Handbook of Local Government Fiscal Health - PA 650

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Handbook of Local Government Fiscal Health - PA 650
2015-11-11 19:52:27
Financial management

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  1. Decentralization
    The delegation of decision-making authority to lower levels of government.

    (Session 3, Handbook Chp 8)
  2. Dual Federalism
    A separation of powers where different levels of government operate independently from each other.

    (Session 3, Handbook Chp 8)
  3. Economies of Scale
    The marginal cost of producing a good or services decreases as more of the good or service is produced.

    (Session 3, Handbook Chp 8)
  4. Federalism
    A centralized system where the constitution enumerates certain powers to the national government.

    (Session 3, Handbook Chp 8)
  5. Devolution
    The transfer or delegation of power to a lower level, especially by central government to local or regional administration. Devolution does not imply sole power or decision making ability as states or local governments become the managers of federal programs.

    (Session 3, Handbook Chp 8)
  6. Fiscal Federalism
    Different layers of government exist (federal, state, local) and each is responsible for the taxing, production (expenditures) of a different set of goods and services. Local runs neighborhood parks, state runs state parks, national government runs national park maintenance.

    (Session 3, Handbook Chp 8)
  7. What is the governments role in the economy?
    To provide goods and services to the public that are not profitable and therefore will not be provided by private industry.

    (Session 3, Handbook Chp 8)
  8. Bond Rating Agencies
    Bond rating agencies are corporations registered with the Securities and Exchange Commission that assign credit ratings to issuers of debt, in this case, states and municipalities.

    (Session 3, Handbook Chp 15)
  9. Dillon's Rule
    This court decision, decided by Judge John Forest Dillon, has become the cornerstone of municipal law. Under Dillon's Rule, a municipality only has the power granted in the express words of the state statue, the power implied in the powers expressly granted, or the power otherwise implied as essential to the municipality.

    (Session 3, Handbook Chp 15)
  10. Financial Control Board
    As fiscal crises plagued American cities over the years, states established boards of prominent citizens who have control over the budget decision making of their cities.

    (Session 3, Handbook Chp 15)
  11. Municipal Assistance Corporation (MAC)
    The state authorized MAC, a corporation New York State created during the 1975 fiscal crisis, to sell bonds for New York City to alleviate cash flow problems.

    (Session 3, Handbook Chp 15)
  12. State Receiverships
    A state receivership occurs when a state takes over the finances of a local government unit, which can be a school district, municipality, etc. The degree to which the state controls the finances depends upon the laws of the individual states.

    (Session 3, Handbook Chp 15)
  13. Why does the Tenth Amendment and the Constitution affect the governance of cities?
    Because the Constitution does not strictly address local governance and the Tenth amendment reserves all rights not given to the federal government to the states, the states then have the power to regulate local governments.

    (Session 3, Handbook Chp 15)
  14. Budget Stabilization Fund (BSF)
    The budget stabilization fund, or "rainy day fund" (RDF), is a fiscal device used by subnational governments to store extra revenues during economic booms for use in economic downturns to supplement inadequate resources for meeting outlay demands. Since the early 1980s, this countercyclical device has attracted increasingly more academic attention.

    (Session 4, Handbook Chp 10)
  15. Cutback Management
    The management of organizational change toward lower levels of resource consumption and organizational activity.

    (Session 4, Handbook Chp 10)
  16. Local Government
    Administrative authorities over areas that are smaller than including municipal governments, county governments, village governments, and township governments, among others.

    (Session 4, Handbook Chp 10)
  17. Tax Increment Financing (TIF)
    TIF is a public financing method that has been used for redevelopment and community improvement projects in many countries including the US for more than 50 years.

    Mechanism through which, starting from a base year, the growth in taxes within a certain boundary are sequestered and can only be used for services or infrastructure within that boundary and not for the rest of the governments jurisdictional boundary. This deprives tax revenues for the general purpose governments that would have collected those taxes.

    The goals is to stimulate economic development through concentrating resources in one specific geographic area. With federal and state sources for redevelopment generally less available. TIF has become an often-used financing mechanism for municipalities.

    (Session 4, Handbook Chp 10)
  18. Asset
    From an accounting perspective, an asset is anything that the government owns that can produce an economic benefit. From a more general economic perspective, an asset is simply any form of wealth. Cities have long-term assets such as capital infrastructure as well as short term assets such as current revenues.

    (Session 5, Handbook Chp 2)
  19. Balance
    Reflects the extent to which a government has adapted its current fiscal structure to the demands, pressures, opportunities, constraints, and likely future changes in the environment.

    (Session 5, Handbook Chp 2)
  20. Budgetary Solvency
    The ability to balance the budget or generate enough resources to cover expenditures in the current fiscal year.

