Professor theory

Question 1

What is a budget?

Answer 1

A budget is an instrument useful in managing resources.

Question 2

What are the particularities of the state budget?

Answer 2

• It is realized on an annual basis
• It has a high degree of complexity
• It is used to control the allocation of public resources vs private ones.
• It has the form of a list

Question 3

What are the meanings of the state budget?

Answer 3

• It is a set of specific operations and financial flows
• It is a synthesis of various economic, social and political options
• It is an instrument of negotiation with various financial entities

Question 4

What is the state budget?

Answer 4

The state budget is a list of of probable revenues and expenditures of the state, that are recorded and compared in order to reach thier balance.

It is then submitted to the Parliament for approval.

Question 5

What does the binding character of a state budget reffers to?

Answer 5

It reffers to the fact that this document needs prior approval of the legislative authority.

Revenue collection and public expenditures can only be done if the state budget has the form of a law, which means after it is approved by the national Parliament. (the budget has a legal content)

Question 6

What is the purpose of a modern budget?

Answer 6

The purpose of a modern budget is:

• to be an act of interventionism through the impact of revenus on the economic structure
• a productive act through the major part of expenditures.

Question 7

What makes the state budget a political document?

Answer 7

• It reflects the general choices (from voting) of citizens, related to public services that the state must finance for them as members of the society and taxpayers.
• It reflects the priorities reflected after the mediation of groups and individuals
• It reflects the relative position between the intentions of politicians in order to satisfy the wishes of electors.
• It represents a strong tool of government accountability towards citizens, because they want to know the way the government spends the money and if their preferences are being satisfied.
• It reflects the choices of citizens for different forms of taxes
• It influences the economy through budgetary policy, through the level of fiscal revenues and public expenditures included in it
• it reflects the relative power of different individuals and organizations to influency budgetary spending.

Question 8

What is an economic budget?

Answer 8

An economic budget is the budget of a national economy.

The eoconomic content prevails over the legal content in the case of an economic budget.

Question 9

What are budgetary principles?

Answer 9

Budgetary principles are rules concerning the budgetary area

Question 10

What does the principle of universality of the budget say?

Answer 10

The principle of universality states that:

• All revenues and expenditures, must be recorded in the budget in total ammount and that they shouldn’t appear only as a balance.
• It ensures the total transparency of the budget

Question 11

What are the arguments of the universality principle of the budget?

Answer 11

• The political argument: the political authority that analyzes and approves the draft budget can achieve a real and global image of the state’s revenues and expenditures.
• The technical argument: financial authorities can have an easier control over public revenues and expenditures and can asses the effectiveness of public services and actions.

Question 12

What does the unity principle of the budget state?

Answer 12

The principle of unity states that all state revenues and expenditures must be recorded in a single document, following a single pattern.

Question 13

What are the arguments that support the principle of unity of the state budget?

Answer 13

• The perspective on state activity is clearer
• The Parliament controlls it more efficiently.
• The organization of the budgetary principle becomes simpler.

Question 14

What are some exceptions agains the principle of unity of the budget?

Answer 14

• Annex budgets
• Independent budgets
• Exceptional budgets
• Special treasury accounts
• Para-fiscal taxes

Question 15

What does the budget annuality principle state?

Answer 15

1. The budget year: meaning that the budget should be drafted each year and for a one year period (must be annualy reviewed and approved for one year by the Parliament)
2. The budgetary exercise: refers to the time interval in which the executive authoritty must ensure the collection of revenus and must make expenditures approved by the Parialement, for each budgetary year, in a one year period.

This principle shows the periodicity that must characterize the budgetary activity

Question 16

What are the arguments that justify the annuality principle of the budget?

Answer 16

• The Parliement can identify the Government’s intentions for the following year
• Is is easier to correctly asses budgetary provisions if the assesment is done on an annual basis and for one year

Question 17

What factors can influence the budgetary year?

Answer 17

• Particularities of the economy
• Work schedule of the Parliament
• Tradition

Thus the budgetary year can coincide or not wit the calendar year.

Question 18

What are some arguments agains the principle of budget annuality?

Answer 18

• The economic conditions of a country can substantially change over a few months

The easiest solution might seem the periodical review

Question 19

What is the issue of budgetary execution arrears?

Answer 19

This happens when the budgetary exercise does not coincide with the budgetary year.

Meaning that:

• Revenus that have been approved to be collected in a budgetary year are not effectively collected.
• Expenditures that are commited during the year are not effectively done before the end of the budgetary year.

Question 20

What are the different factors which contribute to the issue of budgetary arrears?

Answer 20

• The management system
• The exercise method

Question 21

What does the budget anteriority principle state?

Answer 21

This principle states that the voting and authorization of the budget must be done before its entering into force

Question 22

In the case of the principle of anteriority;

What does the twelfth previsory reffer to?

