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government budgeting final Flashcards

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1
Q

what are the pros and cons of a federal balanced budget amendment? (5)

A

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?

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2
Q

how are state balanced budget amendments defined?

A

to include the operating budget only; states can and do go into debt due to capital projects budget

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3
Q

identify the constitutional requirements or parameters regarding budgeting in Arkansas (7)

A
  1. the General Appropriation (for government functions) has to be passed first
  2. no money from treasury without appropriation
  3. specify amounts in dollars, no ranges
  4. each bill must be limited to one subject (makes for a lot of appropriations)
  5. supermajority requirement (except for public schools, highways, debt)
  6. taxes also have supermajority (general sales tax not included)
  7. earmarked taxes - no tax levied for one purpose shall be used for other purposes
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4
Q

In Arkansas, who are the primary actors and their roles in the budget preparation and submission stage? (4)

A

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

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5
Q

In Arkansas, who are the primary actors and what are the roles in the legislative review and approval stage? (4)

A

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

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6
Q

how did the Amendment 86 to the Arkansas State Constitution change the budget process in Arkansas? (3)

A
  1. requires annual legislative session; annual review of budgets in AR
  2. prior: biennial
  3. now they can and do make budget and appropriation decisions every year
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7
Q

identify the purposes of the Arkansas Revenue Stabilization Act (3)

A
  1. allocates general revenues via priorities categories
  2. prevents deficit spending by cutting spending to lesser priority items when revenues are not sufficient
  3. prevents us from going into special sessions to discuss spending cuts
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8
Q

what is an appropriation

A

the authority to spend or obligate public funds

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9
Q

types of appropriation bills (4)

A
  1. regular agency operating appropriation: 1 year period, effective next fiscal year (July 1)
  2. supplemental appropriation: effective before July 1 and usually immediately, provides additional authority to spend
  3. construction: for major construction or maintenance projects; state funds usually from General Improvement Fund
  4. reappropriation: not new authority to spend, allows the agency to spend the balance of an appropriation provided by another General Assembly
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10
Q

Elements of an appropriation bill (4)

A
  1. for who? - which state agency or which higher education institution?
  2. for what? - what will the money be used for?; must be a specific purpose
  3. where $? - where will the money come from?; what type of fund?
  4. how much? - what is the maximum amount of authorized and for what time period?
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11
Q

what are the 3 methods of funding state agencies in Arkansas that receive general revenue funding?

A
  1. dedicated source: special revenue earmarked by law for a certain agency (federal grants, cash funds like tuition)
  2. general improvement fund: fund balances, interest earnings
  3. general revenue: “pot” of other revenues, Revenue Stabilization Act allocates this revenue
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12
Q

what is line-item budgeting?

A

appropriations and budgets are created by summating objects of expenditure (line items)

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13
Q

why is the line-item approach to budgeting the most traditional and most common approach to budgeting? (2)

A
  1. transparent
  2. hold bureaucrats accountable (have to spend by the objects of expenditure)
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14
Q

what is the primary weakness of line-item budgeting? (2)

A
  1. don’t know what people/positions do
  2. how productive or effective is the agency?
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15
Q

Identify and discuss the factors that provide budgetary power to governors and legislators

A

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

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16
Q

What key budget actor has the primary budgetary power in most states? Why? (2)

A

executive (governor)
1. sets priorities for agency requests
2. forecasts revenue

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17
Q

What are the top two revenue sources for the federal government?

A
  1. individual income tax
  2. payroll tax
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18
Q

What are the top two revenue sources for state governments (average)?

A
  1. sales tax
  2. state individual income tax
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19
Q

What are the top revenue sources for local governments?

A
  1. sales tax
  2. property tax
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20
Q

Why are most state and local revenue systems regressive? How regressive is the state and local tax system in Arkansas?

