Cover Story

State Government Nears Breakdown

The budget war went nuclear this week in Concord (N.H.) particularly between [Governor] Jeanne Shaheen and House ___

Speaker Donna Sytek New Hampshire politics

With the July 1 dead- not s0 picture-perfect

Vnidset it became more appai ent state

L resolution to keep going at the cun«*

1(W level [partisan politics appeals to be heads if it is to be resolved any time soon

_Fosters Daily Democrat, June 13, 1999

State and local levels of government, like the federal government, also have expenditures. Like the federal government, these governments must approve spending before revenue dollars can be released. As the cover story shows, the budget process at the state and local levels can be just as complicated as it is at the federal level.

Approving Spending

■ifl Approving spending at the state level can take £Mm~ many forms. In most states, however, the process is loosely modeled after that of the federal government.

Some states have enacted a balanced budget amendment-a constitutional amendment that requires that annual spending not exceed revenues. Under these conditions, states are forced to cut spending when state revenues drop. A reduction in revenues may occur if sales taxes or state income taxes fall because of a decline in the general level of economic activity.

CONTENTS

At the local level, power to approve spending often rests with the mayor, the city council, the county judge, or some other elected representative or body. Generally, the amount of revenues collected from property taxes and other local sources limits the spending of local agencies. If state and local governments are unable to raise the revenue they need, they must deal with having inadequate resources to hire teachers, police officers, or other state and local workers.

State Government Expenditures

■A The major types of state government ^Ki expenditures are shown in Figure 10.5. Seven of the most important categories, accounting for nearly 80 percent of all state spending, are examined next.

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The largest category of state spending is intergovernmental expenditures-funds that one level of government transfers to another level for spending. These funds come from state revenue sources such as sales taxes, and they are distributed to towns and other local communities to cover a variety of educational and municipal expenditures.

The second largest category of state expenditures is public welfare. These payments take the form of cash assistance, payments for medical care, spending to maintain welfare institutions, and other miscellaneous welfare expenditures.

Many states have their own retirement funds and insurance funds for state employees. Money in these funds is invested until such time as people retire, become unemployed, or are injured on the job. Contributions to these funds make this category the third largest type of spending overall.

Generally a large category, higher education is a traditional responsibility of state governments with their networks of state colleges and universities. Local governments spend less in this area, usually to support community colleges and universities.

Highway construction and road improvement expenditures represent a significant portion of state expenditures. The federal government builds and maintains much of the interstate highway system, but states maintain state roads and other highways that generally link smaller communities with larger ones.

Local Government Expenditures

Wijf% Local governments include counties, municipalities, townships, school districts, and other special districts. The largest categories of spending by local governments include elementary and secondary education, utilities, hospitals, police protection, interest on debt, public welfare, and highways.

Local governments have primary responsibility for elementary and secondary education. Expenditures in this category include teachers' and administrators' salaries, textbooks, and construction and maintenance of school buildings. This category accounts for more than one-third of local government spending.

Many public utilities, such as water and sanitation, serve local needs. For most local governments,

ECO r

NOMICS ^■

Figure 10.5

AT A

GLANCE

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