Annual Budget: Revenue Sources and Expenditures
Governments provide services because the market cannot provide all that are necessary in efficient amounts. Yet any policy choice involves trade-offs between efficiency and equity because some people believe they pay more in taxes than the dollar cost of the services they receive from government while others pay less than the dollar value of the services received. For example, the person who does not have school-age children may think it inequitable to pay for public education. The person who does not ride the bus may think it inequitable to subsidize public transit. As Hyman (2021) notes, “Government provision of goods and services is justified by the belief that the marginal social benefit of the services outweighs the marginal social cost” (p. 63).
In your local government Annual Budget, find a section that summarizes revenue sources and expenditures. For example, in the San Francisco budget (2014) in this week’s Learning Resources there is a section titled “Consolidated Schedule of Sources and Uses.” If you use a section of this kind in your budget, you will be able to compare and contrast income and spending for the 2 years covered by your budget. Major categories of expenditure are public protection, public works, human welfare, community health, culture and recreation, and general administration. Major sources of revenue are property taxes and other local taxes, business taxes, and transfers from state and federal government.
For this Assignment, in a 2- to 3-page paper, from the Annual Budget of your local government, do the following:
Identify the three largest areas of expenditure, e.g., public safety, social services, welfare.
Analyze how the expenditure levels for these three areas have changed over the last 2 years.
Identify the most important revenue sources and analyze how these have changed over the last 2 years.
Note: You may need to explore your local government’s website to find necessary information. For example, the City and County of San Francisco Office of the Controller’s website, http://sfcontroller.org, has a pull down menu titled “Information and Reports” that includes economic analyses and information on performance evaluations. Another pull down menu titled “SF Open Book” has a report on overall spending and revenue categories.
Sample Solution
An annual budget forecasts a company’s revenue and expenses for the next 12 months. The process of developing an annual budget entails balancing a company’s revenue sources against its expenses. An yearly budget is sometimes expanded to include a balance sheet and cash flow statement, especially for non-individuals. Individuals, firms, governments, and other sorts of organizations that need to keep track of financial activity employ annual budgets. If planned expenditures equal projected receipts, annual budgets are termed balanced. If expenditures exceed revenues, the budget is in deficit; if revenues exceed expenditures, the budget is in surplus.
