In the latest edition of IPF Notes, Simona Prijaković analyses how accurately local units in Croatia and Slovenia plan their budgets by comparing planned and executed revenues and expenditures for 2023. On average, Slovenian units plan their budgets more accurately, with smaller deviations – especially in tax revenues, total revenues and operating expenditures – while Croatian units have larger deviations, especially in expenditures for non-financial assets, operating revenues and total expenditures. The analysis highlights the need for more transparent and cautious budget planning, especially in smaller cities and municipalities and during pre-election periods.

Credible budget planning is essential for strengthening citizens’ trust, ensuring the responsible management of public funds, delivering public services effectively and efficiently, and achieving objectives optimally using available resources. It reflects the ability of local authorities to achieve planned budget revenues and expenditures during the fiscal (calendar) year in accordance with adopted plans, directing funds towards agreed priorities, public services, and sustainable community development.

The comparative analysis of planned versus actual revenues and expenditures in Croatian and Slovenian local units for 2023 shows that, on average, Slovenian local units generally plan more realistically than Croatian ones. In both countries, the most significant deviations occur in revenues from non-financial assets (around 70%) and revenues from grants (around 44%), particularly in smaller municipalities and cities. Meanwhile, local units with more than 35,000 inhabitants generally have the lowest deviations in revenues and expenditures. In Slovenia, the smallest deviations are seen in tax revenues (3%), while in Croatia, they are in operating expenditures (18%). Notably, only 16% of all observed local units managed to keep the deviations of total revenues within an acceptable 5%, and even fewer, just 10%, when it comes to total expenditures. Slovenian units are more often within these limits than Croatian ones.

The author summarises a set of policy recommendations to improve the budget credibility, including clearer reporting on deviations and their causes, more realistic planning, and strengthening fiscal responsibility.

This Note was created as an outcome of the Outbound Mobility Programme, implemented by Simona Prijaković at the Faculty of Economics and Business, University of Maribor, Slovenia, funded by the Croatian Science Foundation (MOBODL-2023-12-3604).