REVIEW OF REVENUE ESTIMATES IN FEDERAL, STATE AND LOCAL BUDGETS

Review of Revenue Estimates in Federal, State and Local Budgets [Name] [Course Title] [University] [Instructor Name] [Date] Review of Revenue Estimates in Federal, State and Local Budgets A budget is designed to determine the allocation of the resources held by an entity to its departments, agencies and other subsidiaries in order to achieve its ultimate mission. The budget includes comprehensive detail about the use of resources to be made in the fiscal year, the manner in which the resources would be used and allocated, the expected return or the source of funding and many other facts. The budget also reflects the policies and decisions of the entity, for example, if an entity plans to develop a specific part of its business, it would increase the allocation of resources to that particular part of its business. Similarly, the budgets designed by the governmental authorities also reflect their policies for the fiscal year for which the budget has been determined. Budgets are formed at all levels of the structure of the government. The budgets to be considered in this paper would be federal budget, state budget, local budget and budget for an agency of the government. Each budget is like a planned allocation of resources and the level of expenditure to be done in the fiscal year for which the budget is proposed. Budgets are significantly important in order to maintain a balance between different departments and agencies of the governmental structure. Budgets are also important to conduct variance analyses. For conducting variance analyses, budgeted expenditures are compared to the actual level of expenditure done in order to determine whether the funding has been done in accordance with the budget determined or there is difference between the budgeted and actual figures. Budgets also help an entity design its strategies and to make effective and efficient decisions. Strategies of an organization are designed on the basis of the fact and figures provided in the budgets, for example, budgets represent the financial potential of an entity therefore before taking any major decisions, the strategic core of an organization considers the budget of the entity and makes its decisions in accordance with the resources available. The implementation of the strategies is conducted by aligning day to day decisions with that strategy. Budgets are very helpful in designing strategies for organizations and in case of government, budgets are important for the designing and implementation of fiscal policies. United States Federal Budget The United States Federal Budget is proposed by the President of the United States to the Congress. The federal budget recommends the levels of funding to be done in the fiscal year for which the budget is proposed. There are certain controls over the budget determination process and due to these controls decisions made by the congress are subject to the rules related to federal budget. The spending limits for the House and Senate committees are determined by the budget committees in order to keep a check whether such authorities are spending more than what is necessary. The committees also decide the spending limits for subcommittees and it also approves bills related to funding of federal projects and agencies. The appropriation bills are approved by the congress, which are sent to the President after approval. The President has the power to sign them into enforcement or to veto them. The major expenditures in the United States federal budget include Medicare, Non-Defense Discretionary, Social Security and Defense Department. Medicare is one of the significant programs of the federal government. It consists of four separate parts which are separately funded. Social Security is a social insurance program. Social Security is funded by a specifically allocated payroll tax of 12.4%. The military budget is also a significant proportion of the federal budget. It is also the most debated issue in the federal budget (Budget, Fiscal Year 2011). One of the major roles of Federal budget is the enforcement of fiscal policies designed by the relevant authorities. Fiscal policies are designed to control the overall inflation by controlling the extent of spending in the fiscal year. The spending done by government affects the overall inflation significantly therefore the budget designed by Federal authorities is decided in such a manner that it helps the authorities implement upon fiscal policies as well. The fiscal policy is governed by the deficit or surplus in the federal budget. Deficit is the difference between the actual revenue collected and the budgeted spending for the fiscal year. Maintaining a deficit in the budget is an attempt towards the growth of the overall economy of the country but it also has an adverse effect of triggering inflation. When a government makes spending, it actually injects capital into the cycle of economy of a country which grows as it is repeatedly invested by the firms. Thus, increased spending increases the level of overall investment. On the other hand, surplus is when the revenues in hand are more than the budgeted spending in the fiscal year. Federal authorities do not usually propose a budget with surplus except when there is no other way to put a constraint on the increasing inflation. Surplus is when the government spending lowers and it affects the overall cycle of economy. Investments are not made, unemployment increases and the overall economy declines. The government has made surplus budgets for only four years which are from 1998 to 2001. State Budget Similar to the Federal budget, State budget is the allocation of resources to the different departments of the state government. State budget is about determining the level of expenditure to be done by the State within the State. The procedure of the finalization of the budget is similar to that of the federal budget. The governor of a state proposes