1. Toward a More Inclusive and Effective Participatory Budget in Porto Alegre

2. 2 AGENDA 1.Context 2.Objectives 3.Scope and Methodology 4.Impact Evaluation 5.What else have we learned?

3. 3 CONTEXT Porto Alegre was one of the first local government to adopt PB as the core policy for improving governance and reducing social inequalities Macro Changes in Brazil: The process was initiated during the early years of re-democratization and decentralization in Brazil, which significantly expanded the fiscal, political and administrative space of local authorizes Local Innovation: It started as a response to social pressure for opening decision making and reducing social inequalities, but also as a strategy of a progressive mayor to gain social support for his progressive agenda under a constrained fiscal situation, and adverse local council No Single Model: From its early experimental phase, PB has evolved from a very simple governance approach to highly diversified forms of engaging citizens in the budgeting process Global Dissemination: From a left-wing administration in Porto Alegre, it rapidly expanded in more than 200 cities across the political spectrum in Brazil, Latin America, North America, Europe, Africa, and Asia

4. 4 CONTEXT ESW: Joint initiative of LAC Social Development Unit and the Social Development Department Anchor Demand driven: Municipal Government of Porto Alegre and Participatory Budgeting Council (COP) requested WB support to strengthen the PBsustainability  PoA moved from a fiscal surplus to deficit in 3 consecutive years  About R$ 30 million of public investments prioritized through the PB process on hold  Transition in political leadership

5. 5 OBJECTIVES Analyze the key challenges and recommend strategic reforms for improving the PB process Research Questions:  How can the “quality of participation” in the PB be improved?  How can the interface between the PB and municipal fiscal management be strengthened?  How can the capacity of the PB to monitor budget execution be improved?  How can a more coherent system of social accountability in the city be established,  How to improve the articulation between the PB and different participatory fora?  What are the social and fiscal impacts of the PB?

6. 6 SCOPE AND METHODOLOGY Conceptual Framework WDR 2004: “the long route of accountability”

7. 7 SCOPE AND METHODOLOGY Chapter 1: Quality of Participation  representative survey of Porto Alegre households 1300 interviews Desegregated by gender, age, income, and territory  Focus groups with PB participants and non-participants  Interview with key informants Chapters 2, 3, 4: Interface between PB and Municipal Finance Management, Budget Execution Oversight, the broader local governance space  Information gathering covering the past 15 years  Review of key data on municipal revenue and expenditure  Review of budget policies and guidelines  Review of key internal audit reports  Focus groups with PB participants and non-participants  Interview with key informants Chapter 5: Impact Evaluation  Uses econometric tools to undertake a counterfactual analysis of the fiscal and social impacts 150 PB municipalities Porto Alegre

8. 8 IMPACT EVALUATION The impacts of PB on Brazilian municipalities Challenges/Limitations  Need to isolate the influence of PB from other variables which affect social and fiscal outcomes i.e.: tendency to find PB in LGs run by the Workers Party which have progressive polices independently of having or not PB  PB potentially impacts on many areas, which were beyond the scope of the ESW  Certain impacts are likely to occur over a longer time period which data is not often available Approach  Use of well-known econometric techniques to evaluate impact on intended variables  Isolating the causal relationship is the most important aspect to make compelling arguments  Comparing Brazilian municipalities that adopted PB to a group of non-PB municipalities with similar characteristics before the baseline point.

9. 9 IMPACT EVALUATION Although Porto Alegre became internationally known for its progressive governance agenda, few studies tried to estimate the PB impacts Marchetti’s (2004) evaluation concluded that PB in PoA led to a more progressive distribution of public goods, but did not provide contracfactual to compare results Zamboni’s (2007) research used randomly Audit Report from CGU to suggest that PB municipalities were likely to have less corruption than non-PB municipalities Baiocchi et all (2006) used cross-sectional data and a pairing approach to suggest a positive impact on empowerment and poverty reduction The ESW built on these previous studies, but it used the same set of variables in years prior to the baseline to control for municipalities which have similar dynamics in the intended outcomes before PB was implemented

