Budget
From Encyclopædia
A budget is a document itemizing anticipated receipts and expenditures over a period of time, most commonly a year. Both a planning and a
Control instrument, it is a useful tool for individuals and families and an essential one for businesses and large organizations, such as governments, where subordinate units are responsible to a
Central authority. To assure
Control, the
Central authority dispenses funds only for those expenditures approved in the budget. For a government, the budget is also a political statement, reflecting the administration's primary goals and, in the amount of revenues anticipated, its forecasts of the volume of economic activity.For the federal government of the
United States, the major budget outlays are for income (including social security and welfare) and national defense payments, and the major revenue sources are individual income taxes and social insurance contributions and taxes. for state and local governments, the major expenditure are for
education and public welfare, and the main revenue sources are
sales taxes,
property taxes, individual income taxes, and revenues from the federal government.The U. S. federal budget is made for the fiscal year, which begins on October 1 and ends September 30 the following year. There are two
stages in normulating the budget. In the first, the
president and the
executive branch of the government develop requests for funds and estimates of revenues for the fiscal year. Although government bureaus make rough expenditure plans running several years into the future, actual budget formulation begins about 18 months before the start of the fiscal year, when departments and agencies develop specific requests for funds. These requests are coordinated by the Office of Management and Budget (OMB; see MANAGEMENT AND BUDGET, U. S. OFFICE OF), which is a part of the Executive Office of the
president. The OMB confers with the agencies in order to incorporate the
president's priorities and then works with the
president to prepare the administration's budget request, which is presented to Congress in January.The second
stage in formulating the budget is carried out by the Congress as it considers and acts upon the requests made by the
president. Congressional consideration goes forward simultaneously on two levels; on one level, appropriations for specific agencies and departments are determined; the other level sets budgetary aggregates, that is, the total size of the budget. On the appropriations level, the
president's requests are considered by subcommittees of the Appropriations Committee of the House of Representatives. Separate appropriations bills are recommended by the committees and acted upon by the House. These bills are considered by the Senate Appropriations Committee and are then acted on by the Senate. Finally appropriations bills emerge after differences between the House and the Senate have been reconciled.On the budget aggregates level, the grand total and the major functional breakdowns of the
president's budget are considered by Budget Committees in both the Senate and the House. By about mid-May the Congress adopts a resolution setting target amounts for total expenditures and for broad functional areas of the budget. The Congressional Budget Office maintains a running account of specific appropriations and how they match the totals established in the target resolution. In September the Congress compares the total of individual appropriations bills to the total established in the target resolution and takes action to reconcile any difference. (An important issue involves "off-budget" items, such as loan guarantees and financing arrangements. These are not included in the budget, which therefore does not state total anticipated expenditures with entire accuracy.) The appropriations bills then go to the
president for signature or veto.After budget action has been completed by the Congress, the
Control aspects of the budget process are carried out by the Office of Management and Budget, which releases funds to individual agencies as specified by the budget, and by the GENERAL
accounting OFFICE, which audits agency and department accounts to ensure that the directives of the budget have been followed.The U. S. federal government budget process is incremental, for it focuses mainly on changes from previous budget appropriations. ZERO-BASED BUDGETING is an alternative method that gives regular periodic
attention to all items in the budget. The zero-based process may be nonincremental: that is, it may ignore preceding budget levels and budget each program as if it were new. The process is often used to examine and justify budgeting levels of individual programs. Another variation is capital budgeting, which separates long-term investment expenditures from current operating expenditures. Program budgeting organized budget considerations by functions and objectives rather than by administrative agencies.In
Great Britain and Canada the budget prepared by the government (in
Great Britain, it is the responsibility of the British Treasury; in Canada, of the Treasury Board) must be accepted or rejected in its entirety by Parliament. Budget preparation in France and other European countries is usually carried out by the entire
cabinet. The French
assembly, like the U. S. Congress, has the power to amend budgets submitted to it.Wayland GardnerBibliography: Collender, Stanley E., The Guide to the Federal Budget (1986); Rubin, Irene, ed., New Directions in Budget Theory (1987);
Richard Wagner E., Public Finance: Revenues and Expenditures in a Democratic Society (1983); Wildavsky,
Aaron, The Politics of the Budgetary Process, 4th ed. (1983).
