A Closer Look at Regional Government Expenditure Changes in Indonesia

This study seeks to investigate the underlying motivations behind budgetary changes at the regional government level and whether budget variance and fiscal stress are the principal determinants of such alterations in regencies and cities throughout Indonesia. The sample for this study includes 224 regencies and cities in Indonesia, selected through purposive sampling from a total population of 514. The results indicate that budget variance and fiscal stress significantly influence budget changes, whereas revenue variance are not a driving force for budget changes within the regional governments of Indonesian regencies and cities.

These results suggest that the government, as the executive authority responsible for budget execution, tends to maximize budget allocations for expenditures. Empirical evidence shows that Regional Budgets are consistently structured with budget allocations reaching the maximum threshold, resulting in a balanced budget without surplus or deficit. Conversely, the magnitude of revenue variance from the preceding fiscal year is not a reason for regional governments to initiate changes to their budget allocations. Furthermore, a high level of fiscal stress is a driving factor behind budget changes in regional governments. These research findings have profound implications and recommendations for regional governments in policy formulation and resource allocation in the Regional Budgets to reduce the magnitude of regional expenditure variance. It also serves as a practical guide for budget changes to lower fiscal stress levels within the Regional Budgets, aiming to reduce the budget deficits in the actual budget realization reports.