Citizen Participation and Budget Variance: How Does Local Government Make Better Fiscal Accountability?

Abstract

We explore how citizen budget participation influences the difference between the original and final versions of local government budgets. Our findings based on 1,506 city and county governments in the U.S. show that localities with a higher level of citizen participation tend to increase any budget gap between original and final expenditures but decrease the gap on the revenue side of the budget. Citizens appear to be reluctant to modify revenues due to the lack of flexibility in allocating the tax burden. Alternatively, citizens may have more willingness to exploit the uncertainty of how expanded services will ultimately be funded over time. Our analysis provides insights into how public participation mechanisms influence the fiscal accountability of the presiding government budget decision makers.