Question 117

Does the executive seek approval from the legislature prior to reducing spending below the levels in the Enacted Budget in response to revenue shortfalls (that is, revenues lower than originally anticipated) or other reasons during the budget execution period, and is it legally required to do so?
 * a. The executive is required by law or regulation to obtain approval from the legislature prior to reducing spending below the enacted levels in response to revenue shortfalls or other reasons, and it does so in practice.
 * b. The executive obtains approval from the legislature prior to reducing spending below enacted levels, but is not required to do so by law or regulation.
 * c. The executive is required by law or regulation to obtain approval from the legislature prior to reducing spending below enacted levels, but in practice the executive implements these cuts before seeking approval from the legislature.
 * d. There is no law or regulation requiring the executive to obtain approval from the legislature prior to reducing spending below enacted levels, and in practice the executive implements these spending cuts before seeking prior approval from the legislature.
 * e. Not applicable/other (please comment).

OBS Guidelines
Question 117 examines whether the executive receives approval from the legislature prior to cutting spending below the levels in the Enacted Budget in response to revenue shortfalls or for any other reason, and whether it is legally required to do so. Good practice requires the legislature to approve changes in revenue or expenditure relative to the Enacted Budget. For example, if less revenue is collected unexpectedly during the year, the legislature should approve or reject any proposed reductions in expenditures that are implemented as a result. If such requirements are not in place, the executive might substantially change the composition of the budget at the executive’s discretion, with no legislative control.

Typically, legislative approval of proposals to reduce spending below the levels reflected in the Enacted Budget would occur as part of the supplemental budget. But other formal procedures for getting approval from the legislature in advance of it adopting the supplemental budget may exist. If that is the case, then please provide information about that approval process.

To answer “a,” the executive is required by law or regulation to obtain prior legislative approval before implementing spending cuts in response to revenue shortfalls or for other reasons, and it does so in practice. Answer “b” applies if the executive received legislative approval before implementing such cuts, but is not legally required to do so. Answer “c” applies if the executive is legally required to obtain legislative approval before implementing such cuts, but does not do so in practice. Answer “d” applies if legislative approval is not legally required for the executive to implement such cuts and the executive does not obtain such approval in practice. A “d” response applies if the legislature only approves the spending cuts after they have already occurred.

1) Executive’s ability to temporarily suspend budget execution
If the executive has the authority to temporarily suspend budget execution no longer than 45 days, but then it has to propose a budget rebalance that legislature adopts ==> response “a” applies, because de facto the executive cannot implement the budget for those 45 days. Example: Serbia in OBS 2017.

2) What is the difference between a “d” and an “e” response?
In OBS 2019, we found a national law in Ecuador that allows the government to implement changes without approval from Congress when the change is equal or less than 15% of the budget (see Article 118). The researcher in this argued that the response should be “e” and not “d”, because marking “d” would make one think that there is no law, and there is a law.

However, the spirit of the question is that the more limited the powers that the legislature has to oversee budget implementation, including approving changes to the original budget, the weaker the role of the legislature and the less effective its oversight. This includes the many cases in which the weak role of the legislature is "self-inflicted", i.e. when some law they passed says the government can do what it wants up to a certain limit, etc.

Since that limit is more than 3% in the case of Ecuador, we scored this question “d”, based on the above reasoning. (Note that the clarification about the 3% is in the guidelines for Question 115, but not for Question 116 or Question 117, hence this clarification.)