A

Most states rely heavily on the sales tax and that is the most regressive tax among the big 3; Arkansas is a regressive state

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21
Q

Adam Smith standards that compromise a sound revenue policy (4)

A
  1. People who have more wealth should be expected to pay more
  2. Taxes shouldn’t be arbitrary
  3. Government needs to tell people exactly when they’re due
  4. Shouldn’t take more taxes than are needed
22
Q

NCSL standards that compromise a sound revenue policy (6)

A
  1. Revenues and spending should reflect the preferences of a majority of citizens
  2. Revenues should be adequate (yield and stability)
  3. Revenues should be diversified
  4. Revenues should not be earmarked
  5. Revenues should be administratively feasible
  6. Understand impact of taxes on tax burden
23
Q

income tax (tax base, tax burden, administrative costs, political feasibility)

A

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

24
Q

sales tax (tax base, tax burden, administrative costs, political feasibility)

A

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

25
Q

property tax (tax base, tax burden, administrative costs, political feasibility)

A

tax base:
tax on wealth - real property (land, buildings); personal property (tangible property - cars, jewelry)(intangible property - stocks, bonds)
tax burden:
individuals bear tax burden
administrative costs:
administratively costly and time consuming
political feasibility:
most hated tax

26
Q

Why is the property tax the most hated tax in the country? What have state and local governments done to mitigate some of this unpopularity? (7)

A

sources of resentment:
1. hurts “cash poor” people
2. anxiety about appraisals
3. inequitable appraisals
4. lump-sum payments
how has government attempted to reduce resentment?
1. programs to help elderly and low-income
2. reducing the shock of lump-sum payments (installment payments, transparency in where tax dollars go)
3. creating a uniform process for appraisal, training appraisers

27
Q

state turnback

A

state gives (or turns) back a portion of revenues it receives to cities and counties; based on population (for street and road maintenance)

28
Q

ability to pay principle

A

citizens should support government in proportion to their abilities

29
Q

user charge or fee

A

Fees charged in return for service; only those who receive the service bear the cost of its provision

30
Q

income elastic

A

changes with the economy, less stable (income taxes)

31
Q

income inelastic

A

does not move with the economy, more stable (property taxes)

32
Q

progressive tax

A

a tax that increases as ability to pay rises

33
Q

regressive tax

A

a tax carrying burden that is inversely related to ability to pay

34
Q

real property

A

lands, buildings (things not movable)

35
Q

personal property

A
  1. tangible property (cars, jewelry, furniture)
  2. intangible property (stocks, bonds, bank accounts)
36
Q

earned income

A

wages, salaries, commissions, tips

37
Q

unearned income

A

interest, dividends, capital gains, rent, inheritance, lottery winnings

38
Q

tax separation

A

Each level of government has a tax that it relies on that other levels do not encroach on
federal: payroll tax
state: general sales tax
local: property tax

39
Q

intergovernmental tax immunity

A

One level of government cannot directly tax another level of government
McCulloch v. Maryland (1819): can Maryland tax the national bank? (no)

40
Q

excise tax (3 types)

A

tax for particular items
1. benefits-based taxes: if you use it, you pay for it (gas)
2. sumptuary or “sin” taxes: prevent behavior (alcohol or tobacco)
3. privilege taxes: privilege of doing business in a location (bank franchise)

41
Q

general sales tax

A

tax for all goods and services; same rate applied to different items

42
Q

tax burden

A

percentage of income

43
Q

tax liability

A

dollar amount

44
Q

earmarked revenue

A

When certain revenue is reserved to be spent on a particular program or agency; can take away spending discretion

45
Q

local option sales tax (why?) (5)

A

states give localities the option to levy their own sales tax
1. allows localities to diversify
2. allows residents to raise local funds
3. allows localities to shift tax burden to non-residents
4. sales tax is more popular than property tax
5. 32 states give such permission

46
Q

administration of the local option sales tax (3)

A
  1. border city problem
  2. local tax base = state tax base
  3. piggybacking the tax
47
Q

marginal tax rates and brackets

A

For the purposes of calculating how much you owe for individual income taxes, there are different levels that are taxed at different rates; Different parts of your income are taxed at these different rates depending on the level they fall under

48
Q

horizontal equity

A

Equity among those in the same economic level (income + lifestyle sim); not controversial

49
Q

vertical equity

A

How or should we treat people in different economic situations?; How much of a burden should different groups have?; very controversial

50
Q

appraised value

A

fair market value (how much you could sell it for on private market); this value is used to determine the assessed value

51
Q

assessed value

A

a percentage of the appraised value; the property tax is applied to this value

government budgeting (2 decks)

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