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POLS 207 > Chapter 4: Finance > Flashcards

Chapter 4: Finance Flashcards

1
Q

Rainy day fund

A

Money put aside by a state or local government to be used during bad economic times

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2
Q

The Budget

A

The most important policy statement of ANY government. Also known as an appropriation bill.

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3
Q

budgeting is a zero-sum game

A

If one thing gets more money, something else must lose money

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4
Q

Revenue

A

Income received by the government. Most of it is from taxes

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5
Q

Expenditure

A

Goods and services purchased or provided with government funds. Provides public goods and merit goods.

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6
Q

Merit goods

A

Things society believes they shouldn’t pay for (such as education)

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7
Q

Public goods

A

Goods and services for the public provided by the government.

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8
Q

Earmarked funds

A

Certain revenues reserved for certain programs

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9
Q

General Fund

A

Money that isn’t already earmarked. The “discretionary” part of spending.

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10
Q

Uncontrollables

A

Funds that are already committed. Pre-existing commitments.

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11
Q

Federal budget

A

$6.13 trillion (2023). $1.69 trillion deficit.
Uncontrollables: interest on national debt. Social security and other
income entitlements. Healthcare entitlements.
Discretionary Spending: Defense, non-defense domestic

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12
Q

Federal budget uncontrollables

A

interest on national debt. Social security and other
income entitlements. Healthcare entitlements.

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13
Q

Texas Budget

A

Biennial. $321 billion. Health and Human services, Education, and Law Enforcement are the biggest spenders.

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14
Q

Balanced budget

A

States can’t spend more than they make in revenue. Texas Constitution requires a balanced budget, except for in EXTREME cases.

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15
Q

How is a budget balanced?

A

Appropriations must be <= forecasted revenue + revenues gained and not spent.

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16
Q

Why balanced budget is not straightforward

A

The budget can be wrong
The plan can be incomplete
The plan can use “accounting tricks”
The plan can be “shifted”
Balanced budget DOES NOT mean NO debt.

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17
Q

Agenda-setting (Budgets)

A

State budgets are an important way to declare the political agenda of the next fiscal year.

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18
Q

Line-item veto

A

The chief executive (president/governor) can veto parts of a bill, but not the entire thing. For example, the Texas governor can veto parts of the next year’s budget. It is unconstitutional for the president. The governor of Texas CAN do it.

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19
Q

Legislative Budget Board (LBB)

A

Develops budget and policy recommendations for legislative appropriations, completes fiscal analyses for proposed legislation, conducts evaluations and reviews to improve the efficiency and performance of state and local operations, and adopts constitutional and statutory spending limits. Unlike most states, who has the governor create legislative appropriations.

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20
Q

Governor’s Office of Budget, Planning, and Policy (GOBPP)

A

Provide budget instruction, review Budget, hold public hearings, take budget recommendations. Part of the executive branch, and answers to the governor.

21
Q

Comptroller

A

The chief financial steward of Texas. The Comptroller’s office receives, disburses, counts, safeguards, records, allocates, manages and reports on the state’s cash

22
Q

Chapter 4: Finance Objectives

A
  1. Explain what taxes generate revenue to the states.
  2. Discuss why taxing varies between state and local governments.
  3. Describe the budget process and restraints on budgeting.
23
Q

Balanced budget

A

A budget in which current expenditures are equal to or less than income.

24
Q

Bonds

A

Certificates that are evidence of debts on which the issuer promises to pay the holders a specified amount of interest for a specified length of time and to repay the loans on their maturity.

25
Q

Budget deficits or shortfalls

A

Cash shortages that result when the amount of money coming into the government falls below the amount being spent.

26
Q

Budget process

A

The procedure by which state and local governments assess revenues and set budgets.

27
Q

Capital investments

A

Investments in infrastructure, such as roads.

28
Q

Discretionary spending

A

Spending controlled in annual appropriations acts.

29
Q

Dividend

A

A payment made to stockholders (or, in Alaska’s case, residents) from the interest generated by an investment.

30
Q

Entitlement

A

A service that government must provide, regardless of the cost.

31
Q

Excise or sin taxes

A

Taxes on alcohol, tobacco, and other similar products that are designed to raise revenues and reduce use.

32
Q

Expenditures

A

Money spent by government.

33
Q

Fiscal federalism

A

The system by which federal grants are used to fund programs and services provided by state and local governments.

34
Q

Fiscal year

A

The annual accounting period used by a government.

35
Q

Focused consumption taxes

A

Taxes that do not alter spending habits or behavior patterns and therefore do not distort the distribution of resources.

36
Q

General obligation bonds

A

Investments secured by the taxing power of the jurisdiction that issues them.

37
Q

Income taxes

A

Taxes on wages and interest earned.

38
Q

Intergovernmental transfers

A

Funds provided by the federal government to state governments and by state governments to local governments.

39
Q

Municipal bonds

A

Bonds issued by states, counties, cities, and towns to fund large projects as well as operating budgets. Income from such bonds is exempt from federal taxes and from state and local taxes for the investors who live in the state where they are issued.

40
Q

Progressive tax system

A

A system of taxation in which the rate paid reflects ability to pay.

41
Q

Regressive taxes

A

Taxes levied on all taxpayers regardless of income or ability to pay, placing proportionately more of a burden on those with lower incomes.

42
Q

Revenue bonds

A

Investments secured by the revenue generated by a state or municipal project.

43
Q

Revenues

A

The money governments bring in, mainly from taxes.

44
Q

Sales taxes

A

Taxes levied by state and local governments on purchases.

45
Q

Severance taxes

A

Taxes on natural resources that are removed from a state.

46
Q

Tax burden

A

A measurement of taxes paid as a proportion of income.

47
Q

Tax capacity

A

A measure of the ability to pay taxes.

48
Q

Tax effort

A

A measure of taxes paid relative to the ability to pay taxes.

49
Q

User fees

A

Charges levied by governments in exchange for services. Such fees constitute a type of hidden tax.

POLS 207 (6 decks)

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