Section 2- Part 4-5 Flashcards
Special Funds and Legislative Earmarks
Special funds and legislative earmarks are used to direct public funds to specific purposes. These terms are sometimes used interchangeably, leading to confusion. Traditionally, “special fund” has meant a fund that has been established to account for the collection of revenues that can be spent for only specified purposes and the actual spending of those revenues.
Example of Special Funds
Examples are: a special fund in the federal government and a special revenue fund in state and local governments. “Earmark” usually meant a one-time spending provision specified in an appropriations statute.
Special Funds
Special funds, often created through legislation, are used to collect designated revenues and other resources, and direct them to specific uses. There are several types
Types of Special Funds
- Special Revenue Fund
- Debt Service Fund
- Capital Project Fund
- Permanent Fund
- Enterprise Fund
- Internal Service Fund
SECPID
FAST
Each special fund listed in the Treasury’s Federal Account Symbols and Titles (FAST) Book displays the specific statute establishing the fund. The statute will describe the receipts of the fund and the expenditures of the fund. Likewise, each special revenue fund listed in state and local government financial statements has descriptions that identify the specific statutes or other provisions which established the fund.
A good example at the state level is the many special funds created as a result of the Master Tobacco Settlement, signed by major tobacco companies and 46 states in 1998.
Legislative Earmarks
Hence, when a federal, state or local legislator uses legislative language to designate a portion of an appropriation to favored projects, usually in their district or state, it is considered an “earmark.” Sometimes earmarks cannot garner sufficient votes to be enacted in the appropriations law, but are, then, specified in the legislative report.
Legislative Earmarks Draw Criticism
Frequently, they have not been subjected to management analysis to justify the spending. They bypass the normal legislative debate and competition for scarce resources. They reduce transparency and accountability in government, particularly when the identity of the legislator who inserted the earmark into a budget law is unknown. Finally, earmarks are often the result of successful lobbying by private companies, non-profits and local governments. The ability of individual legislators to insert earmarks fuels the lobbying industry.
Budget Objectives
The budget process fulfills critical objectives, such as setting government priorities. Once an actual budget is in place, it has new objectives to fulfill.
Objectives of the actual budget are often summarized as: document policy, guide operations, plan finances and promote communications.
GFOA Budgeting Principles
The Government Finance Officers Association (GFOA) publishes a guide to best practices in budgeting. According to the GFOA, the budgeting process should incorporate the following principles:
Principle I – Establish Broad Goals to Guide Government Decision-Making.
Principle II – Develop Approaches to Achieve Goals.
Principle III – Develop a Budget with Approaches to Achieve Goals. P
Principle IV – Evaluate Performance and Make Adjustments.
GFOA- Budget Principle I
Principle I – Establish Broad Goals to Guide Government Decision-Making. Develop a broad set of goals that establish a general direction for the government. These goals serve as the basis for development of policies and programs, including the service types and levels that will be provided and capital asset acquisition and maintenance.
GFOA- Budget Principle II
Principle II –Develop Approaches to Achieve Goals. Establish specific policies, plans, programs, and management strategies necessary for the government to achieve its long-term goals. While broad goals set the general direction of a government, it is the policies, plans, and programs that define how the government will go about accomplishing these goals.
GFOA- Budget Principle III
Principle III –Develop a Budget with Approaches to Achieve Goals. Prepare a financial plan, a capital improvement plan, and budget options. Develop a long-range financial plan to ensure that the programs, services, and capital assets are affordable over the long run.
GFOA- Budget Principle IV
Principle IV – Evaluate Performance and Make Adjustments. Identify practices to monitor and evaluate the government’s progress in meeting financial and programmatic goals. Based on this review, make needed adjustments to the budget and to plans and policies, if goals are to be achieved.
Similarities to GPRA
This suggested framework for state and local entities is similar to what the national government has established, in law, for federal agencies. The Government Performance and Results Act (GPRA) requires federal agencies to create long-term strategic plans. The strategic plans are supported by annual performance plans (now called performance budgets), measures and performance reports.
