Essay Sample on Managing State Finances: Creative Revenue Generation and Benefiting Citizens

Public officials and lawmakers of Indianapolis as in other local governments are mandated to manage state finances. It is of the essence to note that management of state finances includes coming up with creative ways of generating revenue legally and approving how that cash will be used to benefit the citizens. Research indicates that state budgets are fluid and complex to manage because they depend on anticipated revenue to fund planned expenditure (Moeti, Khalo, & Mafunisa, 2007). With that mind, it is clear that state budgets are linked to a lot of uncertainties within the course of the fiscal year. Tax expenditures make up a significant part of the annual budget. In the case of Indianapolis, the three most significant areas of expenditure include healthcare, education, and welfare. The health care sector is sensitive. Therefore, Indianapolis injects a lot of money in its management. It involves paying health care workers, the building of new hospitals, funding medical researches, and the cost of managing public hospitals, among other factors. Welfare is made up of factors such as housing, workers compensation, unemployment benefit, food stamps, and cash welfare (Chand, 2008). It is imperative to note that welfare expenditure excludes health care. Education expenditure covers the costs incurred in running K-12, training of state officers, and management of public institutions. The more significant share of the education expenditure goes to elementary and secondary education.

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Research indicates that the total state spending in the US has been growing on a nominal basis since 2012. It was only in 2012 when the total expenditure decreased for the first time in 32 years. The growth in state spending has over time been replicated to the annual budgets of local governments such as that of Indianapolis. With that in mind, it is imperative to note that in the past two fiscal years, the Indianapolis tax expenditure has increased especially in its top three areas of spending. However, that tax expenditure increase has been closely accompanied by strong fund management ethics because, in 2018, Indianapolis reported an annual budget surplus of $100.4 million adding to its budget reserve that is nearly $1.8 billion (Carden, 2019). If the revenue generated by a local government does not keep pace with its expenditure, the management is forced to undertake various measure to ridicule the situation. For example, the local government can borrow money, cut services, raise taxes, or combine the three measures to salvage the budget deficit (Chand, 2008). However, in the case of Indianapolis, they have been able to budget and live within the means of their revenue despite the increasing expenditure.

The total revenue for the 2017-2018 fiscal year was $33,927.1 million while that of 2018-2019 fiscal year was $34,887.3 million (In.gov., 2019). That indicated an increase in total revenue. There are various sources of revenue attached to the local government of Indianapolis. However, the top three among those sources is the total taxes, federal funds, and charges and miscellaneous. An increase in various sources of revenue led to a rise in total income, which was collected in the past two years. Additionally, the state auditor attached to Indianapolis highlighted that such an increase had impacted the Indianapolis' reserve amount positively (Carden, 2019). Such a situation is critical for cushioning economic downturns in the future. That is by avoiding financial flexibility such that in the event of an economic recession, the local government will not be forced to increase taxes or cut vital services.

References

Carden, D. (2019, May 17). Indiana records $100M annual surplus, budget reserve nearly $1.8 billion. Retrieved from https://www.nwitimes.com/news/local/govt-and-politics/indiana-records-m-annual-surplus-budget-reserve-nearly-billion/article_2760e18a-669c-588c-89d3-05d02567ccd8.html

Chand, S. (2008). Public Finance. New Delhi, India: Atlantic Publishers & Dist.

In.gov. (2019). TOTAL REVENUE BY FUND TYPE. Retrieved from https://www.in.gov/sba/files/AP_2017_A_1_3_0_Revenue_Charts.pdf

Moeti, K., Khalo, T., & Mafunisa, J. (2007). Public Finance Fundamentals. Cape Town, South Africa: Juta and Company.