Does the budget process matter for infrastructure spending? Capital budgeting in local government

ABSTRACT

Investment in long-term capital projects plays an increasingly important role in improving the quality of many public services, as well as promoting economic development. Using data on capital spending and capital budget structures in county governments in Georgia, USA, this paper explains how a separate capital budget protects infrastructure spending in times of fiscal distress. The author found little evidence that county governments with a separate capital budget spent more than those without a capital budget.

IMPACT

This paper suggests that a separate capital budget in the formal budget process might not preserve capital projects. Practitioners need to pay more attention to mechanisms and processes that set capital spending priorities in the budget process. They also need to consider closer co-ordination between capital budgets and long-term maintenance outlays.

KEYWORDS:

• Budget process
• capital budget
• infrastructure spending