Understanding the State Budget: Structure & Method
Budget: Concepts, Structure, and Production Method
6.1. Budget Concept
The budget can be defined as the accounting expression of a business plan for the Treasury, covering a specific period. It is the instrument that addresses the distribution of scarce resources among various needs. Its key features are:
- It’s a prediction formalized in a law.
- It has an accounting book.
- It is formally balanced.
- It is prepared for equal and successive periods.
The General State Budget is the encrypted, joint, and systematic expression of the rights and obligations to be settled during the year for each of the bodies and entities within the state sector.
6.2. Structure of the Budget
6.2.1. State Revenue
State revenue is classified according to two criteria:
Organic Classification: This distinguishes revenue for the General State Administration, Autonomous and Local Administrations, and Autonomous Agencies. It also differentiates income from Social Security.
Economic Classification: This is determined by the type of financial resource. Resources are classified into chapters, articles, concepts, and sub-concepts. These are further divided into:
- Current Operations:
- Chapter I: Direct taxes and social contributions.
- Chapter II: Indirect taxes.
- Chapter III: Fees, public charges, and other income.
- Chapter IV: Current transfers.
- Chapter V: Property income.
- Capital Operations:
- Chapter VI: Disposal of real investments.
- Chapter VII: Capital transfers.
- Financial Transactions (Chapters VIII and IX):
- Chapter VIII: Financial assets.
- Chapter IX: Financial Liabilities.
6.2.2. Expenditure
The classification of budget appropriations is based on organic, economic, and program standards.
Organic Classification: This distributes credits to management centers with budgetary differentiation (e.g., Ministries). It is distinguished by a two-digit code called a “Section.”
Economic Classification: Within each section, credits are arranged according to their economic nature into nine chapters:
- Chapter I: Personnel costs.
- Chapter II: Current expenditure on goods and services.
- Chapter III: Current Transfers. Subdivided based on the recipient:
- Art 40: The Administration.
- Art 41: Administrative Autonomous Bodies.
- Art 42: Social Security.
- Art 43: Autonomous Commercial, Industrial, and Financial Bodies.
- Art 44: Public Companies.
- Art 45: Autonomous Communities.
- Art 46: Local Corporations.
- Art 47: Private Enterprises.
- Art 48: Families and non-profit institutions.
- Art 49: The Exterior.
- Chapter VI: Real Investment (credits for the creation or acquisition of capital goods).
- Chapter VII: Capital transfers.
- Chapter VIII: Financial Assets.
- Chapter IX: Financial Liabilities.
Program Classification: This groups credits according to the objectives they aim to achieve:
- Group Function: Considers these groups:
- Group 1: General Services.
- Group 2: Defense, Civil Protection, and Citizen Security.
- Group 3: Safety, Security, and Social Development.
- Group 4: Production of public social goods.
- Group 5: Production of public economic goods.
- Group 6: General economic regulation.
- Group 7: Economic regulation of productive sectors.
- Group 8: Transfers to other national and supranational governments.
- Group 9: Public Debt.
- Function: A step in the breakdown of spending, but still offers highly aggregated data.
- Subfunction: Refers to a fairly disaggregated classification of Public Spending.
- Program: The most disaggregated level of information within this classification; used to record the allocation of public resources.