1. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 1 PLANNING WAGE BILL EXPENDITURES Saša Jazbec, Director General / Budget Directorate Ministry of Finance Ljubljana, April 2016

2. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 2  BUDGETING IN GENERAL  FISCAL FRAMEWORK  BUDGET PREPARATION AND WAGE BILL PLANNING  FINANCIAL PLANNING  WHAT HAPPENS IN PRACTICE AGENDA

3. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 3 LEGAL BASIS:  Public Finance Act  Decree on Development Planning Documents and Procedures for the Preparation of the National Budget  Budget Implementation Act  The Constitution (Art. 148)  Fiscal Rule Act  Stability and Growth Pact BUDGETING IN GENERAL

4. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 4 BUDGETING IN GENERAL A two-phase planning: 1. Fiscal framework for the general government sector (S.13, ESA methodology)  Objective: To achieve a sustainable medium-term fiscal objective  for the next three years (t + 1, t + 2, t + 3)  adoption by end of April (government, National Assembly) 2. State budget 2-year budget (t + 1, t + 2) Preparation of the Government and ministries by end of September Adoption in National Assembly until year end

5. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 5 PUBLIC FINANCE IN SLOVENIA

6. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 6 DOCUMENTS AND TIMELINE (new PFA) November: Beginning of "budgetary tasks" December: Decision on the priorities at the national level January: Performance assessment, measures to improve March: Medium-term fiscal framework April 10: Framework for preparing the budgets of government (according to Fiscal Rule Act) April 30: Stability Programme May - August: Preparation of annual budgets & financial plans September: Adoption of State budget (by government) October 15: Draft budgetary Plan nov dec jan feb mar apr maj jun jul avg sept okt nov dec Stability Programme Mid - term planning Annual budgets and fin. plans prepparation State budget in the Parliament

7. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 7 FISCAL FRAMEWORK Medium-term fiscal framework: for the next 3 years (2017-2019) Objective: Balanced structural balance of the general government in 2020 The target value of the balance of government (% of GDP) and expenditure ceiling DOCUMENTS National Reform Programme (description of priorities and measures for individual policies) Fiscal framework Stability Programme SPONTANEOUS SCENARIO - the basis is the estimated realization for the current year - legal rights and agreements are taken into account Expenditure ceiling TARGET SCENARIO - restriction of wage bill growth - proposal of measures

8. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 8 STATE BUDGET PREPARATION 1.REVENUE ESTIMATION, based on outturn of previous year and the macroeconomic indicators (FISCAL ENVELOPE) 2.Determination of EXPENDITURE CEILING and TARGET DEBT (FISCAL FRAMEWORK) 3.Preparation and adoption of expenditure ceilings by policies / programmes and users (legal obligations: wages, interest payments, social transfers + „left-overs“) 4.Instructions for the preparation of the draft budgets 5.Negotiations / coordinations with line ministries (arguments for additional funding) as well as preparing proposals of financial plans 6.Adoption of budget & budget memorandum by the government 7.Submission to the National Assembly

9. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 9 DETERMINATION OF WAGE BILL Wage bill of state budget consists of wages for: - officials employed by direct budgetary users (170 DBU‘s of state budget) - officials employed by indirect budgetary users (funds, agencies, public institutions) – transfer On the basis of realisation 2015, taking account of employment and rights deriving from law, agreements (promotion, pay for annual leave….) for year 2016 Estimated realization of 2016 FPP 1 3.800 d.e. FPP 2 250.000 d.e. FPP 3 40.500 d.e. FPP 4 12.200 d.e. General growth 2,5,% (it applies to all budget users) Special rules (it applies only to certain budget users) Limit for 2017 (salaries) FPP 1 3.895 d.e. FPP 2 248.250 d.e. FPP 3 49.512 d.e. FPP 4 13.505 d.e. Special rules: -Transfer of employees from FPP2 to FPP 3 (value 8.000 d.e.) -Additional sources for the project at FPP 4 (value 1.000 d.e.)

10. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 10 FINANCIAL PLANS PREPARATION Budgetary user must take into account the total allocated limit / expenditure ceiling (envelope) for its financial plan, already adopted legal obligations, implementation of potential measures (decision taken by the Government), within the financial plan funds for various purposes not binding. Example (wages): assigned limit on salaries 103 the user evaluation on salaries: 100 (3 allocated to other purpose) the user has to present a a personnel plan, which is in line with the proposal of the funds, ie 100

11. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 11 AFTER THE BUDGET ADOPTION Users must align personnel plan with wage bill (subject to change during the adoption in the National Assembly) Personnel plan does not contain structure of employees nor is it evaluated, thus actual coordination is difficult to verify If a shortfall of wage bill occurs, reallocations according to Budget Implementation Act are employed:  up to 2% of the funds for the salaries can be reallocated from savings in material costs (by budgetary user)  from savings on other purposes within the financial plan (by Government)  from the reserve (for contingent liabilities) or savings from other users (Government) If leftovers occur (wages or other purposes):  they remain unused, thus reducing deficit  possibility of reallocation to other purpose within the financial plan or  possibility of transfer to another user to cover urgent liabilities.

12. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 12 PRACTICE If measures and the agreement with Trade Unions are not taken in time and the agreement is higher than financial resources provided: additional resources are provided through reallocations or supplementary budget is adopted. Examples of poor practice:  PLANNING RESOURCES too low: at year end, request for additional funds (especially users with high proportion of salaries and low proportion of the programmes)  PLANNING RESOURCES too high: with purpose of a subsequent increase in the perosnnel plan or extra payments for good performance (especially users with low share of wages expenditure and high proportion of other programs)

13. REPUBLIKA SLOVENIJA MINISTRSTVO ZA FINANCE 13  Thank you for your attention  Any questions?