Study sheet: Fundamentals of Public Budget Principles

📋 Course Outline

1. Budgetary principles
2. Annuality and budget execution
3. Unity and universality
4. Exceptions to nonaffectation
5. Specialization of credits
6. Budget balance principle
7. Balance in public administrations
8. European budget rules
9. State resources and classifications

📖 1. Budgetary principles

🔑 Key Concepts & Definitions

• Budgetary principles : Budgetary principles are core rules that structure how the state’s finances are organized and how public money is authorized and used.
• Loi de finance : A financial law is the legal act that sets the state budget, including its revenues and expenditures.
• Magna Carta 1215 : Magna Carta is the 1215 English charter that led to requiring authorization for raising taxes.

📝 Essential Points

• Budgetary principles arose from a parliamentary regime where rulers needed political authorization to handle public funds.
• In 1215, English lords used revolt to obtain the right for taxes to be voted, which strengthened the idea of financial laws.
• The principles in the parliamentary tradition also aimed to prevent abuses and diversion of public money by constraining government action.
• Louis XVIII brought these budgetary ideas back to France, and the main French version developed during the Restoration in the 19th century.

💡 Memory Hook

“Taxes + spending need consent”: budgetary principles tie authorization of revenue to authorization of expenditure.

📖 2. Annuality and budget execution

🔑 Key Concepts & Definitions

• Principle of annuality : The annuality principle requires the state budget law to be adopted before year-end and then executed throughout the following calendar year.
• Urgent finance procedures : Urgent finance procedures are special parliamentary tracks used to keep state spending lawful when the full budget is not adopted by 31 December.
• Authorization of commitment : Authorization of commitment allows the state to commit spending over a period that can extend beyond the year, mainly for investment-type works.
• Payment credits : Payment credits authorize the annual payments due during the year, scheduled according to the progress of the committed works.

📝 Essential Points

• The budget law must be voted before 31 December and executed from 1 January to 31 December.
• The draft finance law must be filed no later than the first Tuesday of October, and the Constitution sets a 70-day maximum for voting the project.
• If the draft is not adopted before 11 December, Parliament must at least vote the first part of the finance law, covering tax authorization and budget balance.
• If the draft is not adopted before 19 December, Parliament votes the first article authorizing taxes, allowing full adoption before 31 December.
• Authorization of commitment can be carried over to the next year on the same or another programme with a joint order from the finance minister and the concerned minister.
• Budget credit carryover is limited to 3% of the initial credits on the affected programme, and carryover is forbidden for personnel expenses by the 21 December 2021 organic law.

💡 Memory Hook

AE commits multi-year; CP pays annually—so annuality applies to CP, not to AE.

📖 3. Unity and universality

🔑 Key Concepts & Definitions

• Unity principle : A budget principle requiring the state budget to be presented in a single document, so parliamentary control avoids dispersion.
• Universality principle : A budget principle requiring full presentation of all state revenues and expenditures to prevent hiding items.
• Non-contraction rule : A universality requirement that revenues and expenditures must be reported in gross amounts, not net, in separate columns.
• Non-affectation of revenues : A universality requirement that specific revenues cannot be assigned to specific expenditures, since all funds are pooled together.

📝 Essential Points

• The unity principle means the state budget appears in one document called the finance law, to avoid spreading information.
• The universality principle forbids contraction, so revenues and credits are shown separately in gross amounts rather than net amounts.
• The non-affectation rule prevents linking a given tax to a given spending line, which pools money before allocation.
• Exceptions to non-affectation include incentive taxes, whose proceeds are directed to behavior-changing aims such as anti-tobacco or anti-alcohol measures.
• The CSG is treated as a clear exception because it funds social security, and its earmarking was accepted through constitutional control.
• Article 6 of the 2001 organic law provides both the non-contraction rule and the non-affectation rule, and amendments such as funds de concours allow conditional use of donated resources under respect of property rights (DC 25 July 2001).

💡 Memory Hook

Uni-ty = one budget document; Uni-versality = full gross amounts, and no earmarks (except incentive taxes and CSG).

📖 4. Exceptions to nonaffectation

🔑 Key Concepts & Definitions

• Incentive taxes : Incentive taxes are levies designed to change behavior by targeting particular products, with their proceeds assigned to specific public objectives.
• Fonds de concours : Fonds de concours are resources contributed with a specific intended purpose that the beneficiary must follow when using the money.
• Rétablissements de crédits : Rétablissements de crédits are accounting operations that annul a payment to recover sums due back to the Treasury or to let the originating administration keep sale proceeds.
• Budgets annexes : Budgets annexes are budgets created for specific activities that let a service retain its receipts, funded mainly by user fees under the conditions of a finance law.

