Merriam-Webster defines a budget as an official statement from a government about how much it plans to spend during a particular period of time and how it will pay for the expenses. According to the Oxford Dictionary, the word budget is derived from the old French word bougette – a leather bag, and was first used in reference to a public accounting of government spending in mid-eighteenth century England.
A budget represents a government’s expenditures and revenues for a given fiscal period. How a government acquires and spends its revenue in part defines a city, a state, or a nation. What things are funded and to the extent that they are funded indicates that government’s priorities. All levels of government from the national to the smallest town produce financial documents to account for income and spending. All have some sort of revenue stream from taxes, fines, licenses and permits, etc. All have outlay in the form of funded programs, public services, personnel costs, etc. These activities generate reports, budgets, and other financial documents to account for the funds under government control.
Government revenue is derived from taxes, bonds, fees and licenses, lotteries, and intergovernmental transfer of money. While the majority of nations rely on revenue derived from consumption taxes, in the United States, the federal government relies heavily on revenue derived from personal income tax. It also generates income from corporate income taxes, payroll and excise taxes, tariffs and custom duties, bonds, fines and fees, etc. State governments rely heavily on intergovernmental transfers especially federal grants, individual and corporation income taxes, taxes on specific good and services such as tobacco, alcohol, fuel, etc., licenses, and bonds. Recently some have turned to running lotteries, investing in bonds and the stock market to generate additional income. Local governments – city and/or counties, get most of their income from federal and/or state intergovernmental transfers, property and sales taxes, special assessments, user fees and charges, and finally bonds. Collecting wage taxes is an up and coming revenue stream being tapped by many local governments. The mix varies from country to country, state to state, county to county, city to city. Finding fiscal information on revenue from taxes, funding levels for government programs, budgets, etc. is all very similar.
There are two major components of a “Public Budget”: 1) a listing of revenue sources and 2) a listing of expenditures.
A budget is more than just figures; it expresses the general policies of the government, conveying a vision of society and the way the government intends to respond. It defines a government’s priorities and reflects its policies.