Answer 22

This method indicates that during the time interval when the new budget was not implemented yet, the budget will operate with the budget amounts from the previous budget year.

Meaning that the amounts of the previous budgetary year will be devided by 12 and the result multiplied by the number of months for which the provisory budget will be used)

Question 23

What is one drawback of the twelfth privisory?

Answer 23

One drawback is that this practice ignores the Parliament’s authorization and control.

Question 24

What does the principle of non-earmaking of revenues reffer to?

Answer 24

It reffers to the fact that it is not allowed to collect and use certain revenue for financing certain budgetary expenditures.

Basially once revenues are collected, they are globally managed and will be used for covering overall expenditures.

Question 25

What does the principle of budget specification reffer to?

Answer 25

Revenues and expenditures are categorised based on thier economic nature and destination.

This grouping is done in order to show the origin of revenues and the way these resources will be spent.

Question 26

What does the principle of budget reality reffer to?

Answer 26

Revenues and expenditures must be estimated in order to reflect the reality and the necessities of real activity that must be financed from the budget.

Question 27

What does the principle of budget equilibrium state?

Answer 27

Revenues and expenditures must be balanced.

Tho most develpped countries have a budget deficit.

Question 28

What is an annex budget?

Answer 28

They are budgets elaborated by different institutions or public services of the state.

They collect revenues and make expenditures, compensating their expenditures with revenues.

Question 29

What is an independent budget?

Answer 29

They are the budgets of entities which operate independently from the state.

They are usually approved by their respective managing boards.

Question 30

What is an exceptional budget?

Answer 30

An exceptional budget may be drafted when massive expenditures (possible exceptional revenues) would seriously derange the budget of a certain year.

Question 31

What are special treasury accounts?

Answer 31

They are accounts made in case the state collects or pays some ammounts that are neither revenues nor expenditures.

Question 32

What are the criteria for budgetary classification?

Answer 32

• Administrative classification
• Economic classification
• Functional classification

Question 33

What does administrative classification mean?

Answer 33

Revenues are registered in the budget according to the institution collecting them.

Expenditures are registered in accordance with the institution undertaking them.

Question 34

What does the economic classification reffer to?

Answer 34

It reffers to separate regular revenues and expenditures from capital revenues and expenditures.

Question 34

What does the functional classification reffer to?

Answer 34

It reffers to separate the revenues and expenditures based on the functions of the state:

• administrative
• tutelary
• social
• economic

Question 35

What are the major influences on the annuality of the budget based on modern capitalism?

Answer 35

• The state gets more and more involved in social life
• Capital expenditures are added to consumption expenditures
• The budget imposes economic constraints
• Recovery and orientation actions undertaken by the state become permanent

Question 36

Besides the periodical review, what are other alternative solutions to the issue of budget annuality?

Answer 36

• implement a budgetary reserve
• authorise the Government to intervene
• implement multi-annual budgets

Question 37

How can a budgetary reserve solve the issue of budget annuality?

Answer 37

By using a budgetary reserve, part of revenues are not allocated to expenditures, this amount of money is then used by the executive authority to finance new, unforseen actions related to seasonal developments of the economy.

Question 38

How can the management system affect the issue of budgetary arrears?

Answer 38

Budgetary exercise is closed at the end of the year, and uncollected revenues are reported to the next year’s budget.

This is an issue because the closing account of the budget deviates a lot from the budget approved by the Parliament. (providing inaccurate information)

Question 39

How does the exercise method affect the issue of budget arrears?

Answer 39

In this case, budgetary execution for the closed budgetary year continues for another 3-6 months.

The drawback is that there are two budgets operating in parallel.

The advantage, however is that the exact data about the closed budget will be known.

Question 40

How does the self-adjusting method (the method of the penultimate) work?

In order to reflect budget reality

Answer 40

The drafting of the next year budget starts in current’s year’s summer, while the current budget is stil under execution.

Budgetary revenues and expenditure from year (T-1) are adjusted for the budget of the year (T+1)

Question 41

How does the increase or decrease method work?

In order to reflect budget reality?

Answer 41

This method uses amounts of budgetary execution for several consecutive years, preceeding the budget drafting period.

By using this method, we calculate the average increase/decrease rythm for the entire interval to make a projection of the following year.

Question 42

How does the method of direct assesment work?

In order to reflect budget reality?

Answer 42

For every budgetary revenue/expenditure are made separate assesment calculations.

Question 43

What are the implementations of the anticyclical policy?

Answer 43

• The reserve fund: during phases of prosperity, from the surplus will be created a reserve fund. When recession and budget deficit settles down, this fund is used to cover such deficit.
• The equilibrium fund: the reseve fund is launched during a stage of crysis and not during a prosperity one. In recessions the spendings are lowered, creting revenues which contribute to the equilibrium fund.