1a. Write a comprehensive essay on the differences between federal, state and local governments on capital spending and budgets (2-3 pages APA style).
1b. Review the Broward County FY 2016 budget from the website below and identify the county’s capital expenditure/spending projects. http://www.broward.org/Budget/Pages/Default.aspx (Links to an external site.)
2. Many communities are utilizing performance measures to determine the impact programs and projects
are having on their budget. Several kinds of performance tools are used by state and local governments. Please read the article from from Mecklenburg County, North Carolina (see module 4 readings and download the article) which provides a scorecard/dashboard of services that are linked to legislative, community and budgetary goals. Review this document and discuss:
a. The benefits of having performance measures linked to the budget.
b. Provide an assessment of another state or a local government with a budget that utilizes performance measures and discuss what these measures are and how these measures are linked to the budget.
There are significant differences between the federal, state, and local governments on capital spending and budgets. The main difference between federal budgets and state and local budgets is fiscal deficits. The federal budgets mainly record high expenditures that the budgeted revenue. In contrast, state and local governments are required by law to balance their budgets. The government legislations seeks to ensure that all the budgetary appropriations can be funded fully without any deficits within the local and state levels. It is unlawful for their budgeted expenditure to exceed their expected revenues as the federal governments do. Unlike, the state and local budgets, the federal government is allowed to borrow money to meet its financial obligations. Kelly (2015) notes that the efforts of attempting to align the federal government with the local and state governments regarding the issue of balancing their budget have failed. It was argued that such a law would restrict the federal government from borrowing money during national emergencies.
Another major difference could be examined from the available revenue options. The major components of a budget are revenues and expenditure and these forms the basis of capital spending. The federal governments get most of their revenue from collecting taxes. In contrast, the state and local governments who have a wider variety of choices to get revenue. The federal government revenue is from individual and corporate taxes, capital gains tax, excise taxes, inheritance tax, and borrowing through Treasury bonds. On the other hand, the state and local governments enjoy a wider range of revenue options, which include intergovernmental transfers, sales taxes, fuel taxes, and borrowing. Also, the state governments differ from local governments in revenue sources. State governments get revenue from licensing, special taxes on specific products, and lottery. Contrary to this, local governments have access to revenue from special assessment for special districts and user fees which state governments do not enjoy.
The amount of defense spending also brings about the explicit difference between the federal, state, and the local budgets. The federal governments spend a large proportion of their revenue on defense. The portion of the budget attributable to defense is used to pay salaries to military personnel, purchase equipment for the military, and fund the operations of the military across the state and all over the world (Hope & Fraser, 2013). Contrary to this, the state governments have a negligible role in defense limited to funding the state National Guard. The local governments have no role in defense spending since it is not part of their jurisdiction.
Based on economic influence, the federal budget has a central role in defining the nation’s economy. Its role carries substantial implications on the budget and economic strengths. The Constitution of the United States authorizes the federal government to issue currency and control its circulation in the economy (Kelly, 2015). The federal agencies can print more money when fiscal conditions are bad, regardless of the fact that this act could fuel inflation. In contrast, the state and local governments do not have authority to issue currency nor can they control its circulation in the economy.
In terms of education, the federal budgets allocate approximately 3% of its revenue collections on education. For the federal governments’ budget, education takes a minor proportion after security, health, defense, and the interest on the debt. In contrast, education spending from state and local governments constitutes approximately 33% of the total spending. It takes up the largest proportion of the expenditure for state and local governments. It is the responsibility of state and local governments to provide quality education than it is for the federal government. Finally, state and local governments distinguish between their operating budget and their capital budget. The operating budget is funded by anticipated revenues while the capital budget includes the purchase of land and construction of public amenities. The federal budget unlike the state and local government’s budget does not provide a distinction between the capital budget and operating budget.
The capital expenditure projects of Broward County includes the funding of public safety costs, physical environment, culture and recreation, reserves, and transfers. The reserves had the highest appropriation at $13,910,010 improve and maintain the budgeting and financing of projects in Broward country. Other unincorporated capital expenditures include the garbage collection costs of $8,202,660, street lighting program of $297,200, and the municipal service district of $11,275, 290.
