Budget Example Analysis - 1027 Words

Introduction -In the wake of the dot-com industry’s collapse, the steep stock market drop, the rise of the dollar against foreign currencies, increased unemployment, and other economic factors, March 2001 officially began a nationwide recession that triggered budget problems in at least forty-five states. -The 2001 recession was the fourth recession in 30 years. After past recessions budget experts recommended establishing a â€Å"rainy-day fund† (saving funds during boom times in order to cushion the shocks of economic busts). Wisconsin established the fund but never put money into it. -During the 1990-1991 recession Wisconsin’s fiscal stress was ranked the lowest among the 50 states. During the 2001 recession Wisconsin was among the†¦show more content†¦European and some of the Far East economies were growing slowly or were in a recession before the U.S. Remedies Proposed and Implemented -During a deficit lawmakers have four options. -They can raise taxes, cut spending, employ a combination of both, or employ a method of â€Å"creative bookkeeping†. -The required spending cuts might have been reduced if the lawmakers could have drawn from a Rainy Day Fund. -The other option was to tap into the tobacco settlement money that the state was supposed to get over a 30 year period, the lawmakers decided to draw heavily from this fund. Remedies -Act 16, the 2001-2003 biennial budget bill was passed in August of 2001 contained five major initiatives. -5 percent cuts to state agency budgets -delays in staffing new prisons -use the proceeds from the sale of tobacco settlement agreement revenue bonds -reallocation of federal transfer revenues to support state medical assistance funding -â€Å"extraordinary accounting devices†¦employed to ensure a positive budget balance -â€Å"High-priority programs† were exempt from budget reductions (these included assistance to the poor, disabled, and the elderly, funding of K-12 schools, medical assistance, the court system, and public defenders). -Three largest elements that remained to tax were the University of Wisconsin System, Shared Revenue Fund, and corrections. Consequences -Groups that were helped by these tax breaks were anti-taxShow MoreRelatedNotes on Flexible Budgets and Budgeting952 Words   |  4 Pages1. The budget presented in a flexible budget. 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