government budgeting final Flashcards
what are the pros and cons of a federal balanced budget amendment? (5)
pros:
1. no huge deficits year after year because spending is aligned with revenue
2. we’re not contributing to growing our national debt
cons:
1. how do we define a balanced budget amendment at the federal level?
2. how do we allow the government to deal with emergencies?
3. If they spend over, who gets cuts?
how are state balanced budget amendments defined?
to include the operating budget only; states can and do go into debt due to capital projects budget
identify the constitutional requirements or parameters regarding budgeting in Arkansas (7)
- the General Appropriation (for government functions) has to be passed first
- no money from treasury without appropriation
- specify amounts in dollars, no ranges
- each bill must be limited to one subject (makes for a lot of appropriations)
- supermajority requirement (except for public schools, highways, debt)
- taxes also have supermajority (general sales tax not included)
- earmarked taxes - no tax levied for one purpose shall be used for other purposes
In Arkansas, who are the primary actors and their roles in the budget preparation and submission stage? (4)
executive is the primary actor
1. sets policy for agency requests
2. forecasts state revenue
3. holds budget hearings
4. recommends budget to ALC/JBC
Outcome: executive budget recommendation
In Arkansas, who are the primary actors and what are the roles in the legislative review and approval stage? (4)
legislative committees are the primary actors
1. hold public budget hearings
2. consider agency and governor recommendations
3. recommend budgets to the General Assembly
4. recommend state employee salary levels
Outcome: have bills prepared for introduction during session
how did the Amendment 86 to the Arkansas State Constitution change the budget process in Arkansas? (3)
- requires annual legislative session; annual review of budgets in AR
- prior: biennial
- now they can and do make budget and appropriation decisions every year
identify the purposes of the Arkansas Revenue Stabilization Act (3)
- allocates general revenues via priorities categories
- prevents deficit spending by cutting spending to lesser priority items when revenues are not sufficient
- prevents us from going into special sessions to discuss spending cuts
what is an appropriation
the authority to spend or obligate public funds
types of appropriation bills (4)
- regular agency operating appropriation: 1 year period, effective next fiscal year (July 1)
- supplemental appropriation: effective before July 1 and usually immediately, provides additional authority to spend
- construction: for major construction or maintenance projects; state funds usually from General Improvement Fund
- reappropriation: not new authority to spend, allows the agency to spend the balance of an appropriation provided by another General Assembly
Elements of an appropriation bill (4)
- for who? - which state agency or which higher education institution?
- for what? - what will the money be used for?; must be a specific purpose
- where $? - where will the money come from?; what type of fund?
- how much? - what is the maximum amount of authorized and for what time period?
what are the 3 methods of funding state agencies in Arkansas that receive general revenue funding?
- dedicated source: special revenue earmarked by law for a certain agency (federal grants, cash funds like tuition)
- general improvement fund: fund balances, interest earnings
- general revenue: “pot” of other revenues, Revenue Stabilization Act allocates this revenue
what is line-item budgeting?
appropriations and budgets are created by summating objects of expenditure (line items)
why is the line-item approach to budgeting the most traditional and most common approach to budgeting? (2)
- transparent
- hold bureaucrats accountable (have to spend by the objects of expenditure)
what is the primary weakness of line-item budgeting? (2)
- don’t know what people/positions do
- how productive or effective is the agency?
Identify and discuss the factors that provide budgetary power to governors and legislators
governor power:
1. line-item veto power
2. Legislature only getting executive recommendation shortly before budget hearings
legislative power:
1. legislative staff
2. Legislature more than just executive recommendation, like agency budget requests, months before the budget hearings
What key budget actor has the primary budgetary power in most states? Why? (2)
executive (governor)
1. sets priorities for agency requests
2. forecasts revenue
What are the top two revenue sources for the federal government?
- individual income tax
- payroll tax
What are the top two revenue sources for state governments (average)?
- sales tax
- state individual income tax
What are the top revenue sources for local governments?
- sales tax
- property tax
Why are most state and local revenue systems regressive? How regressive is the state and local tax system in Arkansas?
Most states rely heavily on the sales tax and that is the most regressive tax among the big 3; Arkansas is a regressive state
Adam Smith standards that compromise a sound revenue policy (4)
- People who have more wealth should be expected to pay more
- Taxes shouldn’t be arbitrary
- Government needs to tell people exactly when they’re due
- Shouldn’t take more taxes than are needed
NCSL standards that compromise a sound revenue policy (6)
- Revenues and spending should reflect the preferences of a majority of citizens
- Revenues should be adequate (yield and stability)
- Revenues should be diversified
- Revenues should not be earmarked
- Revenues should be administratively feasible
- Understand impact of taxes on tax burden
income tax (tax base, tax burden, administrative costs, political feasibility)
tax base:
1. individuals: earned (wages, salaries, commissions, tips); unearned (interest, dividends, capital gains, rent, inheritance, lottery winnings)
2. corporations: net profits
tax burden:
burden is high on individuals and corporations
administrative costs:
high administrative enforcement costs
political feasibility:
not the most hated tax, but we want code simplified
sales tax (tax base, tax burden, administrative costs, political feasibility)
tax base:
varies by state (goods and services)
tax burden:
burden is low on individuals and corporations
administrative costs:
low administrative enforcement costs due to piggybacking
political feasibility:
most popular tax
