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At the ad hoc session of the Parliament of Georgia held on 20 November 2013, Member of the Parliamentary Minority, Vakhtang Lemonjava, stated:  “After nine months, only 57% of the projected funding has been directed towards the financing of Goods and Services while in the case of the overall budget spending, 73% of the amount has been funded. This virtually represents a sequestration. You are just avoiding the term “sequestration” and transferring the funds towards transitional projects. In actuality, there is a shortage of around 700 million in the budget.”

FactCheck

inquired about the accuracy of the facts pointed out by the MP.

At the time of issuing the abovementioned statement, the budget execution data had been published only for the first three quarters of the year and so our further inquiry about the accuracy of the statement is based only upon the data of those three quarters.

The state budget’s Goods and Services article includes the expenditures related to office expenses, business trips, transportation, representation, military equipment and so forth. In line with the 2013 budget plan, a total of GEL 854.7 million was earmarked for the funding of this article while according to the three quarter budget execution report, GEL 489.4 million was spent for the purpose. As gathered from the table below, the plan of the budget expenditures (for the Goods and Services article) has been fulfilled only to 57%. This is precisely the figure indicated by the MP in the statement and it represents a fairly low indicator for three quarters.

Table 1:  Budget Execution of Expenditures (three quarters) lem

The MP also touches upon the matter of the funding for overall budget spending in which, according to the 2013 budget plan, the expenditures were defined in the amount of GEL 7,248 million while the budget execution in three quarters totalled GEL 4,385 million. This figure equals only 60% of the planned amount which is less than the 73% indicated by the MP.

Considering the fact that on average the funding was provided for 20% of the total expenditures in each quarter, the execution of 73% in nine months would have been a fairly decent indicator. However, as only 60% of the funds have been administered for the budget expenditures in the first nine months, the possibility of financing the full 100% by the end of the year remains under a question mark.

Table 2:  State Budget Execution (three quarters) lem2

As can be seen in the table above, the initial forecasted indicators for the receipts of the first nine months of 2013 amounted to GEL 6,102 million prior to the revision whereas the budget execution for the same period equalled GEL 5,353 million. The difference between these figures reveals a shortfall of GEL 749 million in the budget which confirms the statement of the MP pointing out the “shortage of 700 million” in the budget.

The Dictionary of Civil Education offers the following definition of the term sequestration:

 “The proportional monthly spending cuts in all articles of the budget throughout the remainder of the financial year. The term is used in the case if in the process of the budget execution the deficit in the budget surpasses the defined threshhold or the budget revenues are significantly shrinking. Normally, the protected articles of the budget are not liable to sequestration.”

Taking into account the fact that in the given situation, according to the data of the three quarters, the  budget expenditures did not see monthly proportional cuts in all articles, it is safe to say that sequestration did not take place in the classical meaning of the term. It should still be emphasised, however, that the occurred changes prompted approximately the same effects as sequestration is known to do; that is, some of the expenditures foreseen in the budget failed to be financed.

Table 3:  Budget Execution of Expenditures (11 months) lem3

For a deeper insight into the matter, it is of interest to analyse recent data on the budget execution as well. As gathered from the table above, in the period of 11 months only 77.9% of the funds foreseen for the financing of goods and services were provided for this purpose. Accordingly, 22.1% of the expenditures would have had to be covered in one month for securing the full execution of the budget in 2013. Therefore, this data once again confirms the notion about the failure of the budget execution in the Goods and Services article. The table also portrays that sequestration in the traditional sense of the term has not taken place as the proportional cuts have not been introduced in all articles of the budget spending.

As for the 12 month budget execution report, it has not yet been published, but according to the official website of the State Treasury (which publishes data on the initial remainder, receipts, taxes, payments and final remainder), the budget receipts in the 12 month period totalled GEL 7.6 billion while the forecast for the year defined the receipts to amount to GEL 8.4 billion. Accordingly, a shortfall of GEL 800 million is evident in the budget. The budget payments throughout the year amounted to GEL 8 billion while the budget plan projected 8.8 GEL billion. This information further strengthens the belief about possible budget sequestration in the last month of 2013. No definite assertion, however, can be made without the final budget execution report of 12 months. In accordance with the Budgetary Code of Georgia, the yearly report on the State Budget of Georgia is to be presented to Parliament no later than 15 June (Article 58).

Conclusion

At the ad hoc session of the Parliament held on 20 November 2013, Vakhtang Lemonjava spoke about the 2013 budget sequestration. Our research based upon the nine month budget execution report confirmed the accuracy of Lemonjava’s assertion regarding the 57% funding of the Goods and Services article. The funding of the overall budget spending has been executed to 60% which is less than the figure named by the MP – at 73%. The Ministry of Finance reports that the receipts of the State Budget of Georgia saw a shortfall of GEL 749 million in the first three quarters of the year which comes in agreement with the MP’s statement.

Conforming to the traditional definition of the term “sequestration,” and relying upon the data of the three quarters, at this stage FactCheck

refrains from using the term sequestration but deems Lemonjava’s pathos regarding the government’s failure to provide the projected funding for the budget expenditures to be perfectly logical.

Consequently, we conclude that Vakhtang Lemonjava’s statement:  “After nine months, only 57% of the projected funding has been directed towards the financing of Goods and Services while in the case of the overall budget spending, 73% of the amount has been funded. This virtually represents a sequestration. You are just avoiding the term “sequestration” and transferring the funds towards transitional projects. In actuality, there is a shortage of around 700 million in the budget,” MOSTLY TRUE.