How to Prepare a Fiscal Budget

The U.S. Congress debates fiscal budgets every year.

Preparing a fiscal budget is the first step a government takes in planning how it intends to use society's resources for the public good. Governments develop and prepare fiscal budgets by pursuing some form of fiscal policy. Fiscal policy describes the ways in which government intends to spend and tax for the purpose of influencing the overall economy. Preparing a fiscal budget is an ongoing process in which the various different departments, agencies and branches of government compete for funding.

Things You'll Need

• Department funding request
• Revenue forecast
• Debt service payment schedule

Instructions

1. Write a budget policy memo describing the fiscal policy that is to be pursued in the preparation of the fiscal budget. Fiscal policy can be either tight or loose. Loose fiscal policy refers to an increase in the overall size of the budget. Tight fiscal policy refers to a decrease in the overall size of the budget.

2. Request funding levels from the various different governmental departments, agencies and branches of government based upon the fiscal policy being pursued. For example, tight fiscal policy might require all requests for funding to cut costs by fifteen percent from the previous year's fiscal budget, whereas loose fiscal policy might request certain governmental departments that engage in economic development to incur new costs for programs meant to foster greater economic growth.

3. Forecast anticipated revenues to be collected and any debt service payments scheduled to be paid in the upcoming fiscal year. Revenues to be forecasted include all government imposed taxes and any fees the government collects from administering public programs such as health-care. Debt service payments include any interest and principal payments the government will need to pay on its outstanding debt in the upcoming fiscal year.

4. Prepare a budget document detailing all of the revenue forecasts, requests for funding from the various different departments, agencies, branches of government, and debt service payments for the upcoming fiscal year. The itemized fiscal budget document should show how much money is being appropriated to each program individually as well as provide a descriptive section describing the revenue the government expects to collect. Debt and financing charges to be paid should be displayed separately from the various different program appropriations.

Tips & Warnings

• Generally, the procedures for preparing a fiscal budget are prescribed by law. In many cases, it is the responsibility of the executive branch of government to prepare and propose a budget that is then submitted to the legislative branch of government for review and approval.

References

• Fiscal Policy
• The Budget Systems and Concepts

Resources

• A Citizen's Guide to the Federal Budget