Governmental Budgeting Process
A. How and where revenues are derived from the agency.
The federal government can be categorized into several groups: grants, taxes, earnings, sales, balances and transfers. It is noted that for budgeting purposes, federal revenue is divided into two categories: the non-general fund and the general funds. Arguably, more than half (60%) of state funds are non-general income and set for specific purposes. For instance, gasoline taxes are set aside by law for transportation programs. On the other hand, general fund revenues tax make slightly less (40%) of the budget. These funds are mostly obtained from direct general taxes paid by citizens and various businesses in the country. Notably, general fund revenue can be used in different ways, for example, the governor, as well as the General Assembly, has the most discretion to spend (Sperber, 2000).
Moreover, General Fund revenues are obtained majorly from three primary sources of income. First, it is derived from individual income taxes paid by citizens on their revenues and they account for $ 20 billion. Secondly, there are corporate income taxes obtained from different businesses and corporations on their incomes and they account for $ 1.4 billion. Lastly, there are sales and use taxes paid by citizens and business on commodities they purchase. Other general sources of income include insurance premium taxes, wills, public service gross receipt taxes as well as contract fees.
Nongeneral fund revenues are set aside by law for the particular purpose. For instance, in the United States, they total $ 42.5 billion excluding bond proceeds and balances. Notably, federal grants are the primary source of general fund revenue; however, they do not come to the state as simple cash transfers. Additionally, institutional funds are another source of nongeneral fund. The primary source of this revenue is patient fees at hospitals as well as fees paid by students at institutions of higher learning. Other nongeneral fund includes state transportation revenues, unemployment revenues, and taxes paid citizens as well as business for enterprises.
B. revenues and governmental, proprietary, and fiduciary funds
Government funds have a general fund and can set up other funds for other government activities. For instance, they are used to set up special revenue funds, permanent funds, capital project funds and debt service funds. Proprietary funds are used when government acts as a business as well as when the government provides goods and services to other government entities such as internal service fund. Fiduciary funds are also called Private Purpose Trust Funds. Notably, the beneficiaries of the fiduciary fund are external individuals as well organizations. For example, scholarship funds to benefit external people and endowments held to benefit needy employees (Peng, 2008).
C. how public policy decisions affect the receipt of revenues and possible restrictions that are (or can be) placed on the revenues.
Public policy decisions such direct cash transfers to individuals increase the income of citizens of a depressed country. Also, the public such as the politicians does not agree on public policy decisions such as budget deficits and taxes. Thus, possible restrictions that can be placed on the revenues include coming up with laws that restrict the public from making decisions that affect income of a country negatively.
D. Economic conditions that affect revenue projections.
Some of the economic conditions that affect revenue forecast include Growth of the real gross domestic product, interest rate, and inflation. It is noted that stronger economic growth improves the revenue whereas weaker growth worsens it. Additionally, slower Gross Domestic Product has various effects on the revenue projections. For instance, it would result in less growth in taxable income, hence, lower tax revenue. Besides, a smaller amount of revenues the state would borrow more and thus would incur higher interest costs. Higher interest rates affect the flow of interest payments to and from a state. Arguably, budgetary deficit makes the Treasury follow additional funds from the public to cover the loss. Higher inflation increases revenues and thus resulting in substantially larger budget deficits (Alm, Buschman, & Sjoquist, 2009).
References
Sperber, R. I. (2000). An analysis of the potential control factors in Public law 874.
Peng, J. (2008). Fiduciary Funds. Public Administration and Public Policy Handbook of Governmental Accounting, 317-338.
Revenues from Nonexchange Transactions. (2015). Governmental Accounting Made Easy Ruppel/Governmental, 169-186.
Alm, J., Buschman, R. D., & Sjoquist, D. L. (2009). Economic Conditions and State and Local Education Revenue. Public Budgeting & Finance, 29(3), 28-51.
