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government budgeting midterm Flashcards

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1
Q

capital budget

A

a budget for capital investment; state and local governments use the capital budget to segregate capital investments from operating expenditures; the federal government has no separate capital budget

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2
Q

discretionary spending

A

spending over which budget makers have discretion, within limits set by law

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3
Q

continuing resolution

A

a legislative act that continues current-year spending at last year’s levels, although those levels can be selectively adjusted in the resolution

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4
Q

baseline

A

a projection of future revenues, expenditures, and debt under current laws and assumed economic conditions

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5
Q

authorization

A

a legislative act that provides authority for the establishment or continuation of a governmental program; a program or agency must be authorized before funds can be appropriated in its support or obligations can be incurred

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6
Q

appropriation

A

the authority to spend or obligate public funds

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7
Q

deferral

A

an action of the president that delays the obligation or expenditure of appropriated funds for a duration not to exceed the end of the fiscal year; deferrals must be approved by both chambers of Congress

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8
Q

budget authority

A

the legal authority to commit or spend public funds, whether in the form of an appropriation or the authority to borrow or enter into contractual obligations

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9
Q

backdoor spending

A

spending based on budget authority included in authorization acts, which does not have to be appropriated separately

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10
Q

entitlement

A

a requirement in federal law, applied to certain programs, that individuals who meet eligibility requirements for federal assistance have a legal right to that assistance, regardless of the amounts appropriated in support of the program

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11
Q

budget outlay

A

actual spending/expenditures (not estimated)

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12
Q

mandatory spending (uncontrollable)

A

all of the spending that is spent on entitlements (65% of the budget) (ex: social security)

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13
Q

deficit

A

outlays/spending that exceeds revenues for a 1 year period; an annual figure

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14
Q

debt

A

all previous deficits; cumulative (borrowed money that has to be paid back at some point)

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15
Q

what is a public budget?

A

a method of allocating scarce resources among competing interests; it’s political, competitive, there will be conflict

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16
Q

what are the functions (tools) of the public budget? (6)

A
  1. control/accountability tool
  2. planning tool
  3. historical tool
  4. policy tool
  5. management tool
  6. economic tool
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17
Q

what are the criticisms of the incremental theory? (4)

A
  1. it doesn’t always reflect reality (big changes can occur)
  2. incrementalism doesn’t specify amount (not a precise theory)
  3. bias toward the status quo (big changes aren’t encouraged)
  4. fails to answer important questions (if agencies/programs are efficient, effective, and/or needed)
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18
Q

why did Wildavsky argue that incrementalism is the most appropriate way to create a public budget? (3)

A
  1. incrementalism is politically feasible and politically rational
  2. it prevents big mistakes
  3. any attempt to make the budget process more economically rational will fail
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19
Q

Irene Rubin’s 5 clusters of budgetary decision-making

A
  1. revenue cluster
  2. process cluster
  3. expenditure cluster
  4. balance cluster
  5. budget implementation cluster
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20
Q

revenue cluster (important questions) (4)

A
  1. what types of revenue should be collected?
  2. how are revenues to be forecasted?
  3. what is the proper mix of revenues?
  4. what is the appropriate tax burden?
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21
Q

process cluster (important questions) (4)

A
  1. who gets to participate in budgetary decision-making?
  2. what powers/responsibilities should they have?
  3. what rules and/or deadlines should we set?
  4. what are the impacts of these rules and deadlines?
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22
Q

expenditure cluster (important questions) (3)

A
  1. which programs will be funded? at what level?
  2. how do we estimate likely expenditures?
  3. if necessary, how will cuts be made? (across the board, program/agency specific, ineffective/politically unpopular programs)
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23
Q

balance cluster (important questions) (6)

A
  1. does the budget have to be balanced? (what is the law)
  2. what is the definition of a balanced budget?
  3. how do we balance the budget?
  4. how do we deal with emergencies?
  5. how much of a deficit/debt is okay?
  6. how do we deal with surpluses?
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24
Q

budget implementation cluster (important questions) (3)

A
  1. how do we make budget changes after formal budget enactment?
  2. how do agencies implement budgetary decisions?
  3. how do elected officials monitor agencies and hold them accountable for budgeted funds and/or legislative intent?
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25
Q

responsibilities of citizens in the public budgeting process (2)

