Critical Evaluation of Czech Municipal Spending Predictive Models

The aim of the paper is detailed knowledge of factors that affect the volume and structure of municipal expenditures, based on research of budgetary expenditures of 6258 Czech municipalities. The sustainability of the public sector is not yet widely discussed in the professional public. As the Gutherie & Farneti (2008) study shows, the first area has been voluntary reporting in Australia.Design/methodology/approach: The sample used for basic results are 6258 Czech municipalities and their budgets. The data sources are three systems of Ministry of Finance of the Czech Republic – ARIS, ÚFIS, and MONITOR. The analyzed predictive model assumes constant grow rate. The analysis is based on the generated time series of the municipal budgets.Findings: Some factors have a greater impact on public budget size; the impact of other factors is primarily structural. Analyzed predictive model with constant growth rate doesn’t allow a satisfactory estimation of future values. General predictions based on this model could be used in the economic growth; it is not applicable in times of economic crisis. This issue could be fixed by adding more parameters of the prediction like GDP.Research/practical implications: The entire thematic framework is illustrated by case studies, which are based on 3 municipal budgets. Attention is paid especially to big cities with the largest budgets, municipalities with financial problems (bad practice) and municipalities with healthy financing (best practice).Originality/value: Several theoretical publications are dedicated to this area. However, there are almost no studies on real data. For example, Ochrana and Pavel deal with an analogical issue in Czech conditions. This is the opportunity for future cooperation.