Public budget and finance
The public budget and finance have six processes that are interrelated; those are budgeting, taxation, tax policy, capital, and debt, money management and financial system (FIU). The study will be applied to two study cases: the Alligator Alley lease and the Hollywood City cash flow. Both cases are at a local level in the state of Florida in the United States of America. First of all, the definition of each process:
Budgeting: The budgeting is the process consists on a yearly basis plan where the institution estimates the incomes and outcomes of money according to previous budgets, higher institutions, and goals. The budgets may have surpluses or deficits. When the budget has deficits, especially in regional and local governments, the institution must apply measures to fill the budget gap as: reduce expenses, increase income or new debt. This situation is different to a national administration which could work with the Central Bank to create money (National League of Cities).
For the first case, the Florida Department has a budget of maintenance of the Alligator Alley highway, and the administrations want to change those expenses from the budget to new revenue due to the lease of the highway and to use the money to build new roads.
For the second case, the Hollywood local government has the problem of overestimation of incomes in the 2011 budget which generated a deficit at the end of the year; the income failure was for the estimation of incomes for the red-light cameras.
Taxation and Tax Policy: According to the budgeting process, the public institutions at different levels has by law the right to tax the citizens and organizations to have a constant income and develop their activities. The taxation has rules and rates according to the income and activity nature of citizens and organizations.
The first case of Alligator Alley, the lease of the highway will allow the government to change the use of the taxpayer's money in other applications or to reduce the tax rates. The potential deal of 500 million to 1.3 billion dollars is the potential saving for taxpayers.
The second case of Hollywood City, the government overestimated the incomes for tax in beverages, licenses, permits, court fines and security. That situation provoked a deficit in the 2011 budget of Hollywood City.
Capital and Debt: Those concepts are related to the balance sheet of the institutions. The capital is owned by the equity holders of the institution, in the case of a public institution is the state or local government. The debt is the liabilities and compromises with banks and bondholders.
The first case of Alligator Alley, the lease of the highway will allow the government to maintain the highway as an asset because the highway is not for sale, but a lease. The lease allows the institution to maintain the property and generate a monthly or yearly positive cash flow.
The second case of Hollywood City, the deficit in 2011 budget increased the debt of the local government without tools to increase revenues and balance the budget. The only strategy that the city can apply is the expenses reduction on police, fire department, and services.
Money Management: The money management or the cash flow is how the money flows outside and inside the organization at the time. For convenience, months, quarters and years are the time periods to study the cash flow.
The first case of Alligator Alley, it will generate a positive cash flow to the government with the possibility to invest the money in other projects.
The second case of Hollywood City, the cash flow is negative and the only possibility to balance the budget is to reduce expenses.
Financial System: This is the economic context where the institution is. In this case, the United States of America economy is the context of the considered institutions with the US dollar as the currency, low-interest rates (near 0%) for deposits and 12%-25% interest rates for bank loans.
Both cases are under the same financial system and the same state where the tourism, banking, and real estate are the economic activities that have an important stake in the Gross Domestic Product.
Works Cited
FIU. Public Budgeting and Financial Management. 2015. Web. 22 march 2016
National League of Cities. Public Budgets. 2013. Web. 22 march 2016
