Participatory Budgeting and Transparency in Municipal Finances

In the recessionary years following the 2008 financial crisis, prominent voices predicted an imminent crisis in state and municipal finances. The voices – including Bill Gates, Josh Ruah, Meredith Whitney, Paul Volcker, and Richard Ravitch – declared or implied that the road to fiscal responsibility lies in reining in the pensions and benefits of public servants. We argue that painting public employees as villains introduces divisiveness in what should be a universal goal of sound public finances. We suggest that the road to fiscal responsibility lies with budgetary transparency and widespread public knowledge of state and municipal finances. A potential key to achieving these objectives is participatory budgeting. We motivate a research question on the local government level: Does participatory budgeting increase transparency? Although it is too early to test this question on the local level, we use country-level data from the International Budgetary Partnership to explore ways to operationalize budgetary transparency in order to measure the association between participatory budgeting and budgetary transparency