It is important for the county to link their budgets with performance measures. The officials of Mecklenburg County, North Carolina, have enjoyed various benefits from the linking of the budgetary plans to the performance measures. The linkages help to understand mission statement that helps in the achievement of the core values that must be followed to serve the residents and improve their lives. Appropriate performance measures assist the county governments in making quality decisions for the greater good of the residents of the county. The outcome of using the performance measures promotes the integration of relevant legislation and budgeting which promotes the implementation process.
The benefits of linkage define the model of performance-based budgeting for state and local governments which is common. Today, most local and state governments have started to link performance measures in their budgets (Kelly, 2015). The performance measures assist the budgeting committee in allocating scarce resources among projects to achieve maximum benefits. Because of the scarcity of funds, state leaders have to make important decisions on which projects to undertake for the maximum benefit of the public. It also assists in getting high returns on the performance measures, which are necessary for policy-making and budgetary allocations.
Linking performance measures to the budgets also provide resource allocation outcomes over time. It enables the budget planners to plan on what projects can be undertaken at different times. The performance measures identify budgetary outcomes and assess the efficiency and effectiveness of budgetary improvement and programs. Another benefit of linking performance measures to budgeting is that it triggers an in-depth examination of budget defects and possible corrections (Hope & Fraser, 2013). The budget can be assessed for workability and efficiency and necessary corrections made for more effective use of funds. The main issue is that linking budgets with performance fosters improvement in spending of the limited resources to maximize the overall welfare of the society.
Performance measures are also beneficial, as they act as the control mechanism for overspending. When budgets are linked to the performance every single cent will be accounted for, and thus, it is a cost-benefit-analysis tool. Each project that is undertaken must be providing the highest possible benefit to the public, but it is not valid. It prevents planners from allocating a huge sum of money to one project while forgetting other beneficial projects (Hope & Fraser, 2013). Lastly, performance measures assist in building public trust and increasing accountability of stakeholders in the budgeting process. The public can trust the budgets that are presented if they are linked to performance. The knowledge that the local and state governments are undertaking projects that are the most beneficial to them is a big tool in building public trust.
The government of the City of Austin has been continually implementing a system of performance measures in their management and budgeting. Their system is designed to build on previous performance measurement and strengthen their management performance by making it more result-oriented. All employees’ performance are evaluated and linked to service delivery to the public. Performance measurement and reporting and auditing are linked in budget preparation, and key performance indicators are integrated into the financial process (Kelly, 2015). The performance measures are used in the city to justify budget requests to prevent unnecessary requests, and the budgeting process is simplified. Great improvement in the performance of the city has been noted, the use of performance measures has been described as making budgetary decisions less political and more objective. Several cases were cited where program managers were questioned during budget development by the city budget office
In the critical review of the fund appropriation of the city of Austin government, it is clear that they have been able to link the performance measures with the budgets. It ensured that all the employees signed performance contracts that require performing to a certain level in a year. The annual assessment was critical in ensuring that the city of Austin achieves their objectives. The government of the city of Austin linked the performance measures to the budgets through the creation of strategic goals and mission which offers guidance for the future performance of the government. The strategic goals and objectives provide a coordination of the performance measures and the budgets to improve the allocation resources to maximize the welfare in the Austin.
In summary, it is critical that the use of performance measures is critical in developing budgets and making important decisions. It assists in the creation of relevant policies that would lead to improved outcomes alongside the federal, local and state budgets. Considering the challenges of implementing the performance measures, the federal, state, and local governments should develop relevant measures to improve budgeting plans and programs. Therefore, the budgetary process and performance messages relate to the proper utilization of resources and budget controls.
Hope, J., & Fraser, R. (2013). Beyond budgeting: how managers can break free from the annual performance trap. Boston, MA: Harvard Business Press.
Kelly, J. M. (2015). Performance budgeting for state and local government. London, UK: Me sharpe.