Kalistan

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Empire quietly adopts unitary budgeting model
Seeks to "increase flexibility" in public sector, says FinMin
Kaliburg, Grand Duchy of Ananto
November 10, 5698


Dr. Roger Berry, Finance Minister discusses unitary budgeting in Kaliburg last month

Budgeting methods aren't frequently added to lists of "most exciting party conversation starters"- the very thought of budgetary processes often makes people's eyes glaze over. So as a word of warning, this story will probably do the same. But The Republic has learned that, since Her Imperial Majesty's new government was named, Kalistan has been slowly and quietly shifting from its traditional line-item and performance based budgeting models, which are used almost universally in modern liberal nations, to a more radical form of budgeting. You, our dear readers, have been warned.

Dr. Roger Berry, Her Imperial Majesty's Minister of Finance, who is a member of the Nationalist Caucus in the Institutional Party has been overseeing radical changes at the finance ministry that will determine how public sector operations will be paid for in the future. In fact, Dr. Berry was selected by Her Imperial Majesty for the post specifically because he is an outspoken champion of what he refers to the Unitary Budgeting model. His changes have caused major consternation in the majority conservative Institutional Party and have even been publicly questioned by the Chancellor of the Empire, Lady Ericka Donahue as being innovations that will unnecessarily rock the boat at a time when Kalistan requires calm so it can adequately fund the myriad reforms Her Imperial Majesty has commanded for the Empire.

"Dr. Berry is very well respected," said the Chancellor in June. "He also enjoys the complete confidence of Her Imperial Majesty. However, his reputation as an innovator puts him at odds with many of this nation's long held policies which promote stability and balance, and this is something that we would certainly advise caution in. One of the specific functions of this Party is to put brakes onto runaway trains that are the result of untried and untested notions that put our system at risk for running off the rails. Dr. Berry's policies aim at taking off those brakes, and we are uncertain of the outcomes. And if it appears that we are losing control of our public sector operations, it will be my duty to advise the Empress to call a halt to these changes before they become irreparable."

The reforms toward unitary budgeting have nonetheless proceeded apace, with the Finance Minister being given broad authority on regulatory implementation, subject, of course to Imperial veto. And while it is still far too early to tell about the full effects of the implementation of the unitary rules around financing of public sector operations, (we won't know until the audit is completed in 5701 for fiscal year 5700, which will be the first year that the unitary budgeting model will be fully in place,) there are already some indications that the new methods are increasing both the ambition and the capacity of the National Government.

"We can already see the Empress pushing a more forward leaning agenda for reform," said analyst Dwight Edwards of Kaliburg's Center for Fiscal Accountability, a think tank dealing with fiscal and monetary policy in Kaliburg. "With new methods of funding not only existing programs but expanding the scope of the National Government in areas it already operates in, Her Imperial Majesty is announcing lots of really major systemic reforms that have the genuine potential to change the face of Kalistan in a permanent way."

Conservatives in the government are certainly concerned, because the Unitary model centralizes decision making in the Finance Ministry rather than decentralizing it to the different individual ministries. While this does provide the benefit of a unitary vision, it also reduces the role of the various ministries to those of policy implementation, not as agenda setters. Conservatives view this sort of consolidation of power over budgetary maters as an undermining of traditional delegation of powers within Her Imperial Majesty's government that can, in the hands of an incompetent finance minister, lead to catastrophic outcomes. They also criticize the system most viciously in that it is borrowed, at least philosophically, from revolutionary communism, which described one of the main roles of the state under socialism as being central planners in the ongoing effort to stomp out capitalism and radically redistribute wealth.

Of course, the Finance Minister disagrees, and as of the current moment, so does Her Imperial Majesty. "The Unitary System allows us to move money from profitable state owned enterprises and those who are meeting their statutory requirements under budget to the enterprises and ministries that provide public social goods at a loss," said Dr. Berry. "By treating the National Budget as a single budget with a single bottom line, we not only protect the annual national surplus, which Her Imperial Majesty has declared to be a priority, but we can be more creative throughout the year with our plans and expanding the range of actions for our institutions. We are no longer locked into an annual cycle that we have to predict at the beginning of the year, but can create a general plan which is based on Her Imperial Majesty's priorities and then adjust as the year actually happens, moving money from where it is horded to where it is needed without having to amend the budget. At the end of the day, its a single payer anyway: We should stop pretending these ministries are somehow independent of the entire National Government."

