Tax and budget is not simple. Here are some definitions for key words that might be new to some readers:
AD VALOREM TAX: While technically any tax based upon the value of something, this term most commonly refers to property taxes, which depend on the value of the property.
APPROPRIATION: The legal action by the Legislature to authorize spending by specific agencies for specific purposes and to place maximum limits on such spending.
ASSET: Something of value, such as cash, investments, rights to receive money in the future, and long-term assets such as land, buildings, and equipment.
AUDIT: An examination of financial transactions and reports to determine if they comply with laws, policies, and procedures.
BOARD OF EQUALIZATION: A seven-member board composed of six top-ranking elected officials and the president of the State Board of Agriculture whose functions include certifying an estimate of revenue available for legislative appropriation.
BUDGET: A detailed financial plan for a fiscal year or other period. It specifies sources of revenue and allocations of funding to various funds, agencies, programs and activities.
CAPITAL EXPENDITURE: Spending on an asset with a long useful life and relatively high cost. Common capital expenditures include land, buildings, infrastructure such as streets and utility systems, and equipment.
CONSTITUTIONAL RESERVE FUND: Also known as the Rainy Day Fund. All General Revenue fund receipts in excess of certification are deposited to this fund until it reaches a maximum of 10 percent of the annual General Revenue Fund revenue. Three-eighths of the balance may be appropriated for a shortfall in current year General Revenue collection; three-eighths may be appropriated, if the upcoming year’s projected GR is lower than the current year’s. The other one-fourth may be appropriated upon declaration of an emergency.
EXCISE TAX: A tax paid when a specific good (such as gasoline) is purchased. The tax often is included in the retail price of the product.
EXPENDITURE: The disbursement of monies for goods or services.
FISCAL YEAR: The twelve-month budgetary year from July 1 to June 30. Fiscal years are identified by their end date (i.e. FY ’10 begins July 1, 2009 and ends June 30, 2010).
FUND: A self-balancing accounting structure with revenues, expenditures, assets and liabilities used to track monies flowing into and out of government agencies. Governments use funds to divide budgets and financial activity into smaller units. Most funds are used to account for revenues that are legally or otherwise restricted for specific purposes.
GENERAL APPROPRIATION (G.A.) BILL: The bill funding the ongoing operations of state agencies, but typically not containing new programs. Unlike most measures, the G.A. bill does not need an emergency clause to become effective July 1. It may include funding for multiple government functions and agencies.
G.C.C.A. (General Conference Committee on Appropriations): This committee is made up of members from both the House and the Senate who essentially write the final budget for the Legislature. It usually convenes late in the session after passage of the General Appropriations Bill and allocation of new revenue to subcommittees. Its work is done with subcommittees on groups of agencies. G.C.C.A. also serves as the conference committee for certain non-budgetary bills with fiscal implications.
GENERAL (OR GENERAL REVENUE) FUND: The principal funding source for most government operations. Any revenue not restricted for a specific purpose flows into the general fund and is available for appropriation for any legal purpose of the government. The State of Oklahoma calls its general fund the General Revenue Fund (GRF).
INFRASTRUCTURE: Basic networks of systems necessary to support community and economic life, such as streets, water and sewer lines, streetlights and sidewalks.
INITIATIVE PETITION: A provision to change the Constitution or create, amend, or repeal a law by initiative of citizens. Requires signatures of a minimum percentage of voters, review of the state Supreme Court, and a vote of the people.
INSURANCE TRUST: A financial entity whose purpose is to collect premiums or other contributions to finance future liabilities such as retirement, employee benefits, and unemployment and workers compensation.
INTEREST GROUP: Organized groups of private interests that seek favorable treatment from government.
INTERGOVERNMENTAL REVENUE: Revenue one government receives from another. Includes grants, over which the giving government maintains control over amounts and uses of funds, and shared revenue, which the giving government must provide as required by law.