📝 Essential Points

• Nonaffectation can be bypassed when taxes are structured as incentive taxes whose proceeds are earmarked to the related policy objective.
• Fonds de concours require use of the funds in line with the contributor’s intention, and the Council constitutionnel recognized this as a respect of property rights in its decision of 25 July 2001.
• Rétablissements de crédits are used when the Treasury is owed repayments (for example, double salary situations) or when an administration can retain money from selling state assets.
• Budgets annexes are set and ended only by a finance law, and they must be financed mainly by redevances paid by users.
• Budgets annexes are not part of the general budget: they are separate, and each annex budget forms a mission within the finance law.
• Only two annex budgets remain, one for air traffic control (financed by airports and air-line operators) and one for official publications and administrative information (former JORF).

💡 Memory Hook

Fonds = given-with-purpose, Rétablissements = undo-to-restore, Annex budgets = separate cashbox funded by user fees.

📖 5. Specialization of credits

🔑 Key Concepts & Definitions

• Specialization of credits : Specialization of credits is the requirement that budget credits be written in the finance law in a detailed, separated way by divisions and sub-divisions.
• Abonnement system : The abonnement system is the former approach where Parliament voted lump-sum credits and the government then redistributed them freely across ministries.
• Specialty principle : The specialty principle is the later approach where Parliament votes credits in a structured way, first by chapters and then by more specific programming breakdowns.
• Credit transfers : Credit transfers are an exception procedure that changes how credits are allocated, under strict conditions set by the finance organic law.

📝 Essential Points

• Specialization of credits means credits are voted in the finance law with detailed divisions and sub-divisions, so their allocation cannot be changed during execution.
• Parliament used to vote global sums under the abonnement system, which was abandoned in 1817 in favor of the specialty approach.
• After reforms, credits are specialized by programs, reducing the number of votes needed (about a hundred under the 1959 ordinance to about sixty today).
• Credit transfers are allowed under Article 12 of the organic law via a strict decree involving the finance minister and notification of the Assembly and Senate commissions.
• Besides transfers, at least three traditional adjustments can occur during execution: credit virements, accidental expenses, and special funds.

💡 Memory Hook

Abonnement = one big pot; Specialty = sliced votes (chapters → programs). Credits can’t be reshuffled mid-year except via strict transfer/virement paths.

📖 6. Budget balance principle

🔑 Key Concepts & Definitions

• Budget balance principle : The budget balance principle requires the public budget to be balanced so that expenditures match authorized resources rather than being systematically deficit-funded.
• Relative social security balance : Relative social security balance means spending targets can be exceeded because the framework sets objectives rather than a strict spending cap for the social security budget.
• Real balance for local budgets : Real balance for local budgets means each section of a local budget must be balanced between receipts and expenditures without using new borrowing to repay past debt.

📝 Essential Points

• Applied strictly, the principle means mathematical equality between expenditures and credits so resources are set to cover spending.
• France has had systematic deficits since 1981 despite budgets being voted as balanced, with about 300 billion euros in debt to be repaid.
• EU constraints limit deficit to 3% of GDP and public debt to 60% for member states.
• Social security balance is governed through expenditure objectives under Article 34C, so Parliament cannot directly cap social spending as it does for the State.
• Local authorities must keep real balance under Article L1612-4 and cannot borrow to repay a previous loan, or they can be placed under state supervision.

📖 7. Balance in public administrations

🔑 Key Concepts & Definitions

• Public administrations scope : Scope refers to the entities covered by the Maastricht view of balance, namely the state, social security, and territorial local authorities.
• Relative equilibrium social security : Relative equilibrium means social security’s budget balance is set through expenditure objectives rather than a binding spending ceiling.
• Real balance of local budgets : Real balance is the rule for territorial local authorities requiring each budget section to balance its own revenues and expenditures, without offsetting by borrowing.

📝 Essential Points

• Under the Maastricht-based approach, balance concerns the state, social security, and territorial local authorities.
• Article 34C sets general conditions for social security’s financial equilibrium by fixing expenditure objectives based on revenue forecasts.
• Because Article 34C sets objectives but not a spending cap, social security spending may exceed initial forecasts.
• By decision of 18 December 1997, the Constitutional Council allows restoring social security equilibrium to justify making the family allowance payment subject to conditions of resources.
• For territorial local authorities, Article L1612-4 requires real balance for each budget section, without borrowing to repay debt, and failure can lead to supervision by the state representative.