10. 10 IMPACT EVALUATION Expected outcomes of participatory budgeting What effects are expected from PB? What are the mechanisms through which it causes the expected effects? What variables are proxies for outcomes? Strengthened pro- poor capital investments. PB is a municipal governance approach that aims to close the gap between the preferences of the poor and decision making by means of empowering the poor to voice their needs in capital budget formulation. As such it is expected to come up in the short-term with a capital budget more consistent with the real needs of the poor. Access to water Access to sewerage By means of redirecting capital budget to pro-poor investment, it is expected that OP can have a mid- to long-term positive impact on poverty Poverty headcount Strengthened budget transparency and literacy PB is municipal governance that aims to strengthen budget transparency and citizen awareness. As such it, is expected to come up with increased local tax compliance, a better balance between current and capital expenditure and a lower incidence of corruption IPTU divided by municipal GDP as a measure of the willingness to pay taxes Incidence of mismanagement of public funds (as evaluated in Zamboni)

11. 11 IMPACT EVALUATION Positive social impacts However, impacts on poverty reduction is more evident in the long run Positive impact on local tax collection However, the impact on capital investment to current expenditures is negative

12. 12 What else have we learned?

13. 13 AUGUST/ SEPTEMBER Discussion and vote on the Budgetary Matrix; beginning of the distribution of resources for the regions and non COP themes. Second Fortnight APRIL/ MAY Single round of assemblies in the regions; election of the thematic priorities; election of councilmen. MAY/JUNE/JULY Regions, Thematic and Municipal Forums of Employees; Election of delegates; Prioritization of works and services. MARCH/ APRIL Preparation Meetings in the regions; Integration meetings of the delegate forums and planning forums. First fortnight JULY Municipal Assembly JULY/ AUGUST/ SEPTEMBER Analysis of the demands and organization of the matrix. NOVEMBER/ DECEMBER Discussion in the regional, thematic forums and municipal forum of employees of the alterations of the Internal Regime, general, technical and regional criteria. DECEMBER/ JANUARY Discussion and vote on the Internal Regulation, general, technical and regional criteria. FEBRUARY Recess OCTOBER/DECEMBER Detail of the Investment and Service Plan. Finalization of the distribution of resources to the regions. Data to send the LDO to the Chamber of Councilmen – August 15th. Approval of the LDO by the Mayor by Oct 10. Sanction of the LOA by the Mayor – December 15th. Data to send the LOA to the Chamber of Councilmen – October 15th. Interface between PB and Municipal Finance

14. 14 Interface between PB and Municipal Finance The revenue forecasting capacity deteriorated in recent years. Accuracy of municipal income forecasts, 1995–2005 Expected Income = Actual Income 70% 75% 80% 85% 90% 95% 100% 105% 110% 19951996199719981999200020012002200320042005

15. 15 Interface between PB and Municipal Finance The share of investment prioritized through the PB in relation to total capital investment decreased in recent years. Percentage of total investments planned by the PB, 1997–2006

16. 16 Interface between PB and Municipal Finance The capacity to executed the PB decreased continuously % of PB Priorities Executed 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 19992000200120022003200420052006 Ano %

17. 17 PB as an Independent Budget Oversight Mechanisms

18. 18 PB as an Independent Budget Oversight Mechanism Although the PB formally enables citizens to monitor the execution of the Investment Plan, oversight takes place mainly in an ad- hoc manner. The PB has not fulfilled its potential to improve budget literacy, and has paid scant attention to budget oversight.

19. 19 The PB enjoys credibility among participants and the population of Porto Alegre as a whole. Public perception of the PB by percentage of population, 2006 Quality of Participation

20. 20 Evolution of the number of PB participants 1990 to 2006 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 19901991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 20052006 Year Number of OP participants General Total Although the initial increase in the number of participants, the trend started to reverse in recent years Quality of Participation

21. 21 Quality of Participation Social groups that suffer from a lack of incentives to participate: extremely poor, youth, middle- and high-income groups, entrepreneurs. Over-representation of elder people.

22. 22 Mismatch between the PB’s positive public perception and its weak internal accountability system Uneven playing field for PB participants in delegating to upper levels of representation Lack of systematization and records in reporting mechanisms between delegates and their constituencies. Quality of Participation

23. 23 THANK YOU