Since a budget is actually a financial plan in action, government agencies just like individual households need a budget to effectively manage money. Budgeting at all levels of fiscal planning requires two basic steps – knowing how much income you have to work with and how much money you expect to spend. Identifying spending priorities is another crucial step in the process of reviewing and deciding whether to support a budget.
Making the budget request is the first step in allocating a budget. This is the phase where someone asks for money. Without a budget request, an entity and its services or programs would not be able to continue. The budget request is the way a program, department or agency gets the financial resources it needs to carry on operations. Presenting a budget involves summarizing how much revenue you expect to collect, how much money you expect to spend and whether you anticipate spending more or less money than you take in.
Budget negotiations are part of the budget allocation process and require working toward a common goal. Depending on how many people are asking for money to fund programs and services, budget cuts are sometimes necessary. A budget committee carefully reviews all requests and then makes recommendations before deciding how funds will be allocated. Compromise is an effort at working out the details of the budget and resolving any conflicting differences. Departments and agencies submit supporting documentation and data corroborating their projected operating costs for the upcoming fiscal year.
This step in the budget process defines a spending plan for the next fiscal year. Although the budget resolution does not determine how much money particular programs can spend for the year, it does set limits for each category of spending. Before funds can be allocated to specific programs, the budget resolution determines how much revenue will be available. The process involves calculating how much income taxes and other financial resources will generate to cover expenses.
Appropriating funds is often the toughest part of the budget development process. It is the responsibility of the appropriations committee to decide how the money will be spent. Based on funding availability, the appropriations committee sets money aside for specific purposes. Once spending priorities are established, the task of the budget committee is to approve funds for as many services and programs as possible while at the same time saving taxpayers money. The appropriations committee can cut spending by cutting programs in order to keep taxes down.