Describe the main characteristics of the budgetary process (cycle, actors, instruments, etc.) in Slovakia.
The process starts with the Committee for Macroeconomic Forecasts and the Committee for Tax Forecasts, which prepare a macroeconomic and tax reports. By February 15, the Ministry has necessary information for preparing a budgetary framework – a macroeconomic forecast, an overall volume of tax and non-tax revenues and fees (a tax forecast), and determination of a share of deficit/surplus on GDP. Based on that the Ministry of Finance prepares a budgetary framework for upcoming three years alongside the Stability Programme and National Reform Programme usually by the end of March. The budgetary framework includes a medium-term expenditures framework. However, the expenditure ceilings are binding only for the first budgetary year of such three-year budgetary framework and not for the two subsequent years, something that is criticized by the Council for Budget Responsibility.
The Ministry submits the budgetary framework to the Government by April 15. The budgetary framework includes the information on the share of deficit or surplus on GDP. The Government approves the budgetary framework and the Ministry prepares an outline of expenditures and revenues ceilings for individual chapters of the state budget and for budgets of other subjects of the general government’s budget by the end of April. By the end of May, the Ministry prepares an analysis of expenditures and revenues ceilings.
Meanwhile, the Government submits the Stability programme and NRP to the Parliament for approval and sends them to the European Commission by the end of April. Until June 30, the Ministry consults the budgetary works with the subjects of the general government’s budget. On July 1, the Ministry incorporates updated macroeconomic forecast and expected tax and non-tax revenues and fees into its preparation of a draft budget (the Committee for Macroeconomic Forecasts and the Committee for Tax Forecasts shall submit their respective forecasts by June 30). At this time, the Ministry receives Commission’s recommendations approved by the Council and incorporates them into the preparation of a draft budget (this is not regulated by national budgetary rules).
The draft budget must be submitted to the Government by August 15. The deadline of August 15 may be extended if a new Government has been appointed meanwhile, by 60 days since the presentation of a Government program in the Parliament (if this happens before April 15). The Government cannot include such changes that would increase the share of deficit on GDP. The Ministry includes changes and finalizes the draft budget. The Government decides on the draft budget usually by Sept. 30 and submits it to the Parliament by Oct. 15, if not decided otherwise. The Supreme Audit Office submits its report on the draft budget to the Parliament. By the end of December, the budget shall be adopted in the form of a statute by the Parliament and published in the official Collection of Laws.
The cycle is concluded with a State Closing Account, that is prepared by the Ministry of Finance, approved by the Government, and submitted to the Parliament for approval by April 30 of the year following the budgetary year which the report is concerned with. The Government approves the State Closing Account and submits it to the Parliament and the Supreme Audit Office by May 20. The Parliament decides on the use of budgetary surplus if this is the case. The Ministry publishes the State Closing Account on its website within ten days after being approved by the Parliament. By Oct. 3, the Ministry of Finance prepares and submits an Annual Consolidated Report for a previous budgetary year to the Government and the Government submits the report to the Parliament by Nov. 20 for information. The Ministry publishes the Annual Consolidated Report on its website within ten days after being discussed by the Parliament.
Two additional dates are important, although they are not part of the budgetary process. By April 30, the Council for Budget Responsibility publishes its report on long-term sustainability and by Aug. 31, the Council for Budget Responsibility submits its report evaluating the observance of the rules on fiscal responsibility and fiscal transparency in the preceding budgetary year to the Parliament for discussion.
How has the budgetary process changed since the beginning of the financial/Eurozone crisis?
The changes were exhaustively covered in the previous sections of this report. Here, I summarize the main changes:
– New deadlines and reports:
o Specific deadlines were introduced (April 15 for budgetary framework and August 15 for draft budget)
o Annual Consolidated Report was introduced (prepared annually on Oct. 3 for a previous budgetary year)
– Budget structure:
o The upper ceiling on public expenditures has been incorporated in the budgetary rules. It represents an instrument to actively manage the general government balance with a view to ensuring its long-term sustainability. Unlike the debt rule, the mechanisms of which are triggered only if a significant deviation from fiscal position occurs, the expenditure ceilings constitute operational instruments linked to the consolidation targets and the plan for improving the indicator of long-term sustainability of public finances.
