THE PUBLIC EXPENSES SYSTEM

THE PUBLIC EXPENSES SYSTEM

ublic expenses express social-economic relations in cash between state and the members of society on the occasion of allocation of financial resources for financing the social, cultural, economic, political, administrative objectives of the state.

The public expenses express the transfer of value (purchasing power) intermediated by the state in favor of the beneficiaries of public services and goods, and it can have a productive or unproductive character. Most of the public expenses are unproductive, expressing the final consumption of GDP.

Public expenses include budgetary expenses, but not all the public expenses are budgetary.

Characteristics of budgetary expenses:

They are expressly mentioned in the budgetary law;

Strict compliance with their destination, according to the law;

Making of budgetary expenses in not strictly subject to the existence of resources;

Control over budgetary expenses.

Public expenses include the expenses made by public authorities, by both central and local state administration, by international organisms, by international institutions whose member the Romanian state is.

Incomes and expenses of the budgetary system, cumulated at national level, comprise local budgetary incomes, respectively total budgetary expenses, which, after consolidation, by elimination of transfers between budgets, shall show the dimensions of the financial public effort on the respective year, the state of balance or unbalance, as the case may be.

Approved budgetary expenses shall be used for financing the functions of public administration, priority programs, actions, objectives and charges, according to the purposes provided in laws and other regulations, and they shall be engaged and used in strict compliance with the provided degree for reception of budgetary incomes.

The annual budgetary law provides and authorizes, for the budgetary year, the budgetary incomes and expenses, as well as regulations specific to the budgetary exercise.

The approved sums, at the part of expenses, by budgets, within which payments are engaged, ordered and performed, represent maximum limits that can not be surpassed.

The expenses in such budgets shall be engaged only within the limit of approved budgetary credits.

Engagement and use of budgetary credits for other purposes than those approved shall incur the responsibility of the guilty parties, according to the laws in force.

For the multi-annual actions there will be written in the budget, distinctively, the engagement credits and budgetary credits.

In order to achieve the multi-annual actions ordering credits they conclude legal arrangements, within the limit of engagement credits approved by budget for the respective budgetary year.

The consolidated budgetary expenses shall be found within each budget or at the level of the general consolidated budget.

The general consolidated budget expresses the total public financial effort made at a certain moment in time. By consolidation of expenses they aim to eliminate repeating sums, the distribution of transfers between budgets, as well as the net inclusion of expenses made from engagements in the public debt.

Criteria of classification for public expenses

Administrative (Institutional) Classification

Within this criterion, expenses are divided per institutions and by applicants for credits. Institutions represent consumers of financial-public resources. The budgetary law devides expenses per main applicants for credits.

This criterion has a practical importance being used as it is for approving and distributing the expenses per institutions. The problem with this criterion is the fact that in time the institutional structure changes (some institutions appear while others disappear).

Economic Classification of Public Expenses

a) Current expenses (regarding the operation of state objectives and actions):

Personnel expenses;

Service and material expenses;

Subsidies and transfers;

That can be consolidated (passing from one budget to another);

That can not be consolidated (expenses made within each budget and are related to transfer) pensions (30% of budget):

Premiums, interests to public debts, reserves.

b) Capital expenses (investments are made and also reserve stocks are created and increased):

Granted loans. The state can proceed with granting of loans to some state companies for supporting them in case of arrears;

Reimbursements of credits, payment of interests and commissions. A state that made loans is obliged to reimburse such loans. Due annual installments from various creditors shall be entered separately for external credits and separately for domestic credits.

Functional Classification of Public Expenses represents objectives and actions financed from the public budget.

Public services (services provided by public authorities) Presidency, Government, Parliament, ministries;

National defense, internal order and civil security;

Social-cultural services (education, healthcare, culture and art, social assistance, youngsters and sport);

Communal administration (public domain), dwelling places, environment, waters;

Economic actions (industry, transports, communications, agriculture, forestry);

Other actions;

Transfers (that can be consolidated);

Granted loans;

Interests and other expenses regarding the public debt;

Reserve funds available to the government;

Deficit.

Financial Classification of Public Expenses:

Final expenses finalize the allocation of financial resources. They include both current and capital expenses. The majority of performed public expenses are final, finalizing  with payments on certain dates;

Temporary expenses are followed by the finalization by payments with certain due dates. The majority represent treasury actions and are recorded in the special treasury accounts;

Virtual or possible expenses represent expenses that the state engages to make under certain conditions. For example, the guarantees granted by the state for loans can lead to public expenses only if their reimbursement from social resources established or by security debtors can not be achieved;

After the form of manifestation, public expenses can be:

Expenses without a counter-service are budgetary allocations, representing final financing, without any counter-service from the part of the collectivity beneficiary of public resources;

Expenses with counter-service refer to the reception of money from the state, according to the conditions in which such expenses are made: interests for loans, commissions to governmental securities;

Final expenses do not assume the restitution of the amounts of money allocated by the state, while the temporary expenses (loans) are followed by the reimbursement or liquidation of the obligation to provide the state institutions with products or services.

Budgetary expenses have a precise and limited destination and are determined by the authorizations included in specific laws and in annual budgetary laws.

No expense can be written in budgets nor engaged and made from them, if there is no legal basis for such expense.

No expense from public funds can be engaged, ordered and paid if it is not approved according to the law and it has not budgetary provisions.

In cases when they make propositions for elaboration of some projects of normative deeds whose application results in the decrease of revenues or increase of expenses approved through the budget, then the initiators are obliged to provide the means necessary for covering the deficit of revenues or the increase of expenses.

For such purpose the initiators have to elaborate, with the support of the Ministry of Public Finances or of other involved institutions, the financial record accompanying the exposure of reasons or the reasoning note, as the case may be, and which can be updated according to the possible changes intervened in the project of normative deed. In such record there will be the financial effects over the general consolidated budget, which shall take into consideration:

the anticipated changes in budgetary incomes and expenses for the next 5 years;

the annual sharing of budgetary credits, in case of multi-annual actions;

realistic propositions in order to cover the increase of expenses;

realistic propositions in order to cover the minimum of incomes.

After submitting the project of the annual budgetary law with the Parliament, they can approve normative deeds, but only upon mentioning the covering sources for the decrease of incomes or increase of budgetary expenses, regarding the budgetary exercise for which the budget was established.

Factors for the increase of public expenses

Demographic factors. They refer to the increase of population and the changing of its structure per ages and socio-professional categories. For such purpose the increase of public expenses is determined for education, healthcare, social security, public order.

Economic factors. They refer to the development of economy and modernization of the same based on scientific research, on the new requirements for the use of resources and the creation of goods, materials and services. Redistribution of public financial resources helps at repairing the damage created by the competition repartition in the market economy.

Social factors. The increase of the average income per inhabitant in the society makes the state to allocate resources for the amortization of incomes of social categories included in the public sector.

Urbanization. Attracts financial resources for both the creation and the development of urban centers and for financing some pubic units corresponding to the urban environment.

Political factors. They refer to the considerable increase of complexity of charges for the contemporary state, to the transformation of political concept related to the functions of the state, for the completion of whom the increase of public expenses is necessary.