Budgeting and Rebudgeting in Local Governments: Siamese Twins?

• Published date: 01 November 2012
• DOI: http://doi.org/10.1111/j.1540-6210.2012.02590.x
• Author: Mariafrancesca Sicilia,Eugenio Anessi‐Pessina,Ileana Steccolini
• Date: 01 November 2012

Eugenio Anessi-Pessina is full profes-

sor of public and health care management

at Catholic University in Milan, Italy. In

addition, he is senior fellow at the Wharton

School of the University of Pennsylvania

(Department of Health Care Systems) and

editor of Azienda Pubblica (a leading

Italian-language public management

journal). His research interests include

public sector budgeting and accounting,

health care management, and management

control in government and health care

organizations.

E-mail: eugenio.anessi@unicatt.it

Mariafrancesca Sicilia is assistant

professor of public budgeting at Bergamo

University and SDA Bocconi assistant

professor of Public Management and Policy.

Her research interests focus on public sector

budgeting, accounting, and performance

measurement.

E-mail: francesca.sicilia@unibocconi.it

Ileana Steccolini is associate professor

of public budgeting and performance

measurement at Bocconi University in Milan,

Italy, and director of the Public Management

and Policy Department at SDA Bocconi

School of Management. Her research

interests include public budgeting, account-

ing and accountability, and performance

measurement in the public sector.

E-mail: ileana.steccolini@unibocconi.it

Budgeting and Rebudgeting in Local Governments: Siamese Twins? 875

Public Administration Review,

Vol. 72, Iss. 6, pp. 875–884. © 2012 by

The American Society for Public Administration.

DOI: 10.111/j.1540-6210.2012.02590.x.

Eugenio Anessi-Pessina

Catholic University, Milan, Italy

Mariafrancesca Sicilia

Bergamo University, Milan, Italy

Ileana Steccolini

Bocconi University, Milan, Italy

Budgeting and Rebudgeting in Local Governments:

Siamese Twins?

 e literature on budgeting in the public sector has

traditionally focused on the annual budgetary process.

Much less attention has been paid to rebudgeting—that

is, what governments do to revise and update their budg-

ets during the f‌i scal year. Because of its potentially large

impact on appropriations, rebudgeting seemingly deserves

more attention than it has been granted so far.  is

article uses data from a sample of Italian municipalities

to test hypotheses on the main drivers of budget revisions.

According to the results, rebudgeting is strongly af‌f ected

by the degree of incrementalism in the initial budget-

ing process, as well as by several internal and external

determinants, such as political variables, organizational

features, f‌i nancial conditions, and the local socioeconomic

environment.

In most public organizations, the main purpose of

the budget is to authorize (i.e., to limit) spend-

ing by nature and/or purpose (Anessi-Pessina

2000; Caperchione 2000). Traditionally, the litera-

ture has focused on the annual budgetary process

(Fenno 1966; Lu and Facer 2004; Rubin 1990, 2005;

Wildavsky 1964), investigating such themes as the

players involved, their roles, and the internal and

external factors that inf‌l uence budget characteristics.

Approved budgets, however, often need to be revised

during the f‌i scal year in order to incorporate chang-

ing priorities and face unexpected events (Caiden

and Wildavsky 1974; Wildavsky 1988). Rebudgeting

is thus allowed in most public organizations world-

wide, although within dif‌f erent sets of constraints.

Rebudgeting, moreover, has a potentially large impact

on appropriations. So far, however, it has been the

subject of remarkably little research. In addition, the

few existing studies (Dougherty,

Klase, and Soo 2003; Forrester

and Mullins 1992) have pre-

dominantly been exploratory

and descriptive.

 e purpose of this article is

to enrich the existing literature

by adopting an explanatory

stance and testing some hypotheses on the potential

determinants of rebudgeting practices. To this end,

we use data for Italian municipalities over f‌i ve years

(2003–7).

 e structure of the article is as follows:  e next

section reviews the relevant literature and develops

the hypotheses.  en we of‌f er a short background on

Italian municipalities, their accounting systems, and

their rebudgeting rules.  e ensuing section specif‌i es

data and methods, followed by a presentation of the

f‌i ndings.  e f‌i nal section draws some conclusions

and implications for practice and further research.

Previous Studies and Hypothesis

Formulation

Compared with the initial budgeting process, budget

execution and rebudgeting have received much less

attention.  e few existing studies on rebudgeting,

moreover, have predominantly adopted an exploratory

and descriptive stance (Dougherty, Klase, and Soo

2003; Forrester and Mullins 1992).  ey usually have

investigated the importance and magnitude of budget

revisions, the players who initiate the revision process

or are otherwise involved, and the contingencies,

events, and reasons that are more likely to cause it at

the local and state levels.

According to these studies, not only does rebudget-

ing signif‌i cantly af‌f ect the original appropriations

(Hoskins 1983), but also it inf‌l uences future budget

cycles (Dougherty, Klase, and Soo 2003; Lauth 1988;

Lee and Plummer 2007). For example, the revi-

sion of budgeted revenues during the f‌i scal year will

af‌f ect future revenue forecasts

(Bretschneider, Straussman,

and Mullins 1988). In addition,

governments have been shown

to initially favor a conservative

underestimation of revenues

to hedge against the risk of

revenue shortfall (Bretschneider

and Schroeder 1985).  is

 e purpose of this article is to

enrich the existing literature by

adopting an explanatory stance

and testing some hypotheses on

the potential determinants of

rebudgeting practices.