o The institute of public expenditure ceiling is relevant especially within the correction mechanism that is triggered in the event of a significant observed deviation from the MTO; as it is explained in the answer to question VII.7, this correction mechanism may require some immediate changes into an ongoing budgetary process
o Draft budget includes updated information on the expectations on a current budget and realization of budgets for two previous years
o Various changes were introduced into accounting to comply with revised ESA
o New indicators and definitions were introduced – e.g. national net welfare, structural primary deficit, implicit and conditional liabilities, indicator of long-term sustainability
– Obligations of public authorities and other subjects involved in the budgetary process
o Information and data necessary for budget preparation shall be submitted to the Ministry without compensation
o New system of collecting data and information is introduced for territorial self-governments – electronic submission through a specialized system
– Introduction of debt brakes affects an ongoing budgetary process when upper two ceilings are surpassed (see more in the answer to question IX.4)
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?
The most significant change is the introduction of an independent Council for Budget Responsibility and strengthening of the independence of two forecasts committees – Committee for Macroeconomic Forecasts and the Committee for Tax Forecasts, which form together an Institute for Financial Policy, an analytical unit within the structure of the Ministry of Finance. The Council for Budget Responsibility also set up an advisory committee for methodology. The Parliament gained a new competence to elect members of the Council for Budget Responsibility suggested by the Government, the President of Slovakia, and the Governor of the central bank (one each). All public entities shall prepare their annual budgets for a period of at least three years and publish information on their budgets within 60 days after a budgetary year is concluded. For the consequences of the introduction of debt brakes for the competences of the Government, Parliament, and territorial self-governments in the extent they affect the budgetary process, see the answer to question IX.4; and for new obligations and role of the Ministry of Finance, the Government, the Parliament, and the Council for Budget Responsibility within the correction mechanism in the event of a significant observed deviation from the MTO see the answer to question VII.7. New competences are also introduced with the new instrument of Annual Consolidated Report prepared by the Ministry of Finance, approved by the Government, and given for information to the Parliament. Finally, the entrenchment of fiscal rules in a constitutional law means that courts, and especially the Constitutional Court, may within existing procedures (abstract review; less probably concrete review) examine a compliance of statutes (for instance a budget act) with the Fiscal Responsibility Constitutional Act.
Change of time-line
How has the time-line of the budgetary cycle changed as a result of the implementation of Euro-crisis law?
For details see the answers to question VII.8. The timeline was more or less the same before the Eurocrisis law. The change consists in setting legally binding deadlines and a new obligation for the Ministry to prepare an Annual Consolidated Report, for which a deadline was set as well:
April 15 – The Ministry of Finance submits a budgetary framework for three upcoming years to the Government
August 15 – The Ministry of Finance submits a draft budget to the Government
Oct. 3 – The Ministry of Finance submits an Annual Consolidated Report for a previous budgetary year to the Government and the Government submits the report to the Parliament by Nov. 20 for information.
What other information is relevant with regard to Slovakia and changes to the budgetary process?
The Law No. 564/2004 Col., on budgetary assignment of income taxes to territorial self-governments was adjusted as a part of a deal between the general government and territorial self-governments on inclusion of territorial self-governments into the Fiscal Responsibility Constitutional Act and their participation in a fiscal consolidation. One of the results was that the exercise of original competences continues to be funded based on a share on the income tax, instead of a tax mix. As part of the effort of fiscal consolidation, the share was decreased from 93,8% to 87,3%. The second part of the consolidation effort was an introduction of debt brakes for territorial self-governments. The Fiscal Responsibility Constitutional Act subjected territorial self-governments to similar fiscal rules applied to the general government. One of the new elements is that municipalities and self-governing regions will be sanctioned if their debt exceeds 60% of their actual current revenues in the previous fiscal year.
The Fiscal Responsibility Constitutional Act in the part concerning the territorial self-governments is implemented through a rather complex amendment to the Law No. 583/2004 Coll., on budgetary rules for territorial self-governments, in force as of January 1, 2014. The amendment creates conditions for the introduction of new electronic system for collecting data and information for the purposes of budgetary process – a budgetary information system for territorial self-governments RIS.SAM administered by the Ministry of Finance. Various changes are introduced regarding the accounting of the self-governments in order to arrive at real debt and deficits information. The amendment introduces a correction mechanism (debt brakes), which is activated when a debt exceeds 50% of actual revenues for the previous year. Changes with a potential impact on deficit may be adopted only until June 30 of a budgetary year. The amendment also restricts economic management under provisional budget and introduced deadline for adoption of budget. Finally, the amendment introduces changes and details to consolidation regime and receivership.