Pa 508 Test

Front 1

pareto efficiency

Back 1

economy reaches product efficiency when someone can be made better off by not making someone else worse off.
NEED:
producing things efficientyly and cheaply
type and quantiyty of services will meet societies desires

Front 2

Public Good (2 forms)

Back 2

Non Excludable: once produced cannot exclude someone from using service -cannot charge for suing service. ex. national defense

Non rival: once service there additional usage will not create revenue. ex. parks

Front 3

3 functions of finance theory

Back 3

stabilization - price stability, interest rate, fiscal policies. fed gov

redistribution - take from rich give to poor - state and fed gov

allocation - provisions of goods and services. local gov

Front 4

Government Revenue

Back 4

Taxation

Fees/Charges

Grants - esp for local government

Borrowing - all 3 levels

Front 5

TAX
Proportional

Regressive

Progressive

Back 5

Proportional = tax remains constant if income goes up or down

progressive = tax paid increased with the % of income increases (income tax)

regressive = tax % goes down when income goes up (property tax, food not taxed to make less regressive)

Front 6

Grants
Categorical vs. Nonmatching

Back 6

Grant = intergovernmental revenue transfers-only for state and local gov. 1/3 of ALL revenue. Uses: Ensure public good AND minimize fiscal disparity among gov, esp local

categorical-matching: medicaid
categorical - nonmatching (Block Grant, block of money given to local or state for fed's decision) dont have to math, only used for certain item
non categorical - matching - NOT EXIST
non categorical - nonmatching

Front 7

Gov Distributions

Back 7

Federal = personal income tax (most important/most progressive), corporate income

State = sales tax, income tax, fees, grants

Local = property tax(most important), fees, sales tax, grants, income tax

Front 8

Government Budget Functions (6 total)

Back 8

1) financial control - control of gov on tax payers $$, accountability
2) economic function - redistribution, stabilization, allocation all determined. use of mandatory programs, medicaid
3)political function - gov given authority to spend $$, forces gov to reach budget decision else cant operate
4) bureaucratic function - forces bureau's to come up with plan
5)systems function - how economy behaves affects how gov behaves
6) communication function - dialogue w/ taxpayers

Front 9

General Fund - part of Governmental Fund

Back 9

Any revenue without a dedicated purpose:
ALL general taxes, personal income, sales tax, property tax & general revenue sharing
ONLY fund with legitimate freedom to use where wanted
money comes from society-used to benefit society
largest fund - negotiations circle around where this can be used
*uses:
in debt service fund
in pension trust fund for employee salaries/pension

Front 10

Special Revenue Fund

Back 10

earkmarked fund - revenue can only be used for this special purpose
fund used for dedicated fees, taxes and grants
fed, state, local can have as many as wanted
example: medicaid, block grants

Front 11

Capital Projects Fund

Back 11

funds that are borrowed by state and local gov for capital projects such as roads, bridges etc.

can NOT be used for operative budget

Front 12

Governmental Fund Types

Back 12

1) General Fund - any revenue without dedicated purpose
2) Special Revenue Fund - aka Block Grants, revenue only used for special purpose like Medicaid
3) Capital Projects Fund - borrowed revenue by state/local for ONLY capital projets (roads/bridges)
4) Debt Service Fund - used to pay back debt, revenue generated by taxes, fees and grants
5) Permanent Fund - money invested by government

Front 13

Proprietary Fund Types - money beloning to individual

Back 13

1) Enterprise Fund - government activities covered by fees not taxes - fees can be used to pay bac capital investment. used for water/sewage
2) Internal Service Fund - agency giving service to another portion of gov agency - gov vehicles going to gov repair shop

Front 14

Fiduciary Fund Types (Trust Fund)

Back 14

1) Pensions Trust Fund - fund only for gov employee retirees
2) Agency Fund - sales tax paid by vendor which goes into state revenue to turn back to county's/cities
3) Private Purpose Fund - tax advantage plans managed by individual, held by government (college funds)

Front 15

Purpose of Governmental, Proprietary and Fiduciary Funding Structure?

Back 15

1) Accountability - fees collected based off laws, laws define how money can be used
2) legislature accountability - how they use revenue sources
3) Purpose of all 3 is to account for everything that is used and spent with the different funds

Front 16

Budget Process

Back 16

1) Preparation - governor prepares
2) Negotiation - after Gov submits to legislature deadline of July 1st for beginning of fiscal year
3) Execution - budgest executed after July 1st
4) Financial Reporting - done after execution

Front 17

Revenue Forecasting

Back 17

Part of the Preparation step in Budget Process
"Forecasting" how much revenue will collect and will
spend in upcoming fiscal year-determine expenditures
A "top-down" process: assess national economy/federal budget, state economy then revenue needed for the general fund
Major Risk and Use of: assist in preventing long term errors. upside=surplus. downside = get less revenue
Look at: GDP, corporate profits, property tax, inflation, unemployment, stock market,

Front 18

Revenue Forecasting Risks

Back 18

Upside = getting more money, surplus
Downside = get less revenue
1) Technical: model and data used miss variables/not adjust to change in tax base and rate-in gov control to prevent
2) Economic Scenario: knowing when to predict the "turning points" in 7-8 year economy boom/bust cycle (BIGGEST PROBLEM with forecasting)
3) Wild Card: events imposible to know that alter economy, natural disasters, stock market

Front 19

State Budget Spending

Back 19

1) K-12 Education - biggest part of general fund.
2) Health Care - biggest program Medicaid
3) Welfare - predict case loads for upcoming FY
4) Prison - driven by case loads

Front 20

Budget Expenditures Technique

Back 20

Reference last years budget for predictions
1) Zero-Base Budgeting - no base to build from, start budget from scratch
2) Baseline Budgeting - aka 'incremental budget funding' . how much will it cost to run same programs/operations with next years costs--> adding-subtracting reveals baseline budget
Downside: many programs outlive purpose-dont evaluate every single program/dollar being used