Fundamental Critcism of the Budget Process

[HeptaSean]

@Nana_Kwadwo_Safo

What has happened to the Treasury Inflows of 2024, has the funds been used or they are available for community use?

The last lines of the table in the original post:

@HeptaSean

Epoch	Beginning	Reserves	Treasury	Withdrawals/Inflow
459	2024-01-05 21:44:51	8_486_301_514_701_735 µADA	1_451_242_730_302_673 µADA	154_280_000_000_000 µADA
		-990_527_603_116_362 µADA (11.67%)	+190_413_598_882_157 µADA	344_693_598_882_157 µADA (4.06%)
532	2025-01-04 21:44:51	7_495_773_911_585_373 µADA	1_641_656_329_184_830 µADA	0 µADA

can be read as:

At the beginning of 2024, the treasury was at 1.451 billion ADA. At the beginning of 2025, it was at 1.642 billion ADA. That is a growth of 190 million ADA. 190 million ADA of last year’s inflows are still there, have not been spent.

154 million ADA were withdrawn. (Those are withdrawals for Catalyst: 52 million on 6th March and 102 million on 3rd July)

So, the total inflows were 345 million ADA.

We still have 1.642 billion ADA in the treasury. So, we can decide to spend some of them. And we will probably not spend the whole net change limit, anyway.

@LloydDuhon

Intersect’s Budget Committee suggested that spending only what was earned in the previous year (“living within our means”) reduces the risk of forecasting errors. Rather than rely on uncertain future income, the approach uses the verifiable amount of ADA minted or accrued in the preceding year. This mitigates potential overspending and promotes prudent Treasury management.

This approach is, on the one hand, a bit arbitrary, but it, on the other hand, does ensure that we are not eating up the treasury (if we continue to use exactly the same method in the future).

For that, it doesn’t really matter that some of the inflows of 2024 were spent. We can, e.g., just pretend that those were paid from even earlier inflows (as if the approach had already been used and the spendings of 2024 would have had to be lower than the inflows of 2023 … which they were).

The treasury at the beginning of 2025 was treasury at the beginning of 2024 minus spendings of 2024 plus inflows of 2024.

The treasury at the beginning of 2026 will be treasury at the beginning of 2025 minus spendings of 2025 plus inflows of 2025 or, looking from 2024: treasury at the beginning of 2024 minus spendings of 2024 plus inflows of 2024 minus spendings of 2025 plus inflows of 2025. The NCL proposed by the budget committee guarantees that “plus inflows of 2024 minus spendings of 2025” is positive and so the treasury at the beginning of 2026 is guaranteed to be larger than treasury at the beginning of 2024 minus spendings of 2024 plus inflows of 2025.

If we continue to do it like that, the treasury at the beginning of 2027 will be treasury at the beginning of 2026 minus spendings of 2026 plus inflows of 2026. This is larger than treasury at the beginning of 2024 minus spendings of 2024 plus inflows of 2025 minus spendings of 2026 plus inflows of 2026. Again, the NCL (if it is set like this again) ensures that “plus inflows of 2025 minus spendings of 2026” is positive, so this is larger than treasury at the beginning of 2024 minus spendings of 2024 plus inflows of 2026.

And so forth.

In a way, “treasury at the beginning of 2024 minus spendings of 2024” is here a kind of baseline to which the inflows of one year are added and then at most that amount is spent in the following year. If we do not use the full NCL, that baseline even grows every year.