Slide 5 of 84

Basically, a governmental budget does five things:

1. Allocation. First and foremost, a budget allocates the scarce resources of the state among an apparently unlimited number of competing demands for funding. In doing this, the budget process provides a framework for debating and determining the priority that should be attached to each governmental program.
2. Expenditure Control. Second, the budget is the mechanism through which expenditures are kept within available revenues. It, therefore, provides a framework for determining how big state government should be.
3. Accountability. Third, the budget is a major means of establishing accountability. Did you spend the public's money the way you said you would? is a basic question that citizens should be able to answer through the budget process.
4. Performance Evaluation. The fourth function of the budget is closely related to the third. In addition to asking whether the money was spent in accordance with the plan, we can also ask what we got for our money in terms of better roads, smarter kids, or healthier mothers.
5. Intergovernmental Finance. You will quickly find that most of the state budget involves moving money from taxpayers over here and spending it over there. School aid, revenue sharing, community mental health, highway financing, and many other smaller programs form a complex flow of funds among and between units of government in Michigan and it is all accomplished through the budget process.