What should you know about government budgets? While paying your taxes each year, you are plagued by this feeling of ambiguity that says “My tap is still not fixed, where does the money go?” Not to blame, but a majority of people that pay taxes feel the same way. Some of the money gets spent on discretionary programs such as transportation, food and agriculture, environment, labor conditions, education, housing and community, healthcare and so on. Another sizeable chunk goes to mandatory programs such as the veteran’s benefits, pension and retirement funds, Medicare, social security and social health. Finally the government also has to pay the interest on any debts that it may have. This is broadly where all the money that is earned by the government through taxes is utilized. But different countries have different budgets. By that, it just means different ways of allocating finances to such things, both discretionary and mandatory. But most of you already know this! So what is it that you don’t understand about government budgeting? It is when the finance people come up with terms like revenues, payables, cash balances and operating balances and capital budgets, that your head starts to spin. Not to worry! Keep reading if you want further closure on what the government does with your money. What are revenues and expenses? Simply put revenue is what you bring home at the end of the day. With respect to the government it is all of their earning from taxes, service fees and the like. Expenses on the other hand are what you spend to maintain your present balance in accounts or improve the existing situation. Every year, there are projections of both revenue and expenses. Any less of what’s projected and you will be in deficit and more of revenue will create surpluses, which may not always be good for you. Now let’s take a peek into the different types of budgets. a. Operating budgets: This budget tells you the day to day revenue and expenses. It is how much of cash or balance that you have to keep in hand to get through the day. These budgets are different for utilities such as sewer, electricity, water and so on. Every department will maintain a separate budget, and sometimes they may be planned for up to 5 years. b. Capital budgets: This one is for long term growth. They take into account the amount that is spent on infrastructure, health and education services, banks, loans and the fiscal deficit or excess. Every organization maintains a separate fund for these and money isn’t used out of this to fund the operating budget. All this is done through budget proposals. The President along with the executives from the Office of Management and Budget have to plan out each year according to what went on in the past year and what is expected of the year ahead. They are
even second guessed by local officials such as mayors or district officials before being approved and enforced. This was broadly all about government budgeting. But the actual process is a lot more fleshed out and accounts for almost any expense that is incurred in society.