secs. 8, 8a, and 8b of the Law No. 218/2000 Coll. on Budgetary Law as amended.

[4] See “Minutes from the 12th session of the Budgetary Committee of the Chamber of Deputies of the Parliament, March 1 and 3, 2011”, p. 9.

[5] Secs. 101-106 of the Law 90/1995 Coll. as amended on the Rules of Procedure of the Chamber of Deputies of the Parliament.

[6] Sec. 20 of the Law No. 218/2000 Coll. on Budgetary Law as amended.

[7] Sec. 30 of the Law No. 218/2000 Coll. on Budgetary Law as amended.