What is the difference between revenues and spending in a balanced budget

These actions only produce one-time savings, however, as the state simply transfers its obligation to the following fiscal year. If a shortfall results from sudden changes in economic conditions, this flexibility can allow a state time to recover economically and meet its fiscal obligations. However, it can also lead to ongoing reallocation of expenses to the next budget year.

Strong antideficit provisions, such as those in BBRs, are associated with:. Fiscal and budgetary institutions like BBRs, particularly when enforced strongly, influence both the size and composition of states' responses to fiscal deficits.

Poterba , for example, found that states with strict BBRs, which prohibited them from running deficits into the following year, were better able to adjust to deficit shocks, especially if one political party controlled both the governorship and the state house of representatives.

More recent research continues to show that states with relatively strong BBRs cut their budgets more in response to deficits than states with weaker rules. This was true for the two decades preceding the recession, with even more pronounced effects between and Rueben, Randall, and Boddupalli Additionally, in more recent years, states with strong balanced budget rules bridged less of their gap with revenue increases than in years prior, leaning more on spending cuts or possibly reserve funds to bridge gaps.

These actions exacerbate, rather than counter, the effects of an economic contraction. During and following the Great Recession , for example, states with strong BBRs cut their budgets and raised revenues precisely when the economy and residents would benefit from states spending more and easing taxes.

Hou, Yilin, and Daniel L. Smith, Daniel L. Bayoumi, Tamim, and Barry Eichengreen. Levinson, Arik. Poterba, James M. Randall, Megan, and Kim Rueben. Skip to main content. Briefing Book Fiscal Federalism and Fiscal Institutions What are state balanced budget requirements and how do they work? How does the federal government spend its money?

What is the breakdown of revenues among federal, state, and local governments? How do US taxes compare internationally? Federal Budget Process How does the federal budget process work? What is the history of the federal budget process? What is the schedule for the federal budget process? What is reconciliation? How is a budget resolution enforced? What are rescissions? Federal Budget Outlook How accurate are long-run budget projections? What have budget trends been over the short and long term?

How much spending is uncontrollable? What are tax extenders? What options would increase federal revenues? What does it mean for a government program to be off-budget? How did the TCJA affect the federal budget outlook? Taxes and the Economy How do taxes affect the economy in the short run?

How do taxes affect the economy in the long run? What are dynamic scoring and dynamic analysis? Do tax cuts pay for themselves? On what do economists agree and disagree about the effects of taxes on economic growth? What are the economic effects of the Tax Cuts and Jobs Act? Economic Stimulus What is the role of monetary policy in alleviating economic downturns?

What are automatic stabilizers and how do they work? What characteristics make fiscal stimulus most effective? Distribution of Tax Burdens How are federal taxes distributed? Are federal taxes progressive? How should progressivity be measured?

What is the difference between marginal and average tax rates? What criticisms are levied against standard distributional analysis? How should distributional tables be interpreted? Who bears the burden of the corporate income tax? Who bears the burden of federal excise taxes?

How do financing methods affect the distributional analyses of tax cuts? How do taxes affect income inequality? Tax Expenditures What are tax expenditures and how are they structured? What is the tax expenditure budget? Why are tax expenditures controversial? What are the largest tax expenditures?

How did the TCJA affect tax expenditures? Tax Gap and Tax Shelters What is the tax gap? What does the IRS do and how can it be improved? What is a tax shelter? Recent History of the Tax Code What did the —10 tax stimulus acts do? What did the American Taxpayer Relief Act of do? How did the Tax Cuts and Jobs Act change personal taxes? How did the Tax Cuts and Jobs Act change business taxes? Key Elements of the U. What are itemized deductions and who claims them?

How did the TCJA change the standard deduction and itemized deductions? What are personal exemptions? How do federal income tax rates work? What are tax credits and how do they differ from tax deductions? How do phaseouts of tax provisions affect taxpayers? Capital Gains and Dividends How are capital gains taxed? What is the effect of a lower tax rate for capital gains? What is carried interest, and how is it taxed? How might the taxation of capital gains be improved? Who pays the AMT?

Net County Cost is the amount of discretionary resources allocated to a department or program. This is also referred to as the General Fund allocation. Objects or Objects of Expenditure Appropriation or expenditure categories. Within each budget unit, appropriations are broken down into objects and, in some cases, sub-objects. Objects include:. County Executive Office staff review and analyze budget requests from departments and estimates the amount of discretionary resources that will be available.

Based on that, the County Executive presents a recommended balanced budget to the Board of Supervisors prior to the start of the new fiscal year. Departments submit their budget requests to the County Executive Office for review. Semi-discretionary Revenue A component of departmental revenue that includes Proposition and Realignment revenue. There are restrictions on what this money can be spent on, but, within fairly broad restrictions, the Board has the authority to allocate this revenue among different programs.

Proposition revenue comes from a statewide half cent sales tax and must be used to fund public safety programs. Realignment revenue comes from statewide sales tax and vehicle license fee revenue and must be used to fund certain mental health, public health, social services and public safety programs. Connect with Sacramento County.

Translation Disclaimer. Sign In. Skip to Main Content. Sacramento County. This section presents an overview of government spending in the United States. Comparing spending over time in nominal dollars is misleading because it does not take into account inflation or growth in population and the real economy. A more useful method of comparison is to examine government spending as a percent of GDP over time.

The top line in Figure 1 shows the level of federal spending since , expressed as a share of GDP. The other lines in Figure 1 show the major federal spending categories: national defense, Social Security, health programs, and interest payments. From the graph, we see that national defense spending as a share of GDP has generally declined since the s, although there were some upward bumps in the s buildup under President Ronald Reagan and in the aftermath of the terrorist attacks on September 11, Healthcare expenditures include both payments for senior citizens Medicare , and payments for low-income Americans Medicaid.

Medicaid is also partially funded by state governments. Interest payments are the final main category of government spending shown in the figure. Each year, the government borrows funds from U. It does this by selling securities Treasury bonds, notes, and bills —in essence borrowing from the public and promising to repay with interest in the future.

From to , the U. It had budget surpluses from to , and then returned to deficits. The government was able to repay some of its past borrowing by running surpluses from to and, with help from low interest rates, the interest payments on past federal government borrowing had fallen back to 1.

We investigate the patterns of government borrowing and debt in more detail later in this chapter, but first we need to clarify the difference between the deficit and the debt. The deficit is not the debt. The difference between the deficit and the debt lies in the time frame. The government deficit or surplus refers to what happens with the federal government budget each year. The government debt is accumulated over time; it is the sum of all past deficits and surpluses. The single biggest item is education, which accounts for about one-third of the total.

The rest covers programs like highways, libraries, hospitals and healthcare, parks, and police and fire protection. Unlike the federal government, all states except Vermont have balanced budget laws, which means any gaps between revenues and spending must be closed by higher taxes, lower spending, drawing down their previous savings, or some combination of all of these.