Budget Execution
57.508-201
The Budget as a Policy, Planning and Information Tool
Week 5 - Spring 2011
Budget Process
1.
Executive and staff preparation
2.
Submission to policy body budget committee
3.
Policy deliberations, amendments and revisions
4.
Adoption
5.
Execution
6.
Evaluation
7.
Audit
2. Submission
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Draft budget with message sent to policy body
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City council, county legislature, town board, etc.
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Finance committee reviews budget requests
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Sometimes invites in all department heads
Sometimes executive represents all requests
Sometimes conflicts between executive & departments
Politics and reality at play
3. Policy Deliberations
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City council or board of aldermen
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Town council or board of selectmen
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County legislature or board of supervisors
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School board
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Regional council or COG governing board
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NGO Board of directors
4. Adoption
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“Ways & Means” looks at expected revenues
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Public hearings held
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Fixed costs & entitlements vs. discretionary
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Council or board members propose changes
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Changes voted on individually
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Consensus achieved on bottom lines
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Full council or board adopts with amendments
Budget Process
1.
Executive and staff preparation
2.
Submission to policy body budget committee
3.
Policy deliberations, amendments and revisions
4.
Adoption
5.
Execution
6.
Evaluation
7.
Audit
Role of the Budget Office
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Management controls
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Accounting system operations
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Reviewing agency or department procedures
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Setting rules for consultants or travel
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Protecting against fraud & waste
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Overseeing agency or department compliance
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Reporting on organization performance
Subsystems of Budget Execution
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Revenue Administration
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Cash Management
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Procurement
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Risk Management
Revenue Administration
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Taxes
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Determining the tax
Applying the tax
Collecting the tax
Enforcing the law
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Fees, sales, grants, gifts, loans, etc.
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Investment management
Cash Management
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Depositing revenue promptly
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Expenditure planning
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Paying bills promptly
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Short term borrowing
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Contingency funds
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Investment planning and management
Procurement
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System with unambiguous and precise policies
Centralized vs. decentralized
Group or contract purchasing
Low cost, timely delivery, quality product
Bid procedures, RFPs
Purchase vs. lease
Outsourcing & privatizing
Contract management
Efforts to ensure competition, public notice, etc.
Can further policies like…
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MBEs & WBEs
Energy efficiency or environmental quality
Risk Management
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People, property and records to protect
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Liability, exposure to litigation
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Faulty equipment or hazardous location
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Identify probability of extreme events
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Insurance vs. self-insuring
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Premiums, awards, settlements, etc.
Revenue Administration
Taxes & Fees
Determining the tax (fee)
– Applying the tax (fee)
– Collecting the tax (fee)
– Enforcing the law
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Remember the “centrality of revenue constraint”
Legal Basis for Collecting Taxes
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Taxing powers
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Proprietary powers
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Percentage of income
Consumption (sales)
Wealth (investments & property)
Operation of enterprises yielding fees-for-service
Regulatory (or police) powers
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Regulation of land use & code enforcement
Licensing of various professions or activities
Inspection and certification of food establishments
Three Pillars of Taxation
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Equity
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Neutrality
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Effective Administration
Equity in theory
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Horizontal equity
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Vertical equity
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Progressive distribution
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Proportional distribution
Equity in Practice
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Benefits-received principle
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Motor fuels taxes
Hotel/motel occupancy taxes
Property tax
Ability-to-pay principle
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“From those to whom much is given, much shall be
required.”
Elements of a Fair Policies
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Levies are benefits-based
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No favors to special groups
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Ease the burden on the poorest but don’t punish
the wealthiest
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Tailor tax structure to community’s age, income
distribution, and preference for public services
Neutrality in Theory
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Public goods and services
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Private goods and services
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(education, public safety)
(utilities, public transit, solid waste)
Merit goods
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(municipal airport, local library)
Neutrality in Practice
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Broader base
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Flatter tax rates with fewer exemptions
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Benefits-based taxes and charges
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Smaller tax rate differentials (loopholes)
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Carefully designed taxes on business
Tips for Tax Reformers
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Improving the equity and neutrality of existing
taxes is better than introducing new taxes
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Long term, increasing tax neutrality stimulates
economic prosperity more than reducing tax rates
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An equitable tax structure is the best tool for
creating a favorable business environment
Influences on Local Revenues
Trends in Local Revenues
Q: What’s been happening?
Trends in Local Revenues
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Devolution & downshifting
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Greater need for financial self-sufficiency
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More charges and fees for services
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Increased intergovernmental competition
(e.g., for new development)
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Citizen distrust of government
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Increased economic uncertainty
Factors Escalating Competition
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Increased mobility of business
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Stagnant growth, particularly in manufacturing
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Reduction in revenue sharing
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Greater service responsibility shifts
Dependence on the Property Tax
Dependence on the Property Tax
Advantages of the Property Tax
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Provides a stable source of revenue
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Reaches nonresident property owners
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Finances property-related services
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Is easy to administer & difficult to evade
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Promotes local autonomy
Disadvantages of the Property Tax
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Not horizontally or vertically equitable
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Not progressive in distribution
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Not based on ability-to-pay
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Not benefits based
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Not broad based
Q: What happens in areas of declining values?