Budgeting with community participation

The city of Porto Alegre in southern Brazil over 10 years ago began an innovative experiment that gave community input a crucial role in municipal management. First tried in 1989, “participatory budgeting” gained popularity and was eventually adopted by almost 180 Brazilian municipalities and several other Latin American countries.

The IDB recently commissioned a study of the system by the Center for Urban Development Studies of the Harvard University Graduate School of Design to assess the extent to which participatory budgeting is fostering the efficient, democratic allocation of resources and citizen involvement in the planning and management of the localities that use it. The result demonstrates that participatory budgeting is an effective instrument for empowerment and contributes to the IDB’s goal of enhancing social equity.

In a workshop organized by IDB’s Sustainable Development Department, Mona Serageldin, Associate Director of the Center and project team leader, presented her report. The assessment drew on extensive field research in Porto Alegre, other cities and the state of Rio Grande do Sul, the only state to have successfully implemented participatory budgeting.

Serageldin explained how Brazil’s 1988 Constitution gave new authority and a share of national tax receipts to municipalities, prompting some mayors to institute reforms and innovations for sound municipal governance. Subsequent constitutional amendments included the Fiscal Responsibility Act of 2000, which introduced fiscal accountability and transparency at all levels of government, through such measures as public access to fiscal and budget information.

Now required to ensure citizen involvement in local decision-making, municipalities began to experiment with different systems. Porto Alegre’s experiment was so successful that the city gained international recognition as a leader in democratic transparency and accountability in local governance.

The cornerstone of the system is community meetings. These begin in the early spring with preparatory meetings at which the municipality reports on execution of the previous year’s budget and investment plan, and local priorities are discussed. Then two types of meetings are held: at “thematic plenary” meetings, local residents review the state budget and vote on their priorities for investments; at “regular plenary” meetings, they elect delegates who will represent them.

In June, the delegates hold a “forum of delegates” to review projections of the city’s income and expenditures. The delegates also visit the sites for which funding has been requested for works and services in order to assess needs. Then, they prioritize projects in each area of investment according to specific indicators and a scoring system. Also in June, the newly elected city participatory budgeting council (COP) takes office and submits the priorities to the city government.

During the second half of the year, the COP works with the municipality to harmonize the priorities established by the community delegates with the infrastructure needs identified by the city. Together, the COP and municipality prepare a budget plan and investment and services plan, which are submitted the mayor and city council for final approval.

In the discussion that followed Serageldin’s presentation, an economist asked whether participatory budgeting was economically efficient. Serageldin stressed that the system is an instrument for social inclusion, not economic efficiency, and her study showed that participatory budgeting has indeed achieved this goal. For example, in the state of Rio Grande do Sul, the neediest groups, which were estimated at 10% of the population, are now receiving 56% of the state housing budget. Since participatory budgeting for housing was introduced in 1996, she pointed out, there has been no squatting because people feel included.