Topic 1

Question 1

What is Financial Administration, Fiscal Administration, or Public Finance?

Answer 1

• Government Budgeting – Federal, State, Local
• Revenue Policy – Taxes and fees, tax administration
• Governmental accounting
• Debt Policy and Management
• Procurement

Question 2

Why should public administrators understand public budgeting and finance?

Answer 2

• They must make choices about resource utilization and allocation
• Directly and indirectly, they are spending the public’s money
o Administrators have to justify spending to constituents, legislatures, and other executives
o They can go to jail for misuse
• Financial management reflects an understanding of how the organization works
• Crises often have financial underpinnings or financial consequences

Question 3

Difference between public finance and private finance? (what is public)

Answer 3

• It comes down to objectives of the organization

Question 4

______ seek to increase the value of the firm (shareholder wealth) through the allocation and control of resources; main goal is to increase profits

Answer 4

Businesses

Question 5

Public organizations use similar analytic, technical, and managerial tools to allocate and control resources, but face different constraints and objectives

Answer 5

 Governments may tax to increase resources
 Ownership is not clearly defined—many different “shareholders” with very different preferences
 No pricing mechanism – the value of government services is not easy to quantify or reflected in a single measure (like sales, profits, or stock price)
 Governments deal with citizens both directly and through elected representatives
 Governments have coercive powers - the unique power to tax, regulate, and punish

Question 6

the ability to operate over the long term without reducing the standards of life below those currently enjoyed

Answer 6

fiscal sustainability

Question 7

Without a legal system of ____ ____ and enforce contracts a free market exchange would be nearly impossible

Answer 7

property rights

Question 8

____ ____ occur when goods are not supplied, or are under-supplied, in a private (efficient) market.

Answer 8

Market failures

Question 9

Public goods are defined by two attribute of the good

Answer 9

Non-rivalry and excludability

Question 10

_____ occurs when the benefits of the service can only be shared so that a given quantity of the service can be enjoyed by additional people with no reduction in benefit to the existing population.

Answer 10

Nonrivalry

Question 11

______ occurs when the benefits cannot be easily limited to those who have paid for the services.

Answer 11

Excludability

Question 12

National defense, fresh air, street lights are examples of:

Answer 12

Pure public goods (nonrivalrous/non-excludable)

Question 13

Turnpikes, toll bridges, concerts are examples of:

Answer 13

Toll good (nonrivalrous/excludable)

Question 14

Food, clothing, TVs are examples of:

Answer 14

Pure private good (rivalrous/excludable)

Question 15

Aquifers, fishing grounds are examples of:

Answer 15

Common-Pool Resources (rivalrous/nonexcludable)

Question 16

_______ a cost or benefit that affects a third party not involved in a transaction of consumption or production
• Negative—exhaust fumes from a car
• Positive—decreased likelihood of infection from a someone else getting a vaccination
• Positive externalities are underproduced and negative ones are overproduced
• Governments regularly subsidize or tax to try and correct these market failures

Answer 16

Externalities

Question 17

Governments often intervene in markets where consumers have incomplete information about products or services. Examples include new drugs, hazardous products, financial disclosures, and food safety

Answer 17

Imperfect information

Question 18

_____ a process by which persons with the greatest probability of obtaining benefits seek to obtain insurance and conceal info about their adverse conditions.

Answer 18

Adverse selection

Question 19

______ a problem when those with insurance have an incentive to cause the insured event to happen or to be less diligent in averting the insured event (skydiving). People are more risky.

Answer 19

Moral Hazard

Question 20

With ______, only one entity controls the market, so consumers must pay a higher price for lower-quality goods

Answer 20

monopolies

Question 21

________ prohibits business activities that the government deems anti-competitive

Answer 21

Sherman Antitrust of 1890

Question 22

Federal aid to state and local governments is on the decline. In 1979, federal aid represented 17.6 percent of local government revenue; by 2010, less than ___.

Answer 22

5%

Question 23

____ _____ have assumed greater responsibility for providing public services. Terrorism preparedness and highway construction

Answer 23

Local governments

Question 24

Since 1970 the use of public-private partnerships to produce and deliver public services has increased. Two dimensions of joint agreements are:

Answer 24

The customer being served and the bearer of financial risk.

Question 25

Contracting, outsourcing, mixed delivery, and partnership

Answer 25

Typology of Public-Private Ventures

Question 26

narrowly defined as an agreement in which the unit of government itself is the initial customer and the financial risks are borne by the contractor. If the contractor fails to deliver the local government bears no financial risk.

Answer 26

Contracting

Question 27

a unit of government selecting a vendor to provide service that the unit of government normally could provide to its residents. The customers are persons or orgs other than the unit of government itself, and again financial risk is not shared.

Answer 27

Outsourcing

Question 28

as financial risks increase, local governments may use joint ventures as a way to share the risk of financial loss. Mixed delivery occurs when the local government itself is the customer but the financial risk (or return) is shared with the partner to the agreement. • Tax abatement or other economic development ventures

Answer 28

Mixed Delivery

Question 29

when the customers are outside the local government and the agreement involves shared financial risk, the relationship is a true partnership in which the risks and rewards are shared.

Answer 29

Partnership

Question 30

* Tax Competition | * Overlapping Governments

Answer 30

Increased Intergovernmental Competition

Question 31

_____ __ ______ restrict the growth of government revenues or spending by either capping them at fixed dollar amount or limiting their growth rate to match increases in population, inflation, personal income, or some combination of those factors

Answer 31

Tax and expenditure limitations (TELs)

Question 32

Three principal economic events at the regional, national, and international levels affect local budgets

Answer 32

cynical shifts, sectoral shifts, and population movement

Question 33

Cyclical shifts in the economy brought on by ____, inflation, and expansion

Answer 33

recession

Question 34

Sectoral shifts brought on by changes in _____ ___ _____ ____. Away from manufacturing to service based economy

Answer 34

technology and economic development

Question 35

Population movement across regions or national borders brought on by changes in _____ and technology

Answer 35

job markets

Question 36

Governments derive their revenues using one of three legal powers

Answer 36

taxing, proprietary, and regulatory

Question 37

governments also possess constitutional powers to own and operate – even at a profit – various enterprises

Answer 37

proprietary

Question 38

Income based, consumption based, and wealth based are examples of:

Answer 38

taxing

Question 39

earned and unearned income

Answer 39

income based

Question 40

collected as part of sales transaction

Answer 40

consumption based

Question 41

constitute a class of levies that fall on the value of assets

Answer 41

wealth based

Question 42

according to the value. Requires more effort by government to establish tax base value

Answer 42

Property or ad valorem

Question 43

Taxes against a thing, ex. Motor fuels tax levied per gallon

Answer 43

In rem

Question 44

Proprietary activities give rise to fees-for-service as opposed to taxes. Service fees are _____ in which government provides a good or service in exchange for a fee.

Answer 44

quid-pro-quo

Question 45

______ (police powers)governments collect a fee to cover the costs of regulating an activity. Ex. Permits, inspections, certify - Generally fee not to exceed that cost

Answer 45

Regulatory

Question 46

Factors Influencing local financial decisions

Answer 46

Political, economical, social, legal environment

Question 47

Definition of balance is less clear in practice than in may appearing 44 state the governor must submit a balanced budget, but only 35 states have controls in place to avoid a _____ at the end of the year

Answer 47

deficit

Question 48

Balanced budgets for local governments tend to require the budget submission to be balanced, but not end of the ____

Answer 48

year