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The financial referendum (also known as a budget referendum) is a form of the
referendum A referendum, plebiscite, or ballot measure is a Direct democracy, direct vote by the Constituency, electorate (rather than their Representative democracy, representatives) on a proposal, law, or political issue. A referendum may be either bin ...
and an instrument of
direct democracy Direct democracy or pure democracy is a form of democracy in which the Election#Electorate, electorate directly decides on policy initiatives, without legislator, elected representatives as proxies, as opposed to the representative democracy m ...
. It always relates to parts of the public budget of a government and allows citizens to vote directly on individual budget items. Certain initial conditions are usually defined as a prerequisite for holding a financial referendum. In most cases, only budget items that exceed a certain absolute amount or a certain proportion of the total budget or investments that will burden the budget for a number of years can be subjected to a financial referendum. The financial referendum may be either optional or mandatory. In its optional form a specified number of signatures from voters must be collected within a certain time period to trigger a vote on a budget item. A mandatory financial referendum automatically leads to a vote as soon as the conditions regarding the amount and duration of a budget item are met. Budget items that do not meet the specified conditions or that the local authority is legally obliged to do cannot be subject to a financial referendum.


Switzerland

The financial referendum in
Switzerland Switzerland, officially the Swiss Confederation, is a landlocked country located in west-central Europe. It is bordered by Italy to the south, France to the west, Germany to the north, and Austria and Liechtenstein to the east. Switzerland ...
exists in all cantons and many
municipalities A municipality is usually a single administrative division having municipal corporation, corporate status and powers of self-government or jurisdiction as granted by national and regional laws to which it is subordinate. The term ''municipality' ...
. It does not exist however at the federal level. While a few cantons have used the instrument since the 19th century, it has only spread throughout Switzerland since the 1970s. Most cantons and municipalities do not allow both the optional or the mandatory financial referendum. In a few cantons both types exist, whereby higher requirements apply to the obligatory type. An example from the Canton of Zurich, which included the financial referendum in the complete revision of its constitution in 2005: The introduction of the financial referendum at federal level has been discussed in Switzerland for several decades, but has so far been rejected by a majority of Swiss political parties.  Critics argue that a federal financial referendum could hinder the Federal Council in its freedom of action, and delay or even block important investments.


United States

Colorado Colorado is a U.S. state, state in the Western United States. It is one of the Mountain states, sharing the Four Corners region with Arizona, New Mexico, and Utah. It is also bordered by Wyoming to the north, Nebraska to the northeast, Kansas ...
and some local governments have enacted a Taxpayer Bill of Rights which mandates any tax and spending increases exceeding a certain limit be approved by referendum.


Effects and reception

Financial referendums have a moderating and disciplining effect on public funds and reduce centralization of government spending. Disproportionately high or unpopular expenditure will most likely not be approved by the citizens in referendums, and referendums are associated with significantly lower public expenditure and taxes. Controlling for other factors of spending and demographics, data from Swiss cantons shows having mandatory financial referendums cause an average reduction of government spending by 19%. Proponents of the financial referendum argue it has features of citizen participation. Comparable to other procedures of citizen participation, it expands the democratic influence and citizens beyond the framework of the legislation to other socio-political issues. Its proponents therefore see the financial referendum as an important step towards further deepening democracy. It strengthens citizens' preoccupation with community finances and promotes awareness of public investment. Due to the largely positive experience with the financial referendum in Switzerland, some civil society organizations in
Germany Germany, officially the Federal Republic of Germany, is a country in Central Europe. It lies between the Baltic Sea and the North Sea to the north and the Alps to the south. Its sixteen States of Germany, constituent states have a total popu ...
{{Cite web, last=Demokratie, first=Mehr, title=Mehr Demokratie e.V. Landesverband Berlin/Brandenburg: Finanzreferendum, url=https://bb.mehr-demokratie.de/berlin/berlin-referendum/finanzreferendum/, access-date=2021-08-29, website=Mehr Demokratie e.V., language=de-DE and
Austria Austria, formally the Republic of Austria, is a landlocked country in Central Europe, lying in the Eastern Alps. It is a federation of nine Federal states of Austria, states, of which the capital Vienna is the List of largest cities in Aust ...
are calling for it to be introduced there as well.  In many cases this would require a change in their respective constitutions because these often explicitly prohibit votes on parts of the budget, or simply no regulations exist for holding a financial referendum. Critics of the financial referendum mostly argue that it could block important investments and limit the administration's ability to act. In addition, in contrast to the administration and parliament, citizens are often not in a position to objectively assess the appropriateness of larger budget expenditures.


See also

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Direct democracy Direct democracy or pure democracy is a form of democracy in which the Election#Electorate, electorate directly decides on policy initiatives, without legislator, elected representatives as proxies, as opposed to the representative democracy m ...
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Participatory budgeting Participatory budgeting (PB) is a type of citizen sourcing in which ordinary people decide how to allocate part of a municipal or public budget through a process of democratic deliberation and decision-making. These processes typically begin ...


References

Direct democracy Politics of Switzerland Referendums in Switzerland Referendums by issue