Does Fiscal Austerity Affect Political Decision-Makers’ Use and Perception of Performance Information?

ABSTRACT

This article investigates whether the fiscal environment that politicians face influences their use of performance information. It poses two competing hypotheses, suggesting that fiscal austerity either increases politicians’ use of performance information, because they are more concerned about keeping up good performance in times of austerity, or decreases their use, because balancing the books is more vital in times of austerity, and therefore keeping within the budget gains political emphasis relative to sustaining good performance. The link between fiscal austerity and politicians’ use of performance information is tested using survey and documentary data from Danish municipalities. The article concludes that politicians who face high fiscal austerity use performance information to a lesser extent than colleagues who face less fiscal austerity, thus indicating the use of performance information is “the politics of good times.”

KEYWORDS:

• fiscal austerity
• performance information
• performance information use
• performance measurement
• political decision-making

Notes

Here we refer to the financial crisis which began in 2007–2008 (Kingsley, 2012).

The index is for each municipality, measured as the sum of demographic and socioeconomic expenditure needs relative to the financial base of the municipality. See n. 7 for a further description of the index and the interpretation of index numbers.

Meaning that they do not explicitly involve comparisons with other municipalities.

The survey also included a sixth item (“It is difficult to understand the results of user satisfaction surveys”). Conceptually, however, this item focuses on the personal capability of understanding performance information, whereas the other items relate to how politicians perceive the usefulness of performance information. A factor analysis confirms that this sixth item, not only conceptually but also empirically, refers to a different dimension than the other five items.

Specifically, fiscal pressure is operationalized as the sum of demographic and socioeconomic expenditure needs relative to the financial base of the municipality. Expenditure needs are calculated according to the objective criteria in the National Equalization Scheme for municipalities. The financial base is a weighted measure of the tax base (income tax and property tax), corporate taxes, other taxes, interest, and the payment of loans (Houlberg, 2011). A value of 110, for instance, means that the fiscal environment puts a 10% higher pressure on the municipal economy than in an average municipality, implying that tax rates should be 10% higher than average in order to finance average service levels.

The correlation between the objective indicator of fiscal austerity and the subjective perception of austerity is 0.32.

Multilevel random effects yield more efficient estimates than ordinary least squares in the event of nested data (Cameron & Trivedi, 2009, p. 314).

Survey 2 also allowed us to examine whether the politicians’ assessments of performance information usefulness correlate with their subjective experience of the level of fiscal austerity rather than with the objective measure of fiscal austerity used in Table 4. The politicians were asked to evaluate the extent of the financial problems of their municipality relative to those of other municipalities and relative to the respondent’s municipality four years earlier. Substituting either of these two subjective assessments of fiscal austerity for the objective measure in Table 4 does not change the conclusion that fiscal austerity is not associated with politicians’ assessments of performance information usefulness.

Additional information

Notes on contributors

Bente Bjørnholt

Bente Bjørnholt is a senior researcher at KORA, the Danish Institute for Local and Regional Government Research, Aarhus, Denmark.

Martin Bækgaard

Martin Bækgaard is an Associate Professor in the Department of Political Science, Aarhus University, Denmark.

Kurt Houlberg

Kurt Houlberg is the director of research at KORA, the Danish Institute for Local and Regional Government Research, Copenhagen, Denmark.