public budgeting & finance midterm

what is a budget

-a plan that says how the gov is going to generate and spend their money

what are Rubin’s 5 components of budgeting

1. revenue

2. expenditure

3. process

4. balance

5. implementation

define the revenue cluster

-defines the methods of raising revenue to pay for costs of running govt

what are the 3 major ways govt gets revenue

-taxes (property, sales, and income)

-user fees (tuition, parking, registration fees, etc.)

-intergovernmental revenue (IQ)/aid

what are the 3 decisions made about revenues during budgeting

1. do we need to increase or decrease revenue levels

2. how will we generate revenue (progressive or regressive taxes)

3. how will we make an accurate forecast of the future

define the expenditure cluster

-means the money spent on goods and services

what are the 2 different kinds of expenditures

1. operating: the day-to-day stuff, the stuff you pay for on a yearly basis and when you stop paying then you don’t get that service (i.e., fire-fighter salary)

2. capital: money spent for physical, tangible, long-term serving projects (i.e., infrastructure projects, roads, etc.)

define fund accounting

-the idea that money is not money, and we need to categorize it into account 

-a system of accounting used to track the amount of money allocated to various operations at an organization

-Ex: the mayor doesn’t get money and say I can spend it however I want, rather govt is divided towards multiple departments, if the police chief gets money, they must follow a strict budget 

define the process cluster

-describe how the budget is crafted which follows a strict framework

-every budget starts in the executive branch, then goes to legislators, and then other stakeholders

define the balance cluster

-means money that comes in and out needs to be balanced (surplus and deficit)

-looks at whether forecasted revenues covered planned expenditures

what is a surplus and how to fix it

-when revenues exceed expenditures/the govt is over collecting money/taxing to much

-can either raise expenditures or lower taxes

what is a deficit and the 4 ways to fix it

-when expenditures exceed revenues

-take out the debt, cut expenditures, raise taxes, or use cash reserves fund or savings to fill deficits

define the implementation cluster

-involves 3 key decisions

1. who implements the budgets

2. the budget office monitors departments expenditure

3. was the budget successful

why can’t the government balance its budget?

the 3 major ways to organize expenditures

1. administrative: a list of depts. detailing the whos responsible for providing certain goods/services

2. economic: includes line items within a budget which helps people make budget decisions, shows the different categories of spending within depts. (i.e., salaries, supplies, benefits, etc.)

3. functional: where the expenditure categories are arranged by function (i.e., organized by what the govt does like social welfare, education, national defense, etc.)