the budget to the Senate and the Assembly. The state budget mostly include the following spending areas; business, transport and housing; natural resources, environmental protection, education, employee compensation and retirement, and health and human services. The points of emphasis in the state budget include issues like employment, efficient working of the department working under state and betterment of the living standards. Since the state budget is confined to the betterment of the a specific state, therefore the principle objectives of the state budget are to increase transparency in the working of the state departments, improving the standard of living of the people of that state, improving the business and job opportunities in the state, improving the natural environment of the state and to make it more and more habitable and to increase the rate of employment in the state. The state with greater size and economical significance usually enjoys budgets with wider scope. If the state is an active industrial hub, the budget would include more spending toward the betterment of the industrial opportunities. If the state is rich in natural resources or tourist interests, the budget would include allocation of resources to programs like preservation or exploration of natural resources and improvement of tourist attractions. For example; the proposed budget for the state of California for the year 2011 - 2012 includes a number of programs including; legislative, judicial and executive; housing, transportation and business; natural resources; environmental protection; and statewide expenditures (Governor`s Budget Summary). Although the state budget is confined to the functions within that state, it is not isolated from the federal budget. If the fiscal policy of the federal government includes measures to reduce inflation, the state budget would be bound to follow the policies and determine its budget in alignment with the federal budget. Apart from that, federal budget determines the level of spending to be allocated to the states therefore the state government is not independent of the federal government in making decisions regarding state budget. Local Budget Local budget is the budget for a specific component of a state, for example, budget for a city, a school district, a town or special districts. Local budget is determined by the local government and it is confined to the functions of the local government only. Local budget determines the distribution of resources to the different components of a local government such as; government of a city would conduct spending on the development works of the city, government of a school district would allocate maximum resources towards the development of the standard of education in the school district, government of any special district would set aside maximum spending for the special purpose for which the district has been formed. Local budget has a very limited scope therefore the budget document is not as comprehensive as that of federal or state budget. The local budget provides a brief insight on the economic position of the city or the district. It also provides a brief comparison of the preceding budgets. Local budget also provides the statistical information regarding the main function of the local government. For example; the local budget of the New York City includes an insight regarding the business operating in the city, revenues generated by the businesses or the losses made by them, and other facilities provided to the residents of the city (Budget Summary, FY 2010-2014). The local budget is not determined by the local government independently, but it is subject to the state payments to be made to the local government by the state. Thus, the local budget is subject to the decisions taken by the federal and state government. As mentioned earlier, state budget is affected by the federal budget, similarly local budget is affected by both the state budget and the federal budget. Agency Budget A government agency is an organization that is a part of the network of governmental functions. A government agency is a body that is delegated some responsibilities of the government. An agency can be either permanent of a semi-permanent organization. Since the government agency comes within the ambit of the governmental authorities therefore the budget of such organization is approved by the regulatory authorities. The budget of the government agencies is prepared in accordance with their objectives. The more important the objectives, the more extensive the budget will be. If an agency is assigned with administrative tasks which do not require any comprehensive resources to conduct Research & Development functions or the cost for the operations of that agency is fixed, the budget does not include any excessive spending. However, if the objectives of the agency are of significant importance for the government, the budget includes extensive details regarding the resources allocated to that agency and the spending to be made by that agency. In case of the budget proposed for the United States Environmental Protection Agency, the budget includes an overview of the functions of the agency. The budget includes the appropriation of the total resources determined to be allocated to the specific functions of the agency. For example, in case of EPA, the budget has been allocated to five main goals of the agency which are; clean air and global environment change, clean and safe water, land preservation and restoration, healthy communities and ecosystems and compliance and environmental stewardship. The budget has been allocated in accordance with the importance of the goals of the agency. For example; 45.7% of the total budget has been allocated to goal 2 that is clean and safe water. This is one of the most basic needs for human survival therefore this goal is given high priority. Differences between Budgets One of the major differences that are observed between the bud...