FINANCE 3
Running head: FINANCE 1
Public Budgeting
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Practical Pressures Affecting Public Sector Budgeting Designed to Delivering Public Goods and Services.
A public sector budget is a tool used for accountability and transparency in the government’s expenditure for activities and projects that are going to be beneficial to the public. In the budget, targets are formulated and audit conducted in order to ensure that the budget goals are met. One of the activities that public funding facilitates is the provision of public commodities that provide a rise in the economy of a particular country (ICMA, 2016). However, certain factors affect the public sector budgeting, which could lead to the government’s reduction of public commodity production. The involvement of citizens in the production of public goods and services is a factor that pressures public sector budgeting since the public population preferences need to be considered, thus affecting budget allocation. The other aspect is the economic environment regarding inflation, interest rates, and revenues generated by the public, such as taxes. If there is a poor economy and reduced tax collection, it affects budget allocation for the production of public goods. Social and demographic change like the increase in population also affects the allocation of public budgets for public goods production to manage government sending (“ICMA,” 2016).
Consequences of Two Externalities and Their Impact on Public Sector Budgeting
Production or consumption of public goods as a result of public sector budgeting causes externalities that might either be positive or negative. Road construction is a public good funded by the government under public sector budgeting, and the externality it carries is noise pollution. The noises produced have the consequence of disrupting activities that need quietness and concentration, such as meetings at work and classrooms for students (Kenton, 2020). The result is the reduction of a tertiary public good production which leads to a decline in the revenue collected by the government. Air pollution is another externality produced by the production of public goods. Its consequence is an increase in the aggregate expenditure, therefore increasing the public sector budget to control the pollution.
Practical Way to Study the Fiscal Impact of Public Sector Budgeting
One of the ways of analyzing fiscal impacts is a calculation of revenues and expenditures incurred by the such as the taxes paid by the public and other returns on government expenditures (Kotval, 2006). This method of studying the fiscal impact enables the financial team to estimate the future cost of developing public goods. Also, the growth of the country’s economy will be determined by the public service costs resulting from the consumption of the public goods and services produced. The country’s development will be determined by the public costs and revenues, thereby giving a formidable framework for resource allocation by the public sector budgeting body.
References
ICMA. (2016 April, 26). 4 Factors Influencing Local Government Financial Decisions. Retrieved from
https://icma.org/blog-posts/4-factors-influencing-local-government-financial-decisions
Kenton, W. (2020). What is an Externality? Retrieved from
https://www.investopedia.com/terms/e/externality.asp
Kotval, Z. (2006). Fiscal Impact Analysis: Methods, Cases, and Intellectual Debate Zenia Kotval and John Mullin with research assistance from Maureen Lempke. Retrieved from
https://www.jstor.org/stable/pdf/resrep18582.pdf?refreqid=excelsior924c021b3c1d6213acc3c2e134f03b40
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