Public Budgets

A budget is a political instrument that: compares policy priorities against available public
resources; specifies the ways and means of providing public programs and services;
establishes the cost of programs and the criteria by which these programs will be evaluated
for efficiency and effectiveness; ensures that the programs will be evaluated at least once each
budget cycle; redistributes income; provides the government with a spending limitation; and
provides transparency by which the government may be held accountable at the end of each
budget cycle or political term.

The budget is generally composed of an operating budget, which shows expenditures for the
current period, and a capital budget, which shows the financial plans for long-term capital
improvements, facilities, and equipment. The two budgets may be consolidated in order to
indicate the amount of total estimated revenues available for the current period and the
amount of new debt to be incurred for projects in the capital budget. For more information on
expected incomes, see Local Revenue Structures.

Process

Although the details of the budget process vary significantly from city to city, there are four
main sequential stages in the lifecycle of a public budget:

1. Preparation: the budget involves the development of expenditure estimates for

departments in light of available revenues.

2. Approval: budget estimates are then submitted to a city council or board for review and
modification, often with citizen input from public 
meetings. The budget is then legally approved and adopted.

3. Implementation: the budget is then implemented by municipal departments throughout the

year.

4. Evaluation/Audit: the performance of all governmental units is monitored and measured

throughout the fiscal year. Those indicators 
are evaluated at the year's end to inform the budget process for the following year. 

Authority

The entity that prepares the budget may be a mayor with independent authority to develop and
make recommendations for the budget to the city council. In other cases, a city manager may
initiate the process then the mayor may review and comment on the budget for the council. In
all cases, the council is solely responsible for approving the budget. Once the proposed budget
is approved through a budget ordinance, the newly adopted plan becomes a legally binding
document for the mayor or city manager to administer. After the fiscal year has been
completed, most state laws and municipal charters require an independent financial audit
which is made public.

Requirements

In addition, state laws dictate that nearly all cities operate under balanced-budget

requirements, meaning that cities almost always plan on ending the fiscal year with a
surplus to carry forward. This ending balance, often referred to as a "reserve" or "rainy day
fund," which is often capped in size, becomes available revenue for the next fiscal year, as is
the case in two‐thirds of states. In other states, the fund is maintained to use only in times of
unexpected revenue shortfalls or budget deficits. Eight states refund the money to
the taxpayers, and nine states earmark the funds.

(Web site: https://www.nlc.org/public-budgets )

QUESTIONS

1. WHAT´S A BUDGET?

A. is a tax.
B. is a tool to deduce.
C. is a political instrument.
D. is a public spending.

2. A budget is generally composed of:

A. An operating budget and a capital budget.

B. An operating budget and a private budget.
C. A capital budget and a college budget.
D. None of the above.

3. What are the four main sequential stages in the lifecycle of a public budget:

A. Preparation, Approval, Implementation and action.

B. Preparation, Approval, Implementation and Evaluation/Audit.
C. Preparation, Approval, judgment and control.
D. Approval, judgement, action and preparation.

5. Who is the only responsible for approving the budget?

 A. The mayor.
B. The president.
C. The supreme court of justice.
D. The council.

6. The cities almost always plan on ending the fiscal year with a surplus to carry forward.
True or False?

A. True.
B. False.

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