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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
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.?
Why is an Agency’s Budget Process Important?
To Be Filled In By Class Discussion
What is the budget baseline? Why is it important?
To Be Filled In By Class Discussion
Common Budget Presentation: line item
Contract services
Total Expenditures
General Fund
Special Funds
Total Revenues
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
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
Budgeting Vocabulary—selected terms
unallocated reduction
General Fund
special fund
• budget transfers
• one-time v ongoing
• personnel years (PY)
• discretionary expenditures
• earmarking
• tax expenditures
Budgeting Vocabulary—selected terms, cont.
chart of accounts
operating budget
salary savings
year end balance
enterprise fund
entitlement program
fiscal year
progressive tax
regressive tax
zero-base budgeting
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/efficiency
– 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 ==> ends-based ethics
– Responsible use of increased administrative discretion
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
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 can’t
• use (abuse) of data in budget justifications
• design budget process to exclude contrary viewpoints
• advocate for program in opposition to executive budget decision
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
– Political expediency to gain passage (features or
gimmicks that aren’t fiscally sound)
– User taxes to replace general purpose revenues
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