BUSINESS
Georgian State Coffer Is Electorally Motivated
02 August, 2012

ublic spending in election years is electorally motivated. It is more focused on social programs, short term-employment and a populist agenda in general, as opposed to non-election years. And year 2012 of parliamentary elections is no exception, this is a message sent by Transparency International Georgia (TI Georgia) through its recent report Electorally Motivated Public Spending.

Electorally motivated public spending is a form of arbitrary spending with the primary purpose of gaining votes for the ruling party, or other parties in

government and Georgian government practices this method during each election year.

Actually budgeting is the key to discourage electorally motivated spending. If in an election year a government sets out its budget in great detail, appropriations are less likely to be electorally motivated since it is easy to track where the money goes and how it is spent. Therefore, the country with program budgeting model that puts out detailed framework of each budgetary costs of every public activity around programs leaves less chance to government to misuse the budget on election-campaign purpose. Georgia had a conventional budgeting till 2012 that provided by much less detailed information unlike a program budget and makes electorally motivated spending easier.

Starting 2012 Georgia moved on program budgeting but the examination of the country’s program budget revealed that the switch is more formal than actual. As a matter of fact the 2012 state budget of Georgia is less detailed than the previous budgets “as it no longer breaks down certain expenses into goods, services, subsidies, etc which, making economic classification poorer, helps electorally motivated spending in 2012, a parliamentary election year,” TI Georgia report states.

The analysis of the 2012 state budget revealed number of systemic flaws encouraging electorally motivated spending. One of the top blemishes is non-transparency of the budget spending, namely lack of detailed descriptions of expenditures and lack of transparency how certain appropriations are spent.  This is particularly true of contingency funds of President and government of Georgia, since important details of appropriations from these funds like rationale behind spending, are not available for public scrutiny.

These funds fell under severe criticism a week ago as oppositionist MPs accused government in squander of GEL 100 million allocated in reserve funds to finance contingency events like natural disasters. When the disaster stroke Kakheti region on July 19, 2012 government started looking for additional financial sources instead of immediate transferring the due amount of money on liquidation of disaster results.

Certain loopholes in budgetary legislation encourages state budget to be electorally motivated. Since 2012 the Georgian Budgetary Code allows spending institutions a 100% intra-program line item retrenchment, replacing the previous 5% limit thus leaving unlimited freedom to intra-program line item retrenchment enabling spending institutions to shuffle their line items around within their programs with the consent of the Minister of Finance rather than the Parliament.

“We believe this amendment encourages electorally motivated public spending,” TI Georgia experts say. According to them, specific examples of electorally motivated spending is  the Summer Jobs Program for 25 thousand students aimed  to place students with a range of pre-selected employers (in both private and public sector organizations) from July 20 to August 20, 2012 and pay GEL 500 to each student from the state budget. The initiative got GEL 12.5 million from the state budget.

Large-scale employment projects of this kind were deployed by the government always in the pre-election period: before the October 5, 2006 local elections, before January 5, 2008 presidential elections and May 21, 2008 Parliamentary elections.

Governmental social initiatives on distribution of vocational education vouchers worth GEL 1000 to socially vulnerable students, a 25% increase in old-age pensions for pensioners aged 67 and younger and 40% increase for pensioners over 67 that will be ushered in starting September 2012 seem to be a part of election campaign to the upcoming parliamentary and presidential elections.

Besides, government plans to increase coverage of the government-run insurance schemes by more than 100%.

Revisions made to the state budget in May 22, 2012 that cut down appropriations of less populist programs on the one hand and pegged up other more vote-sweeping program appropriations bespeak of electoral motivations. For example funding for the Viticulture Development program increased from GEL 7.75 million to GEL 31.75 million (30.9% increase), while funding for the Sports Development Program increased by 30% to GEL 40.55 million. However, funding decreased by 30% and 50% for the Military Education Development program and the Effective Management of State Institutions respectively.

“The budget of the Department for Viticulture, which includes the appropriation for the program, increased from GEL 7.53 million in 2010 to GEL 10.34 million in 2011. The program is used to subsidize viticulture by paying vine growers a subsidy for each kilo of grapes they grow, which normally takes place in autumn. Autumn 2012 is the time of parliamentary election. Therefore, the threefold increase in the funding for the viticulture program may not be safely thought to be unrelated to the elections,” TI Georgia experts think.

They recommend Georgian government to refrain from using public funds for programs that can be perceived to be electorally motivated rather than serve legitimate public policy priorities and find apt to the State Audit Office to examine rationale behind the questioned programs as well as their proper screening.

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