    (Session 5, Handbook Chp 2)
  21. Cash Solvency
    The government's ability to generate enough cash over 30 or 60 days to pay its bills. Also called the operating position.
  22. Economic Base
    The total amount of economic resources within a jurisdiction, regardless of whether a government to access them. It is a function of the fiscal environment's economic performance and economic structure.

    (Session 5, Handbook Chp 2)
  23. Economic Performance
    Represents the jurisdiction's level of economic activity and is measured by one or more indicators such as percentage unemployment, resident income, and poverty level.

    (Session 5, Handbook Chp 2)
  24. Economic Structure
    The composition of economic activity in the jurisdiction such as land use (residential, commercial, industrial), type of jobs and commerce, transportation facilities, and the regional or state economy.

    (Session 5, Handbook Chp 2)
  25. Expenditure Fixity
    The degree to which expenditure can be altered or deferred. Personnel expenditures and repayment of debt, for instance, are relatively fixed by comparison to maintenance and equipment expenditures that can be deferred more readily. The level of fixed liabilities relative to other liabilities represent the ease with which portions of governments current expenditures can be altered in the near term to react to fiscal shocks and take advantage of fiscal opportunities.

    (Session 5, Handbook Chp 2)
  26. Fund Balance
    On the balance sheet, fund balances (and retained earnings) are the residual equity or net assets in each account. More generally, residual equity is the difference between all assets and liabilities. Fund balances, however, are more specific and represent the accumulation of monetary surpluses (revenues minus expenditures) and are easily accessible to meet obligations during the fiscal year. Governments also have more than one fund balance which offers opportunities to borrow across accounts (called interfund transfers).

    (Session 5, Handbook Chp 2)
  27. Institutions (or environment)
    Refers to the rules, both formal and informal, that constrain decision making. (In this chapter we focus on the fiscal and political institutions that constrain the strategic fiscal decisions of local governments.)

    (Session 5, Handbook Chp 2)
  28. Intergovernmental Revenue
    funds received from the state of federal government for specific functions (grants) or for general financial assistance (aid).

    (Session 5, Handbook Chp 2)
  29. Liability
    Anything that is owed by the government to another party, and, hence, represents a constraint on governments' fiscal activities. More specifically, a liability is the sacrifice of current or future economic benefits that the government must make to satisfy current and past obligations.

    (Session 5, Handbook Chp 2)
  30. Long-run Solvency (HB)
    Refers to the long-run balance between government revenues and spending needs and implies that government has the ability to adapt to uncertain future and fiscal conditions, some of which may be severe shocks.

    (Session 5, Handbook Chp 2)
  31. Own-source Revenue (HB)
    Revenues generated from resources within the local government's jurisdiction, although they can be collected by other government and distributed to the owner government at regular intervals. Local own-source revenues include property taxes, user fees, and other charges and, in some states, may include sales and income tax.

    (Session 5, Handbook Chp 2)
  32. Revenue Actual
    The amount of revenues the government chooses to collect via its tax rates, fee rates, and charges.

    (Session 5, Handbook Chp 2)
  33. Revenue Base
    That portion of the economic base that the jurisdiction has access to through specific revenue-raising mechanisms according to state statute and other legal and institutional constraints.

    (Session 5, Handbook Chp 2)
  34. Revenue Capacity
    Reflects that portion of the revenue base that the government can actually tax, which also is established in most cases by state statute.

    (Session 5, Handbook Chp 2)
  35. Revenue Elasticity
    Indicates the responsiveness of a particular revenue base or revenue source to changes in the overall economic base, national economy, or personal income; the more elastic a revenue base, the more variability in the revenues collected given the same tax rate. In most cases, income taxes have the highest elasticity and property taxes have the lowest. The elasticity of sales taxes also is relatively high.

    (Session 5, Handbook Chp 2)
  36. Revenue Reserves
    Excess or slack revenue capacity that the government has access to but has not used (reserves =capacity - actual). If a locality tapped its revenue base to the full potential, actual revenues would equal revenue capacity and revenue reserves would equal zero.

    (Session 5, Handbook Chp 2)
  37. Risk (fiscal)
    A government's exposure or vulnerability to detrimental future fiscal shocks and faster changes in the environment.

    (Session 5, Handbook Chp 2)
  38. Slack (fiscal)
    The pool of resources available to a government in excess of what is necessary to produce a minimum level of services. Fiscal slack can be surplus monetary resources such as the fund balances or rainy day fund or non-monetary resources such as excess employees.

    Fiscal slack can also be uncollected revenue from that portion of the revenue base that is available to the government through higher taxation.

    On the expenditure side, fiscal slack can be discretionary spending such as capital maintenance and travel that can be easily reduced during times of difficult financial periods.

    (Session 5, Handbook Chp 2)
  39. Service-Led Solvency
    The ability of government to provide adequate services to meet the health, safety, and welfare needs of its citizens given its revenue resources.