A
  1. public participation (budget hearings, contact city officials)
  2. public scrutiny (scrutinize what government spends money on and hold public officials accountable)
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26
Q

responsibilities of government in the public budgeting process (4)

A
  1. accountability
  2. transparency
  3. responsiveness
  4. stewardship and efficiency
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27
Q

federalism

A

a system of government where power is allocated via the US Constitution between a central government and subnational governments; governments act independently of each other, but also must work together to solve problems and provide services to citizens

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28
Q

how does federalism impact public budgets? (3)

A
  1. different jurisdictions have different budget priorities
  2. different levels of government have historically relied upon different revenue sources
  3. increases complexity
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29
Q

trends in fiscal federalism (3)

A
  1. government spending as a % of GDP
  2. shift in government growth over time
  3. general increase in federal grants to state and local governments
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30
Q

why is there a shift to fiscal dominance over time at the federal level? (4)

A
  1. 16th Amendment authorized Congress to levy and collect an individual income tax
  2. historic lack of state and local capacity
  3. ideological shifts
  4. centralizing events (civil war, industrial revolution, great depression/recession, 9/11, natural disasters, pandemics)
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31
Q

why would a higher level of government provide grants to lower levels of government? (4)

A
  1. to encourage subnational governments to implement national policy
  2. to establish uniform policy across the country
  3. to mitigate fiscal inequities among subnational governments
  4. to encourage policy innovation
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32
Q

What is the impact of federal grants on state and local government budgets? (4)

A
  1. state and local government dependency on federal grants
  2. state and local government budget priorities are skewed to meet national priorities
  3. fungibility or leakage
  4. burdensome grant requirements increase administrative costs for subnational governments
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33
Q

differences between public vs. private sector budgeting (6)

A
  1. governments generally have broader responsibilities
  2. governments are responsible for solving “wicked” problems
  3. governments respond to public mandates for action
  4. public budgeting is more complex and controversial
  5. public budgeting occurs within a system of extensive financial controls
  6. public budgeting is more open and transparent
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34
Q

what role should the government play in the economy? (3)

A
  1. allocation
  2. distribution of wealth and income
  3. stabilization of the economy
35
Q

budgetary powers of Congress found in the US Constitution (4)

A
  1. Congress has the power to levy and collect taxes (article 1, section 8)
  2. Congress has the power to borrow money and pay debts of the US (article 1, section 8)
  3. no money shall be drawn from the treasury without an appropriation (article 1, section 9)
  4. a regular statement and account of receipts and expenditures of all public money shall be published from time to time (article 1, section 9)
36
Q

era of legislative budgeting (4)

A
  1. the federal government had little money to appropriate at this time
  2. it had no significant or stable source of revenue
  3. federal government was very small
  4. most services were provided at the state and local levels
37
Q

primary features of the Budget and Accounting act of 1921 (8)

A
  1. statutory grant of power to the president
  2. president creates the executive budget
  3. created Bureau of the Budget (US Treasury)
  4. fiscal year July 1 - June 30
  5. federal agencies send agencies requests to BOB
  6. president can change requests/make recommendations
  7. authority for appropriation and revenue bills
  8. created general accounting office (General Accountability Office)
38
Q

4 stages of the budget cycle

A
  1. executive budget formulation and submission
  2. legislative review and appropriation
  3. budget implementation
  4. audit and review/evaluation
39
Q

Executive Budget Formulation and Submission (primary actors/duties) (5)

A

executive is the president/governor; executive formulates the budget
1. the budget call and budget guidelines sent to agencies
2. forecast of current revenues
3. agency preparation of budget request
4. executive budget hearings
5. executive recommendations made and sent to legislature (executive budget or proposed budget)

40
Q

Legislative Review and Appropriation (primary actors/duties) (5)

A

legislative branch is the primary actor; most dramatic and most public stage
1. agency budget hearings
2. drafting of appropriations bills
3. introduction of bills during session
4. debate and vote on bills
5. bills sent to executive for signature

41
Q

Budget Implementation (primary actors/duties) (4)

A

bureaucracy implements (primary actor)
1. agencies prepare operating budgets
2. agencies implement programs and deliver services to citizens
3. executive and legislative oversight occurs
4. executive and legislature can make changes to the budget during the interim