💡 Memory Hook

Contrast rule: Social security uses expenditure objectives (relative), while local authorities require real per-section balance (strict) with no debt-to-repay.

📖 8. European budget rules

🔑 Key Concepts & Definitions

• Stability and Growth Pact : A 1997 EU framework that monitors Member States’ public finances using preventive and corrective procedures based on EU Treaty rules.
• European Semester : An annual EU cycle that translates stability programmes into EU-wide monitoring using the “six pack” set of rules.
• Six-pack : A 2011 package of EU directives and regulations that adds quantitative constraints for both preventive and corrective budget surveillance.
• Fiscal Compact : A 2 March 2012 intergovernmental treaty requiring signatories to adopt binding rules to limit the structural public deficit.

📝 Essential Points

• The Stability and Growth Pact targets a maximum deficit of 3% and a maximum public debt of 60%, with sanctions triggered only under the “excessive deficit” condition.
• The preventive arm (art. 121 TFEU) requires a medium-term budget objective and annual stability programmes, initially without sanctions.
• The corrective arm (art. 126 TFEU) can lead to fines for deficits above 3% of GDP, with an amount of 0.2% of GDP in the described procedure steps.
• Under the six-pack (2011), the preventive rule uses an OMT expressed as a structural balance allowing up to 1% structural deficit, and the corrective rule requires debt reduction by 1/20 over 3 years if debt exceeds 60%.
• For France, the EU placed it under excessive deficit procedure on 26 July 2024 due to debt around 110% and a deficit of 5.5% of GDP linked to an overestimation of growth, with the likely fine reduced to 0.1% of GDP (about 2.5 billion euros).
• During 2020 Covid-related adjustments, an excessive deficit could be tolerated in crisis circumstances, but the EU did not accept France’s Covid tolerance argument because other countries (except Greece and Portugal) had exited the crisis.

💡 Memory Hook

3-60-OMT: deficit ≤3%, debt ≤60%, structural OMT up to 1%, and if debt >60% then cut by 1/20 in 3 years.

📖 9. State resources and classifications

🔑 Key Concepts & Definitions

• Unity of cash : The unity of cash is the rule that the state uses a single public cash desk for collecting and handling resources.
• Impôt vs taxe affectation : The impôt is never earmarked to a specific spending use, while a taxe can be earmarked to a purpose.
• Financial classification of resources : Financial classification sorts state resources by their budget effect, separating definitive resources from temporary ones.
• Definitive resources : Definitive resources are collected without any obligation to repay or to return, so they should not be tied to a specific expenditure.
• Temporary resources : Temporary resources cover amounts related to borrowing, including the borrowed capital and the interest on that capital.

📝 Essential Points

• The classification financière distinguishes definitive resources (no repayment, no restitution, no need for a link to spending) from temporary resources tied to loans.
• Definitive resources include taxes and similar levies, patrimonial income, and funds from third parties such as donations.
• Temporary resources include loan capital and the interest on that capital, since repayment terms and rates are debated for major borrowing.
• In the administrative approach, resources include those the state gets like a domain owner (products of the domain, donations, legacies, shareholding-related income, industrial/commercial activity counterpayments, and borrowings).
• In the PPP-related administrative approach, the state’s resources also include taxes and mandatory social contributions, as well as fines.

💡 Memory Hook

One cashbox: unity of cash; never-aimed impôts, aimable taxes; definitive = keep forever, temporary = loan + interest.

📅 Key Dates

1. 1215Magna Carta de 1215 autorisant le vote des impôts
2. 2 janvier 1959Ordonnance du 2 janvier 1959 (cadre d’adoption/exécution et reports/AE-CP dans le cours)
3. 1er août 2001Loi organique du 1er août 2001 (reprend notamment l’ordonnance de 1959)
4. 25 juillet 2001Décision du Conseil constitutionnel relative au respect du droit de propriété pour les fonds de concours
5. 21 décembre 2021Loi organique du 21 décembre 2021 : interdiction des reports pour les dépenses de personnels
6. 11 décembreDate limite pour l’exécution par procédure d’urgence (loi de finances partielle) au moins pour la première partie
7. 19 décembreDate limite pour l’exécution par procédure d’urgence (loi de finances spéciale) : vote de l’article premier
8. 31 décembreDate limite de vote de la loi de finances pour exécution du 1er janvier au 31 décembre
9. 18 décembre 1997Décision du Conseil constitutionnel sur le rétablissement de l’équilibre financier de la sécurité sociale
10. 30 décembre 1997Décision du Conseil constitutionnel rappelant que les budgets annexes sont financés principalement par des redevances