LEGISLATIVE REFERENDUM: Process by which the Legislature votes to submit a matter to a vote of the people in the form of a State Question. Requires a two-thirds majority and is not subject to veto by the Governor.
LIABILITY: An amount owed to another entity, such as payroll for work performed by employees, amounts owed to suppliers of goods and services, and repayment of loans.
LINE-ITEM VETO: The power of an executive (most commonly state governors) to eliminate or modify part of an appropriation bill approved by the legislature. In Oklahoma the Governor may line-item veto part of a budget act and the legislature may override the veto by a two-thirds vote of both chambers.
PERSONAL INCOME: The total of all income of individuals from all sources, including wages and salaries, benefit payments from government, business income, rental income, and proceeds from sale of assets.
RAINY DAY FUND: see Constitutional Reserve Fund.
REVENUE: Money received by a government entity.
REVENUE CERTIFICATION: State revenue for many funds is certified by the State Board of Equalization each February. Certification determines the maximum amount available for appropriation in the upcoming fiscal year.
REVENUE SHORTFALL: A situation that arises when revenue collections fall below appropriated amounts (95 percent of certified estimates). By law the Office of State Finance is required to enact proportional across-the-board agency budget cuts to eliminate the shortfall.
REVOLVING FUND: A fund that receives income of a specific agency or entity and supports expenditures of that agency or entity. In Oklahoma most revolving funds are not subject to appropriation by the Legislature and balances of the fund carry over from one year to the next for the same purpose.
SEVERANCE TAX: A tax on the harvesting or extracting of natural resources such as timber and minerals. The tax normally is based on the sale price of the item being taxed.
STATE QUESTION 640: A 1992 referendum that created the constitutional requirement that “revenue bills” be sent to a vote of the people, unless they pass by a three-fourths vote of both chambers of the Legislature.
STRATEGIC PLAN: A long-range plan for the improvement of operations of an organization. Most strategic plans establishes goals and objectives for the planning period, propose programs to meet those goals and objectives, and specify how progress will be measured.
STRUCTURAL DEFICIT: A long-term condition in which recurring revenue of a government is not sufficient to pay recurring expenditures.
SUPPLEMENTAL APPROPRIATION: An appropriation made once a fiscal year is already underway, necessitated either by the original appropriation being inadequate to meet demands placed on the agency or by revenue shortfalls.
TAX BASE: The value of an entity or activity that is taxed. For an income tax, the base is all taxable income.
TAX EQUITY: Fairness in taxation. Horizontal equity means similarly situated taxpayers pay similar amounts of tax. Vertical equity means that as incomes rise, the share of income paid in tax remains the same or higher.
TAX EXPENDITURE: A public program that encourages or rewards desired activities by providing reduced taxes through deductions, exemptions, or credits. In contrast to a normal expenditure, the impact of a tax expenditure is to reduce the tax revenue available to government.
TAX RATE: How much tax is paid for each unit of activity being taxed. For example, a one percent tax rate means that one of every one hundred dollars being taxed (whether income, sales, or wealth) is paid in taxes.
UNFUNDED LIABILITY: An amount that is owed in the future and exceeds the current value and expected earnings of the funds available to pay the amount owed.
USER CHARGE: A fee paid by users of a government service that is based on the unit of service provided and is approximately the same as the benefit the payer receives from the service. Examples include tolls, building permit fees, and college tuition.
UTILITY: A government entity that recovers costs from users to pay all operating and capital expenditures of the entity. The recovery normally is through user charges that depend on how much service is consumed. Water, electric, and gas utilities are examples.
VETO: An act of an executive official to override all or part of an act by the Legislature. In Oklahoma, the Governor has the power of veto, which can be overridden by a two-thirds vote of both chambers of the legislature (three-fourths vote if the act declares an emergency).
ZERO-BASED BUDGETING: A technique for conducting evaluation reviews of state agencies programs, performance and management under HB 1256.