42
Q

Audit and Review/Evaluation (primary actors/duties) (2)

A
  1. evaluate and review what money was spent on; occurs at the end of the FY
  2. multiple audit/evaluation functions at each level
43
Q

primary executive activities in the presidential budget process (3)

A
  1. develop president’s budget proposal
  2. president submits budget to Congress and agencies justify the president’s budget proposal
  3. execute appropriations and other budgetary legislation
44
Q

hard rules for the federal government (1)

A

few hard rules; lack of hard rules has led to some to argue for a balanced budget amendment
1. federal agencies can’t spend without an appropriation

45
Q

soft rules for the federal government (4)

A

numerous soft rules that are frequently changed
1. debt limit is statutory
2. statutory caps on spending
3. accounting practices and standards
4. administrative accountability

46
Q

hard rules for state and local governments (6)

A

many hard rules
1. constitutional mandates to balance budget
2. constitutional limits on raising revenues
3. constitutional limits on spending increases
4. constitutional limits on debt
5. constitutional constraints on the budget process
6. local governments can be significantly restricted by state constitutions

47
Q

soft rules for state and local governments (4)

A
  1. laws limiting spending to some % of the appropriated amount
  2. administrative actions (governors and/or bureaucrats) that limit spending
  3. written/formal policies on debt ratios, conservative revenue estimates
  4. state law limiting local debt, revenue raising abilities
48
Q

who does the federal government borrow money from? (4)

A
  1. citizens
  2. private businesses/corporations
  3. state and local governments
  4. foreign investors
49
Q

types of federal securities (3)

A
  1. treasury bills (1 year or less; short term)
  2. treasury notes (1-10 years; intermediate)
  3. treasury bonds (30 years; long term)
50
Q

public owned debt

A

debt held by individuals, businesses, and governments outside of the federal government (78% of total debt)

51
Q

government owned debt

A

result of federal law - any money in a trust fund must be placed in federal securities (22% of total debt)

52
Q

Should we be concerned with the current levels of deficits and debt in the US? (6)

A
  1. all countries with similar economies to the US are in debt and incur annual deficits
  2. deficits are necessary to deal with emergencies
  3. the US will always have a national debt
  4. US deficits are structural and that is a problem
  5. there may be economic impacts of high deficits/debt
  6. US deficit spending is reflective of our broken political system
53
Q

How do US deficits and debts as a % of the GDP today compare with historical US deficits and debt?

A

US debt is at highest level as a % of the GDP (124% in 2023); international benchmark was 65%, now raised to 85%

54
Q

How does the US compare to other countries with respect to deficits and debts as a % of GDP?

A

US ranked 11th in 2020 (11th highest debt to GDP ratio out of 210 countries); not an accurate ranking because of Covid

55
Q

What are the primary causes of our deficits that we have experienced historically? (3)

A
  1. WWII
  2. Great Depression/Recession
  3. global pandemic
56
Q

What are the primary causes of our deficits since 2009? (3)

A
  1. Obama’s stimulus plan (increased government spending due to recession)
  2. Trump increased defense and disaster spending, tax cuts
  3. Biden’s pandemic aid package, infrastructure bill
57
Q

Balanced Budget and Emergency Deficit Control Act of 1985 (Graham-Rudman-Hollings)

A

goal: reduce deficit to $0 by 1991 (5 years)
Primary features:
1. caps on discretionary spending only
2. created sequestration
Problems:
1. faulty projections (deficits were bigger outward than planned for)
2. can’t balance budget solely on cuts in discretionary programs

58
Q

Budget Enforcement Act of 1990 (5)

A

goal: limit spending and guarantee that revenues cover spending
Primary features:
1. increase individual and corporate income taxes
2. decrease spending by setting caps
3. caps are set by Congress via the Budget Resolution
4. mandatory spending must be “deficit neutral”
5. revenue changes must be “deficit neutral”

59
Q

Omnibus Budget Reconciliation Act of 1993 (5)

A

Primary features:
1. increased the top bracket of individual income tax
2. increased corporate income tax
3. increased the federal gas tax
4. increased the amount of income used for calculating the payroll tax
5. continued the spending caps established under the BEA

60
Q

Congressional Budget and Impoundment Control Act of 1974 (primary purposes) (3)