📊 Synthesis Tables

Balance des administrations publiques : relatif vs réel

Entité	Type d’équilibre	Règle clé dans le cours
Sécurité sociale	relative	Article 34C : objectifs de dépenses, pas un plafond (dépenses peuvent dépasser les prévisions).
Collectivités territoriales	réel	Article L1612-4 : équilibre réel par section, sans emprunter pour rembourser un emprunt, sinon tutelle.
État (cadre général)	mathématique si stricto sensu	Équilibre mathématique dépenses/crédits ; en pratique déficit systématique depuis 1981 (cours).

Exceptions à la non-affectation

Exception	Idée centrale	Ce que le cours en dit
Impôts incitatifs	affectation aux objectifs de changement de comportement	Ex : taxes tabac/alcool dirigées vers lutte contre cancer / alcoolisme (rôle incitatif).
CSG	affectation acceptée comme exception	Créée pour financer la sécurité sociale ; exception « flagrante » admise via contrôle constitutionnel (cours).
Fonds de concours	ressources utilisées selon l’intention du contributeur	Donation ou subvention affectée ; contrôle du Conseil constitutionnel (DC 25 juillet 2001).
Comptes spéciaux (dont comptes d’affectation spéciale)	affectation via comptes intégrés à la loi de finances	Recettes particulières en lien direct avec dépenses ; compléments du budget général plafonnés à 10% (cours).

⚠️ Common Pitfalls & Confusions

1. Mix up annuality with AE/CP: AE can be multi-year, but CP are annual credits that must be re-authorized each year.
2. Confusing unity with universality: unity means one budget document, universality forbids contraction and non-affectation (gross, separate columns; pooled funds).
3. Thinking non-affectation is absolute: the course notes exceptions (incentive taxes, CSG, fonds de concours, and specialized accounts).
4. Assuming local budgets can borrow to repay debt: Article L1612-4 requires real balance per section and forbids borrowing to repay an existing loan.
5. Believing “sincere” means “exact predictions”: the course stresses sincere = absence of intention to falsify / error manifeste, not mathematical exactness.
6. Mixing balance types: security social equilibrium is “relative” (objectives) under Article 34C, while local budgets require “real” section-by-section equilibrium.

✅ Exam Checklist

1. Explain what a loi de finance is and how it authorizes both raising taxes and using budgetary credits.
2. State the annuality principle’s two dimensions: adoption before 31 décembre and execution du 1er janvier au 31 décembre.
3. Describe the “douzième provisoire” practice and how the Constitution (article 47) plus the organic framework make the 31 décembre deadline stricter (as presented).
4. Know the calendar and deadlines for the urgency procedures: lo i de finances partielle before 11 décembre and loi de finances spéciale before 19 décembre, and what Parliament votes in each case.
5. Define and distinguish autorisation d’engagements (AE) and crédits de paiement (CP), including which one is pluriannual and which one follows annuality.
6. Explain reports of credits: the base rule that credits are not carried over, the exception for AE (joint order) and the 3% limit, and the ban for personnel expenses (21 décembre 2021).
7. Present unity and universality: unity = one document; universality = full presentation, no contraction, and non-affectation (pooled funds).
8. List the main techniques that bypass non-affectation: fonds de concours, rétablissements de crédits, and budgets annexes; also mention comptes spéciaux and their categories.
9. Describe specialization of credits: what it requires in the finance law, the historical abonnement system and its abandonment in 1817 for spécialité, and the main execution adjustments (transfers/virements/dépenses accidentelles/fonds spéciaux).
10. Explain the budget balance principle as stricto sensu (mathematical equality) and then the “relative” balance for security social (Article 34C) versus “real” balance for local budgets (Article L1612-4).
11. Define the principle of sincerity: its constitutional/legal anchoring, what “sincere” means for forecasts (relative to available information; absence of intention / error manifeste), and how it becomes stricter for law of settlement (loi de règlement).
12. Reproduce the main European budget rule structure from the course: Stability and Growth Pact (3%/60%, preventive/corrective), the six-pack (OMT structural deficit up to 1% and 1/20 debt reduction), and the Fiscal Compact date and 0,5% rule (as stated).