Question 1

Finances of many state and local government pension programs are a problem because&#10;A) Pension managers used an interest or discount rate that was too low when determining the amount of money to be set aside each year to cover future benefits.&#10;B) State and local governments improperly diverted public revenues into pension funds to garner political support from government employees.&#10;C) Many state and local governments made inadequate contributions into the pension funds to support promised future benefits.&#10;D) States assumed the obligations of local pension programs.

Accepted Answer

Many state and local governments have historically made inadequate contributions to pension funds, leading to underfunded pensions and financial shortfalls.

Question 2

When department heads prepare budget requests without guidance about targets or conditions, the system is called:&#10;A) free form budgeting.&#10;B) Christmas list budgeting.&#10;C) target base budgeting.&#10;D) laboratory budgeting.

Accepted Answer

"Christmas list budgeting" is a term used to describe a budgeting process where department heads or managers prepare their budget requests without any guidance regarding targets or constraints, similar to creating a wish list. This approach can lead to unrealistic or inflated budget requests, as there is no initial framework or target to guide the preparation of the budget.

Question 3

Which of the following statements about state budget processes is correct?&#10;A) All governors have item veto power.&#10;B) All states require biennial budgets.&#10;C) Not all states have budget messages prepared by the governor.&#10;D) States normally spend through systems of entitlements instead of appropriations.

Accepted Answer

While most states do have a budget message prepared by the governor, not all states require this. Item veto power (A) varies by state and not all governors have this power. While biennial budgets (B) are common, not all states require them. States normally spend through appropriations, not entitlements (D).

Question 4

The largest expenditure category for local governments is:&#10;A) Public safety&#10;B) Primary and secondary education&#10;C) Transportation&#10;D) Parks and recreation

Accepted Answer

Primary and secondary education is typically the largest expenditure category for local governments, as a significant portion of their budgets is allocated to funding public schools.

Question 5

Which of the following is not a difference between budgeting in states as opposed to budgeting in the federal government?&#10;A) Many states prepared biennial budgets and the federal government prepares an annual budget.&#10;B) Many states pass a single appropriation / budget law and the federal government normally passes more than ten such bills or at least is expected to).&#10;C) Many states require a balanced budget each year and the federal government does not.&#10;D) Most states provide pensions for their career employees and the federal government only requires that its employees participate in Social Security.

Accepted Answer

The option about providing pensions for employees is not a difference between budgeting in states and the federal government.

Question 6

The state of Alabama has legally earmarked around 85 percent of its state budget. This means that&#8230;&#10;A) In the annual appropriation process, members of the state legislature typically earmark particular locations in which spending will occur, thereby preventing administrative discretion in how appropriated funds get useD)&#10;B) 85 percent of the money received for the state budget is allocated to particular uses in permanent law and is not subject to annual allocation by the legislature.&#10;C) Individuals may receive benefits from the state if they meet criteria established in the earmarking legislation.&#10;D) 85 percent of the budget is legally under control of the state legislature.

Accepted Answer

The statement means that 85 percent of Alabama's state budget is legally earmarked, which implies that the state legislature has allocated these funds to particular uses in permanent law and they are not subject to annual allocation by the legislature. This leaves only 15 percent of the budget subject to annual appropriation by the legislature.

Deck 4: Federal Budget Structures and Institutions