A
  1. reassert a congressional role in budgeting
  2. centralize the federal budget process and focus congressional attention on the overall budget
  3. constrain the use of impoundments
61
Q

how successful was the Congressional Budget and Impoundment Control Act of 1974? (5)

A
  1. increased budgetary role for Congress
  2. increased attention on the whole budget
  3. controlled impoundments
  4. deadlines routinely missed
  5. increased conflict with multiple points of debate
62
Q

operating budget

A

everything that you need to operate during the year; plan for day to day spending by bureaucrats

63
Q

permanent authority

A

entitlement authority; permanent authority to spend; automatic obligation of the government (social security)

64
Q

budget resolution (5)

A

establishes the framework for congressional committees “guideline”; required by the 1974 Act
Contains overall limits on:
1. revenues
2. budget authority
3. outlays (by functional categories)
4. deficit or surplus
5. debt (debt limit)

65
Q

what is the primary alternative to incremental theory? how well does it work in the public sector?

A

rational theory (performance based budgeting, program based budgeting, etc); doesn’t work and is not applicable in budget allocation, but does work well in management

66
Q

how does the US compare to other countries regarding spending priorities?

A

as a % of the GDP, the US is typically on the lower end (below the OECD average); other countries do more for their citizenry (universal healthcare, daycare, etc)

67
Q

what are the primary revenue sources for the federal government? (2)

A
  1. individual income tax
  2. payroll tax
68
Q

what are the top spending priorities at the federal level?

A
  1. social security
  2. healthcare
  3. national defense
69
Q

what led to the end of legislative budgeting and the rise of executive budgeting? (3)

A
  1. industrial revolution
  2. progressive era movement
  3. need for basic services to be provided by government (housing, sanitation, health, etc)
70
Q

why make the executive responsible for starting the budget process?

A

progressives would argue that the president is the only person elected by everyone, so it makes sense if you are going to empower one person to be in charge of the budget for the entire nation, that they would be elected by the entire nation

71
Q

how does executive budgeting provide the executive with power?

A

that person get to set the priorities/policies

72
Q

fungibility (leakage)

A

state or local governments take a federal grant and use that grant money to replace own-source spending on a particular program; MOE (Maintenance of Effort) helps stop fungibility

73
Q

unfunded mandate

A

governments receive little to no money to fund a program; ex: No Child Left Behind

74
Q

Budget Committees main functions (4)

A
  1. budget hearings, testimony
  2. CBO reports, OMB reports
  3. review of the views and estimates reports from the standing committees
  4. create budget resolution
75
Q

Appropriation committees main functions (3)

A
  1. each subcommittee drafts an appropriation bill (12 bills)
  2. subcommittees hold hearings, markup bill, report bill back to full committee
  3. allocate budget authority
76
Q

House Ways and Means main function

A
  1. authority for revenue bills and spending
77
Q

Senate Finance main function

A
  1. authority for revenue bills and spending
78
Q

Standing Committees main function

A
  1. authorization
79
Q

primary congressional committees involved in the creation of the congressional budget (5)

A
  1. Budget Committees
  2. Appropriation Committees
  3. House Ways and Means
  4. Senate Finance
  5. Standing Committees
80
Q

why was the Budget and Accounting Act of 1921 needed? (3)

A
  1. lack of accountability
  2. societal needs weren’t being met
  3. no one was in charge of deciding what the priorities would be
81
Q

conflicts of the public budgeting process (3)

A
  1. environmental conflict (scarce resources)
  2. partisan/ideological conflict (differing values, fairness, standards of evaluation)
  3. special interests (a group of people that is requesting that the government do something that may not be in the best interest of the people)
82
Q

major tenets of the incremental theory (4)

A
  1. process: key budget actors don’t have the time, resources, and analytical capacity to consider all budget options and review all programs annually
  2. process: political reality suggests that small changes to the current budget are easier to adopt (reduces conflict)
  3. outcome: next year’s budget will not differ dramatically from the current year’s budget
  4. outcome: budgeting is fairly stable and predictable from year to year
83
Q

incremental theory

A

emphasizes the plurality of actors involved in the policy-making process and predicts that policy makers will build on past policies, focusing on incremental rather than wholesale changes

84
Q

rescission

A

a request to rescind funds that were previously appropriated by Congress

government budgeting (2 decks)

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