    (Session 5, Handbook Chp 2)
  40. Unreserved Fund Balance
    Fund balances within different accounts are reserved for specific purposes according to state or local statue. Therefore, although fund balance, as a percentage of total expenditures or revenues, is a good general measure of short-term financial condition, percentage unreserved fund balance might be more appropriate.

    (Session 5, Handbook Chp 2)
  41. Accrual Basis of Accounting
    The basis of accounting used in all financial statements except governmental funds financial statements and the proprietary funds statement of cash flows.

    (Session 3, Handbook Chp 4)
  42. Assets
    Resources a government owns or controls that can be used in the provision of services or the generation of other resources to support service provision.

    (Session 6, Handbook Chp 4)
  43. Capital Assets
    Assets with useful lives extending beyond one year, such as buildings, equipment, and infrastructure.

    (Session 6, Handbook Chp 4)
  44. Expenditures
    Outflows of resources, under modified accrual, that occur when resources are consumed or goods or services are purchased or received.

    (Session 6, Handbook Chp 4)
  45. Expenses
    Outflows of resources, under full accrual, that occur when assets are consumed and costs are incurred.

    (Session 6, Handbook Chp 4)
  46. Fiduciary fun
    Fund that accounts for resources belonging to others that a government holds in a fiduciary or agency capacity; fiduciary fund types include pension and other post employment benefit, private-purpose trust, investment trust, and agency funds.

    (Session 6, Handbook Chp 4)
  47. Fund
    An accounting construct that is allocated its own set of assets and liabilities associated with a particular function, program, or activities; the financial transactions of a fund represent just a portion of the government's overall financial activity.

    (Session 6, Handbook Chp 4)
  48. Generally accepted accounting principles (GAAP)
    The body of standards that explain how finances should be accounted for and reported.

    (Session 6, Handbook Chp 4)
  49. Governmental Fund
    A fund that accounts for the basic, typically tax supported activities of a government; governmental fund types include general, special revenue, debt service, capital projects, and permanent funds.

    (Session 6, Handbook Chp 4)
  50. Infrastructure
    Especially long-lived capital assets, such as roads, bridges, and sewers.

    (Session 6, Handbook Chp 4)
  51. Liabilities
    Amounts the government owes to others.

    (Session 6, Handbook Chp 4)
  52. Management's discussion and analysis (MD&A)
    A narrative section preceding the financial statements that summarizes the financial activity covered by the financial statements and provides explanations for the financial results of the period.

    (Session 6, Handbook Chp 4)
  53. Modified Accrual Basis of Accounting
    • The basis of accounting used in the government funds financial statements.
    • (Session 6, Handbook Chp 4)
  54. Proprietary Fund
    A fund that accounts for activities that charge a fee for services, such as water and sewer; proprietary fund types include enterprise and internal service funds.

    (Session 6, Handbook Chp 4)
  55. Required Supplementary Information (RSI)
    Unaudited information that governments are required to present with financial statements and notes, such as management's discussion and analysis.

    (Session 6, Handbook Chp 4)
  56. Revenues
    Inflows of resources that are measurable and collectable; under modified accrual, they are also available to finance current-period expenditures.

    (Session 6, Handbook Chp 4)
  57. Benchmarking approach
    Comparison of a jurisdiction's debt level to that of others, using national medians or peer groups.

    (Session 9, Handbook Chp 18)
  58. Bond Rating Oriented Approach
    Use of measures to assess debt capacity and affordability that mirrors the approach taken by the major bond-rating agencies.

    (Session 9, Handbook Chp 18)
  59. Break-Even Year Method
    Based on a scenario analysis, this analysis answers the question, "How long will it take the government to reach the average for the comparison group?"

    (Session 9, Handbook Chp 18)
  60. Debt Affordability
    Calculations of the burden placed on a jurisdiction associated with repaying its debts.

    (Session 9, Handbook Chp 18)
  61. Debt Capacity
    The amount of debt that can be issued without a jurisdiction overextending its ability to repay its obligations.

    (Session 9, Handbook Chp 18)
  62. Debt Ceiling Approach
    Comparison of a jurisdiction's debt level to a single value or multiple values of an arbitrary measure.

    (Session 9, Handbook Chp 18)
  63. Debt Medians
    Measures of the typical value of debt for a jurisdiction of a specific type, size, geographic location, and other factors.

    (Session 9, Handbook Chp 18)
  64. Debt Policies
    Written guidelines issued by a jurisdiction regulating the amount, issuance process, and types of debt that may be issued.

    (Session 9, Handbook Chp 18)
  65. Modified Benchmarking Approach
    Benchmarking approach that compares not only debt burdens but also measures of economic activity across jurisdictions.

    (Session 9, Handbook Chp 18)
  66. Normal Curve Model
    Modified benchmarking approach that uses statistical properties of the normal distribution to assess relative debt burdens.

    (Session 9, Handbook Chp 18)