Budget Punctuations in Czech Local Government

Purpose: This paper aims to identify which phases of the budgetary process are, according to the predictions of punctuated equilibrium theory, more prone to punctuations; to determine the factors influencing the occurrence of punctuations in these phases; and to test these assumptions using Czech regional data from 2005 to 2023.Design/methodology/approach: The study utilises data on Czech regional current expenditure from 2005 to 2023, disaggregated into 113 functional budget lines. A two-sample Z-test is employed to determine whether the number of large annual changes in a functional budget line differs across the approved, amended, and executed budgets. A binary logit model is applied to assess whether external shocks, electoral changes, or budget complexity increase the likelihood of punctuations in the different budget phases.Findings: The analysis reveals that punctuations occur more frequently in budget allocation than in actual spending, and that greater complexity in the budgeting process leads to an increased number of punctuations. The number of punctuations rose during the rebudgeting phase in response to the COVID-19 outbreak in 2020 and the influx of Ukrainian refugees in 2022. Elections and changes in government leadership were found to have no significant impact. Academic contribution to the field: This paper offers a novel application of punctuated equilibrium theory by linking it to the distinct phases of local government budgeting. It traces the evolution of punctuations across the stages of approved, amended, and executed budgets, and evaluates the influence of external shocks. The study demonstrates the theory’s adaptability in analysing the effects of unprecedented events on public policy and budgeting. Originality/significance/value: The research recognises the differentiation between local government budgeting phases in terms of institutional costs and exogenous shocks affecting decision-making and implementation. This segmentation of the budgetary process makes a significant contribution to both the theoretical understanding and practical application of the punctuated equilibrium theory.