Week 8: Local Government Finance

1
Week 8 Local Government Finance

• Guest Speaker Betty Masuoka, Assistant City
  Manager, City of Sacramento
• City revenues and expenditures
• Major financing issues facing the City
• Course Review
• Begin discussion of ethics in public budgeting
  and finance

2
Review Key Concepts

• Budget process
• why is it important?
• Budget baseline
• what is it?
• why is it important?
• Budget format and presentation
• Line item budgets
• Budget text highlights and summary
• Budget schedules
• Executive v legislative roles and conflicts
• how does this play out at different levels of
  govt.?

3
Why is an Agencys Budget Process Important?

• To Be Filled In By Class Discussion

4
What is the budget baseline? Why is it important?

• To Be Filled In By Class Discussion

5
Common Budget Presentation line item
6
Executive v Legislative Roles and Conflict

• Role of executive
• vision
• priorities
• consistency and support across agencies
• budget balance
• management of resources
• Role of legislative branch
• hold executive accountable
• representation (policy and pork)
• partisan leadership

7
Steps in Developing a Budget

• Plans and priorities
• Revenue projections
• Budget instructions
• Budget request preparation and internal
  submission
• Internal review
• Submission to and review by executive office
• Full budget preparation and submission
• Legislative review
• Approval and appropriation
• Executive branch internal allocations and
  implementation

8
Budgeting Vocabularyselected terms

• incrementalism
• reallocation
• across-the-board
• unallocated reduction
• fund
• General Fund
• special fund

• budget transfers
• one-time v ongoing revenues/expenditures
• personnel years (PY)
• discretionary expenditures
• earmarking
• tax expenditures

9
Budgeting Vocabularyselected terms, cont.

• appropriation
• allocation
• chart of accounts
• operating budget
• salary savings
• reserve

• year end balance
• enterprise fund
• entitlement program
• fiscal year
• progressive tax
• regressive tax
• zero-base budgeting

10
Framework for Public Sector Ethics

• Traditional view of ethics (roots in business
  world)
• low road of compliance -- stay out of trouble
• neutrality/expertise/administration/rules/efficien
  cy
• controls to guard against fraud, waste, abuse
• means-based approach
• Contemporary view of ethics
• high road of moral reasoning, integrity,
  justice, leadership
• ethics of value, not of neutrality
• integrity/moral reasoning/leadership/justice
• Results-oriented government gt ends-based ethics
• Responsible use of increased administrative
  discretion

11
Ethics Framework Applied to Public Budgeting

• Old budgetary ethics
• line item accountability
• limited discretion
• focus on allowable uses of funds
• New budgetary ethics
• discretion on use of funds across categories
• program control, not line-item
• focus on accomplishments
• flexible use of resources to meet goals

12
Some Ethical Issues in Public Budgeting

• From three separate Sac Bee articles on March 17
• hold positions vacant to fund other priorities
  for which augmentations are difficult to get
• subsidize golf enterprise fund with city general
  funds to maintain access for all citizens
• support increases unemployment insurance benefits
  beyond what fund can bear after election
• -----------------------------------------
• spend general fund money on grant costs because
  the latter can be carried over and the former
  cant
• use (abuse) of data in budget justifications
• design budget process to exclude contrary
  viewpoints
• advocate for program in opposition to executive
  budget decision

13
Some Ethical Issues in Public Finance

• Estimate of available revenues
• Are there circumstances when withholding
  information could be ethical?
• Choosing optimistic v pessimistic scenarios
• Impact of tax policies
• Short-term v long-term impacts (leave problems
  for successors)
• Political expediency to gain passage (features or
  gimmicks that arent fiscally sound)
• User taxes to replace general purpose revenues

14
Preview of Week 9

• Part III Practical Applications in Budgeting
• Back to Rubin, Ch 5 on tradeoffs and competition
  for
• Bland and Rubin budgeting in local government
• Department of Finance
• Budget analysis
• BCPs
• In class project on budget justification/analysis