Her Imperial Majesty has expressed satisfaction at the flexibility and the priorities basis of the Unitary Budgeting system proposed and now being implemented by Dr. Berry and his closest advisors. But the plan's main detractors also complained that the Unitary budgeting model discourages saving in National Ministries: Ministers will be in a hurry to accomplish annual programs so their excess money isn't clawed back immediately to fund other priorities. This in turn could eliminate innovation within the various ministries, which would be counterproductive to the benefits unitary budgeting is supposed to achieve. It will also encourage competition among ministries for funding, especially if they know that if they do not spend their entire budgets, that money will be taken from them to give to other ministries.

Dr. Berry seems to believe these fears are unjustified. "We are stuck in this mode of thinking in terms of performance based line item budgeting, but it is completely unreasonable to plan a modern government based on the the fiction that we can see what is ahead of us. Her Imperial Majesty asks us to do things, and in the past, and this is not to offend the Chancellor who has been a model of exemplary leadership during her tenure, but most of the feedback from previous governments is explaining why this or that ministry did not have money for those programs. The Unitary system will allow us to ask ourselves how can we better fund the Empress' priorities, rather than spending all our time trying to explain why we can't do what she is telling us she wants us to do. The reforms, the innovations in the ministries, they will come from where they should come from: The fiat of the Empress. That is proper and legitimate. Our task is to do what she asks us to do. Because at the end of the day, it is her job to see to the needs and desires of this nation. We should not be in the business of hindering her because we are married to some ridiculous notion that fiat currency is limited by gold stocks, or once it has been allocated, it cannot be recaptured and repurposed."

The biggest evidence that the Unitary budget is taking hold in Kalistan so far is the large investment in rural transportation infrastructure, an investment which has been needed for generations, but has been largely underfunded because of budgetary constraints elsewhere. "The budget is incredibly tight in very needed public services, and extremely loose in many other areas," said Minister Berry. "This is wrong. We have hamstrung ourselves in this nation for generations because we are committed to the line being what the line is. It is long past time this attitude about public financing is changed, and adopting a unitary budget is the most important step we can make toward that reform. I personally thank Her Imperial Majesty for the vision and leadership on this point, and her support of our efforts to unify our budget, despite the political concerns of the more conservative elements in our government."

For most people, this conversation is so far in the aether that the only thing most people will ever notice about the changes is that the National Government will become more capable of assisting Duchies who have had to pick up a lot of the slack in areas where the National Government has fallen short. "We don't really have to sell this policy in this nation," said Dr. Berry. "That's not the relationship between Government activity and the people in Kalistan. But the lives of the people will benefit because they should begin seeing the services they have been calling for, not only improvement in quality of service, but expansion of the provision of those services to more parts of the Empire. The Duchies themselves will be the primary direct beneficiaries as they won't have to direct limited budgets to filling in as many gaps in National Services that they have had to do for such a long time. Any costs in implementation will be saved on the back end with increase of efficiency and flexibility making it a fiscally neutral option that will have positive benefits in the long run."

For now, conservatives have to just grin and bear it: The Chancellor, set to retire in just over two years, said she will continue to carry out Her Imperial Majesty's fiat, and instead simply voices caution. "We have to be careful to not radically upset the careful balance we have struck for ourselves in this nation. Walking the line between revolutionary insanity and reactionary paralysis has been our function in this government for decades. And because of this very conservative posture, we have accomplished greatness as a nation. Tipping too far one way or another can lead to disaster, and it is my job therefore to warn Her Imperial Majesty that that is happening before it goes too far. That's all. We give the Empress what she wants, because that's our only job. Hopefully she will be attentive to the advice of all of her advisors when what she wants is not necessarily good for her."

Her Imperial Majesty's Finance Minister gave his remarks to an Economics symposium hosted at Kaliburg Polytechnic last month. Despite the publicity around the event, the shifts toward unitary budgeting are simply not widely reported--there are obvious reasons for this. But nobody can deny that the changes, if they are fully set in concrete, will have long lasting effects for the public sector in Kalistan, and could even be described as revolutionary. They certainly reflect Her Imperial Majesty's general attitude toward change.

@TheRepublic