Review of Revenue Estimates in Federal, State and Local Budgets. Scholarly Activity 2: 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 extensive detail regarding the utilization of resources to be made in the fiscal year, the manner in which the resources would be utilized and allocated, the expected return or the source of funding and a number of other aspects. The budget also reflects the policies of the entity, for example, if an entity plans to develop a certain business objective, 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 formulated.
Budgets are formulated at all levels of the governmental structure. 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 a standardized allocation of resources and the level of funding 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 and to conduct a variance analysis. Budgets are compared to the actual funding done in order to determine whether the funding has been done in accordance with the initial plan or there is difference between the budgeted and actual figures. Budgets also help an entity design strategies and to make decisions. Strategies are designed on the basis of the information provided in the budgets and 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. 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. 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 can sign them into enforcement or can veto them.
The major expenditures in the United States federal budget include Medicare, Defense Department, Non-Defense Discretionary and Social Security. 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).
The federal budget is also used to enforce the fiscal policies designed by the federal authorities. Fiscal policies are designed to control the overall inflation by controlling the extent of spending in the fiscal year. The government spending has a significant impact over the inflation therefore the budget is used to control the government spending. 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
State budget is the allocation of resources to the different departments of the state government. The budget considers the spending to be made by the state government within that 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 state budget puts great emphasis over the employment in the state and the efficient working of the various departments of the state. 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 scope of the budget depends upon the size and economical significance of the state. 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 independent of the federal budget. The state budget is affected by the policies designed by the federal government. If the fiscal policy of the federal government includes measures to curb inflation, the state budget would be affected by the policy as it is also subject to following the federal regulations. 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 distinct 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 considers the allocation of resources to the functions of a local government such as; government of a city would conduct spending for the development 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 allocate maximum resources to the special purpose for which the district has been formed.
Local budget has a very limited scope therefore the budget document is not extensive as that of federal or state budget. The local budget provides a brief insight on the economic condition 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 usually given a responsibility to oversee certain functions 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 extensive Research & Development cost or the costs 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
The major difference between all the budgets discussed above is that of the scope of the budget. As the entity for which the budget is prepared grows smaller, the scope of the budget narrows. From the budgets discussed above the budget with the widest scope is the federal budget. Federal budget includes an extensive detail regarding all the functions of the government and the allocation of resources to its agencies and states. Federal budget deals with the implementation of the fiscal policies designed at the national level. The scope of federal budget is so wide that it has the potential of affecting the overall economy. The decision regarding deficit or surplus budget has a significant impact on the economic conditions of the country. On the other hand, the scope of state budget is much narrower than that of federal budget. The state budget is confined to the functions of a particular state only. State budget deals only with the spending to be done by the state government on the functions of that state. Similarly, the scope of the local budget becomes even narrower. Local budget deals specificall...