FACTBOX-Czech budget process and provisional budget

    PRAGUE, Sept 26 (Reuters) - The Czech Republic has seen a 
sharp worsening of its budget outlook since the lower house 
election in June, and lasting political instability has thrown 
doubt on the fate of the 2007 budget draft. 
    The budget troubles, blamed by the new rightist minority 
cabinet on the previous leftist administration, have most likely 
buried the previous leftist government's plan to adopt the euro 
in 2010. 
    The government approved the central 2007 state budget draft 
on Monday but still needs to find support for it in parliament. 
    The following are basic facts about the budgetary process 
and what happens if no budget is approved. 
     
    BUDGET BASICS 
    * Central state budget approved by cabinet on Monday sees 
revenues of 966.7 billion crowns, expenditure of 1,058 billion 
and deficit of 91.3 billion ($4.08 billion). 
    * The budget includes 31 billion crown income from 
privatisation, and also expects 27 billion in extra revenue and 
savings being debated by parliament. 
    * The law on the state budget as such includes only central 
government operations.  
    * However, the key indicator is overall public sector 
balance under the EU's ESA 95 rules which also includes various 
off-budget funds, the public health insurance system and local 
budgets. It strips off one-off income such as privatisation 
revenues. 
    * The Finance Ministry predicts a 2007 fiscal gap, under the 
EU's ESA 95 rules, at 4.0 percent of gross domestic product, far 
above the original 3.3 percent target. 
    * Upper house, the Senate, does not vote on the budget. 
    
    TIMELINE AND PROCESS 
    * Government must submit a budget to the lower house of 
parliament by the end of September. 
    * The lower house discusses budget in three readings. The 
first reading locks in overall revenue and expenditure. 
    * Rejection in first reading means the government must 
submit new draft 20-30 days after the rejection. 
    * After the first reading, house committees discuss 
individual parts for at least 30 days. 
    * Budget committee adopts recommendations on changes 
proposed by other committees. 
    * The second reading in the house discusses the proposed 
changes. 
    * In the third reading, the lower house votes on individual 
proposed changes and then on the overall bill.  
     
    PROVISIONAL BUDGET  
    * Provisional budget comes in when there is no approved 
budget in place by January 1. 
    * The basic outline of the provisional budget is that volume 
of revenue and spending is the same as in the previous year. 
    * Funding to individual departments s released monthly at a 
rate of 1/12th of the previous year's totals. 
    * Spending can rise above previous year's levels in cases 
where another law mandates higher expenditure. This can be the 
case of welfare and other spending. 
    * Spending can also rise above previous year's level where 
it is funded by own EU revenue -- from value added tax or based 
on GDP. 
 (To see 'ANALYSIS-Eyes on polls, Czech govt makes little in 
savings' please click on [ID:nL26473315]) 
 ((Reporting by Jan Lopatka, editing by Ron Askew; 
prague.newsroom@reuters.com; Reuters Messaging: 
jan.lopatka.reuters.com@reuters.net; +420-224 190 474)) 
($1=22.38 Czech Crown) 
  Keywords: ECONOMY CZECH BUDGET