The Austrian Federal Budget Reform
First stage of the federal budget reformSecond stage of the federal budget reformPresentationsLiterature
The federal budget reform of the Austrian federal government is creating a mechanism for managing and using tax revenues more effectively and efficiently. The new Federal Medium-Term Expenditure Framework Act (BFRG) that has been developed in the context of the federal budget reform enables the government, for the first time, to plan the budget over the medium term: The BFRG prescribes binding ceilings on expenditures for four years in advance with respect to five “headings”, which correspond to the main functions of the federal government. This supports the sustainable development of the federal budget. The federal ministers are now permitted to use budget funds in subsequent years when they have not been used during the year of appropriation. This combats “December fever” (full disbursement of budget funds by the end of the year) and creates a major incentive for the frugal use of tax funds. In the course of the federal budget reform, budgetary management is being reoriented towards achieving objectives and outcomes. One of these objectives is gender equality between women and men (gender budgeting). The federal budget reform is being implemented in two stages – the first stage was brought into effect on 1 January 2009 and the second stage was entered into force on 1 January 2013.
First stage of the federal budget reform
The first stage of the federal budget reform, which has been in effect since 1 January 2009, is directed at the following objectives:
- Budget planning of the federal government is effected on a binding, multi-year basis. In 2009, a financial framework with binding expenditure ceilings was introduced for the first time. Those ceilings, which are broken down by five “headings”, are made binding on a rolling basis over four years in advance. The main portion of the expenditure ceilings is fixed as to amount. Variable ceilings are only provided for in the case of certain elements that either depend on the performance of the economy or on tax revenue levels. The amounts of those variable ceilings are determined by clearly defined parameters. In this way, the budget helps to stabilise the economy. The ceilings are set, and can be amended, by the Austrian parliament. Thus, the political process helps to maintain the necessary spending discipline but is simultaneously able at all times to react to changes in priorities. Accordingly, the Austrian parliament always retains the final say with respect to the budget.
- Multi-year budget planning increases certainty of planning for all parties involved, supporting predictable, sustainable budget policies. The strategy report prepared in tandem with the BFRG contains all of the information needed in order to comprehend the figures in the binding multi-year budget plan. That strategy report (in tandem with the BFRG) thus constitutes the central budgetary planning document.
- Since 2009, the government has likewise been creating incentives for the government departments to make it easier for them to handle tax revenues more frugally: funds not used by the end of a year do not expire, but rather can be added to reserves and used at a later time in line with departmental priorities and without being bound by previous appropriations. This makes every minister “his or her own minister of finance” and puts him or her in a position to increase the ministry’s leeway for action by managing budgetary funds in an intelligent and frugal way. Tax money is thus more efficiently utilised overall, which is in the best interests of all Austrians.
Second stage of the federal budget reform
At present, the Federal Ministry of Finance is working on the second stage of the federal budget reform, which was entered into force on 1 of January 2013.
The second stage of the federal budget reform pursues the following objectives:
Intended outcomes and activities of the political and administrative spheres of the government will be integrated into the budget. This type of “performance budgeting” is intended to show the public in a clear and transparent way what results are being achieved through the use of their taxes.
- One major aspect of performance budgeting is the concept of “gender budgeting”, which was introduced to Austria as a part of the BFRG and for which the Austrian federal constitution already forms the basis. The federal government, the federal states and the Austrian municipalities are subject to an obligation, when managing budget funds, to strive towards gender equality between women and men.
- The second stage of the federal budget reform will constitute a ground-breaking extension of the federal government’s budgetary system in that it establishes a new budgetary structure and – in tandem with this – creates performance-oriented control of the budget managing bodies. One area of focus is the further development of the federal government’s budgeting and accounting system. The presentation of a true and fair view of the federal government’s financial position, which has now been adopted as a budgetary principle in the federal constitution, will constitute a shift from traditional single-entry government accounting to a form of accounting oriented more to commercial factors, but without losing sight of the special aspects of federal budget accounting.
- The federal budget reform has incorporated both international empirical input from other nations and domestic empirical input from sources in Austria dealing with new budgetary rules (particularly the new flexibility clause in Austrian budgetary law). This second stage of the federal budget reform is creating a new body of budgetary law for Austria’s federal government that is truly modern and oriented to best practices.