PLANNING WAGE BILL EXPENDITURES

1. PLANNING WAGE BILL EXPENDITURES Saša Jazbec, Director General / Budget Directorate Ministry of Finance Ljubljana, April 2016

2. AGENDA • BUDGETING IN GENERAL • FISCAL FRAMEWORK • BUDGET PREPARATION AND WAGE BILL PLANNING • FINANCIAL PLANNING • WHAT HAPPENS IN PRACTICE

3. BUDGETING IN GENERAL LEGAL BASIS: • PublicFinance Act • Decree on Development Planning Documents and Procedures for the Preparation of the National Budget • Budget Implementation Act • The Constitution (Art. 148) • FiscalRuleAct • Stability and GrowthPact

4. BUDGETING IN GENERAL A two-phase planning:1. Fiscalframework for the general government sector (S.13,ESA methodology) • Objective: To achieve a sustainable medium-term fiscal objective • for the next three years (t + 1, t + 2, t + 3) • adoption by end of April (government, National Assembly) 2. State budget • 2-year budget (t + 1, t + 2) • Preparation of the Government and ministries by end of September • Adoption inNational Assembly until year end

5. PUBLIC FINANCE IN SLOVENIA

6. DOCUMENTS AND TIMELINE (new PFA) • November: Beginning of "budgetary tasks" • December: Decision on the priorities at the national level • January: Performance assessment, measures to improve • March: Medium-term fiscal framework • April 10: Framework for preparing the budgets of government (according to Fiscal Rule Act) • April 30: Stability Programme • May - August: Preparation of annual budgets & financial plans • September: Adoption of State budget (by government) • October 15: Draft budgetaryPlan nov dec jan feb mar apr maj jun jul avg sept okt nov dec Stability Programme State budget in the Parliament Annual budgets and fin. plans prepparation Mid - term planning

7. FISCAL FRAMEWORK • Medium-term fiscal framework: for the next 3 years (2017-2019) • Objective: Balanced structural balance of the general government in 2020 • The target value of the balance of government (% of GDP) and expenditureceiling • DOCUMENTS • National Reform Programme (description of priorities and measures for individual policies) • Fiscal framework • StabilityProgramme TARGET SCENARIO - restrictionofwagebillgrowth - proposalofmeasures SPONTANEOUS SCENARIO - thebasis is theestimatedrealizationforthecurrentyear - legal rightsandagreements are takenintoaccount Expenditure ceiling

8. STATE BUDGET PREPARATION • REVENUE ESTIMATION, based on outturn of previous year and the macroeconomic indicators (FISCAL ENVELOPE) • Determination of EXPENDITURE CEILING and TARGET DEBT (FISCAL FRAMEWORK) • Preparation and adoption of expenditure ceilings by policies / programmes and users (legal obligations: wages, interest payments, social transfers + „left-overs“) • Instructions for the preparation of the draft budgets • Negotiations / coordinations with line ministries (arguments for additional funding) as well as preparing proposals of financial plans • Adoption ofbudget & budget memorandum by the government • Submission to the National Assembly

9. DETERMINATION OF WAGE BILL Wage bill of state budget consists of wages for:- officials employed by direct budgetary users (170 DBU‘s of state budget)- officials employed by indirect budgetary users (funds, agencies, public institutions) – transfer On thebasisofrealisation 2015, takingaccountofemploymentandrightsderivingfromlaw, agreements (promotion, pay forannualleave….) foryear 2016 Specialrules(it appliesonly to certainbudgetusers) General growth2,5,% (it applies to allbudgetusers) • Specialrules: • Transfer ofemployeesfrom FPP2 to FPP 3 (value 8.000 d.e.) • Additionalsourcesfortheproject at FPP 4 (value 1.000 d.e.)

10. FINANCIAL PLANS PREPARATION Budgetaryusermust take into account the total allocated limit /expenditure ceiling (envelope) for its financial plan, already adopted legal obligations, implementation of potentialmeasures (decision taken by the Government), within the financial plan funds for variouspurposes not binding. Example (wages): assigned limit on salaries 103 the userevaluation on salaries:100 (3 allocated to other purpose) the user has topresent a a personnel plan, which is in line with the proposal of the funds, ie 100

11. AFTER THE BUDGET ADOPTION Users must align personnel plan withwagebill(subject to change during the adoption inthe National Assembly) Personnel plan does notcontain structure of employees nor is it evaluated,thusactual coordination is difficult to verify Ifa shortfall ofwagebilloccurs, reallocationsaccording to Budget Implementation Act are employed: up to 2% of the funds for the salaries canbereallocatedfromsavings in material costs (bybudgetaryuser) from savings on other purposes within the financial plan (byGovernment) from the reserve (forcontingentliabilities) or savings fromother users (Government) If leftoversoccur(wages or otherpurposes): theyremain unused, thus reducing deficit possibility of reallocationto other purposewithin the financial plan or possibility of transfer to another userto cover urgent liabilities.

12. PRACTICE If measures and the agreement with TradeUnionsare not taken in timeandthe agreement is higher than financial resources provided: additionalresources are provided through reallocationsor supplementary budget is adopted. Examples of poor practice: PLANNING RESOURCES too low: at year end, request for additional funds(especially userswithhigh proportion of salaries and lowproportion of the programmes) PLANNING RESOURCES too high: withpurpose of a subsequent increase in the perosnnelplan or extrapaymentsforgoodperformance(especially userswith low share of wagesexpenditure andhighproportionofother programs)

13. Thank you for your attention Any questions?