Using your favorite search engine, locate the federal budget and California's budget for the current fiscal year. Compare and contrast both budgets in an essay consisting of no less than 500 words, an

nati onal budget reported surpluses (Hyman, 2014) . Converging on the political nature of budgets, some experts suggest the surplus es began eroding when tax cuts favoring wealthier citizens were implemented and marked the beginning of budget deficits for the United States (Mc Gahey, 2013) . Additionally, Mc Gahey (2013) asserts that budget deficits and debt accumulation were exacerbated beca use the government maintained the tax cuts beyond their expiration date of 2012. Other contributing factors included the two wars in Afghanistan and Iraq . A social perspective of budgets can be examined through the lens of the economic snowball of 2007. The snowball began with the subprime mortgage crisis (also known as the housing b ubble) and ended with high levels of unemployment. As many as 800,000 jo bs were lost in one month alone ( January 2009), giving rise to increased demands for social programs, s ervices, and goods (McGahey, 2013) . High -levels of unemployment translated into lower collections of tax revenue, th ereby resulting in budget gaps. Historically, public officials’ response s to budget shortfalls have led to the development of many fiscal p olicies (Campbell & Sances, 2013). President Obama’s fiscal response to this crisis was the American Recovery and Reinvestment Act, which distributed $500 billion into government programs. However, this act contributed to the deficit reaching the maximum a mount allowed by law, pro mpting the debt ceiling crisis (Meyers, 2014) . Other fiscal policy created included the Budget Control Act of 2011, allowing the president to raise the debt ceiling in exchange for budget cuts. These market reactions resulted in Mo ody’s, a credit rating agency, downgrading the U.S. n ationa l credit rating from AAA to AA (Meyers, 2014) . The reason cited was increased lending risk due to the lack of political leadersh ip in dealing with pending crises. Other n ational budget negotiations included the fiscal cliff of across -the -board spend ing cuts through sequestration. Sequestration, as you may recall, prompted the 2013 government shutdown of services deemed “nonessential” for sixteen days (Meyers, 2014). This political budget gridlock impacted public services such as the Environmental Protection Agency that monitors environmental threats; the Food and Drug Administration, which approves life -saving drugs and devices; and tourism of the Stat ue of Liberty, a national landmark. Government employees of these agencies were furloughed. However, entitlement programs such as Social Security, Medicare, and v eteran’s benefits receive d autom atic funding (Hyman, 2014) . Next, let us shift our focus to c hronic deficits of sub -national (state/local) governments. Sluggish tax collections, balanced budget requirements, external debt, and limited revenue options exacerbate budget shortfalls (Elder & W agner, 2013). Due to cyclical fluctuations, many states ins tituted rainy day funds. This budget stabilization tool is designed to reduce fiscal stress during economic downturns (Elder & W agner, 2013). Approximately 34% of sub -national revenues come from national aid (federalism) (Hayes, Pangallozzi, & Erbeck, 201 3). Therefore, national government activities impact state and local budgets. For example, the American Recovery and Reinvestment Act appropriated $100 billion to state governments for Medicaid (Municipal Bond Market, 2011) . However, after the expiration o f this act, state governments were required to fill the budget gap in funding (Hayes et al., 2013). Key economic staff members meeting in White House Roosevelt Room (Souza, 2009) PUA 5305, Public Finance and Budgeting 3 UNIT x STUDY GUIDE Title Let’s think back to a previous discussion of services provided by the Federal Eme rgency Management Agency (FEMA) (N ational Association of State Budget Offi cers , 2011) . The Budget Control Act of 2011 included cutting $1 trillion in discretionary spending across the board , resulting in a minimal 2.6% cut in FEMA’s budget. However, this minimal cut at the national level translated into a 57% reduction for state and local services provided by FEMA (National Association of State Budget Officers, 2011) . Reductions in federal aid can often time result in state governments shifting funds or making tra deoffs between public services. Unlike the national government, su b-national governments do not have the luxury of printing money. Therefore, as a result of the 2007 recession, many state governments experienced deficits, layoff s/furlough s of state employees, increased taxes, reduced expenditures, cut s in public services , and in extreme cases , default s and bankruptcies (Hyman, 2014) . A review of the fiscal stress experienced by sub -national government s can aid us in understanding the tremendous impact on public services. Hyman (2014) indicates internal debt, usually expe rienced by national government , is owed to its citizens. In contrast, sub -national government experience s external debt owed to creditors, which diverts income away from r esidents in that jurisdiction (Williams & Fadairo, 2013; Hyman, 2014) . Payment of thi s debt reduces revenue to provide local services and increases budget gaps , which can result in default on obligations, ultimately leading to bankruptcy. Jefferson County, Alabama , filed bankruptcy of approximately $4.2 billion in 2011 (Richardson, 2015) . The bankruptcy resulted from lingering debt consisting mostly of borrowed funds from the 1990s and 2000s as well as declining tax revenue and repair s to county sewers (Richardson, 2015 ). Despite the multifaceted approach to combat the de bt problem, such a s laying off employees , closing county facilities, reducing employees’ pay, and cutting public services, Jefferson County, Alabama , concluded that bankruptcy was the only remaining option. San Bernardino County, California , filed bankruptcy of app roximate ly $500 million in 2012 (Callahan & Pisano , 2014) . Factors contributing to bankruptcy were major indu stry closures resulting in high levels of unemployment, reduction in home ownership, interstate construction, declining tax base, the 2007 recession, and d ecreases in federal funding (Callahan & Pisano , 2014) . These factors resulted in budget cuts that precipitated the closure of county courts, county employee layoffs and salary cuts, a nd reducing county welfare and food stamp programs , although request s for these public services w ere increasing. Stockton, California , filed bankruptcy of ap proximately $1 billion in 2012 (Pryor , 2014) . Mounting budget deficits, shrinking revenue, and increased hou sing foreclosure rates were major contributors to the city’s decision to file bankruptcy. These factors contributed to a series of drastic cuts to public services , such as downsizing the police force by one -fourth, prompting higher levels of crime ; downsizing the fire department by one -third ; and reduc ing other city employees by 40%(Associated Press, 2012) . Detroit , Michigan , filed bankruptcy of $18 billion in 2013 (Hayes et al., 2013) . With no signs of an imminent solution, the largest city in Mic higan found itself under great public scrutiny. Often referred to as the “Motor City ,” the industrial giant of three automakers and a major producer of domestic and sporting goods became trapped in a downward spiral of fiscal unsustainability.

Factors of t his bankruptcy included excessive borrowing, industry closures, and poor accounting procedures, along w ith the great recession of 2007 (Skeel, 2015) . Picture of Detroit, MI bankruptcy petition (Rfc1394, 2014) PUA 5305, Public Finance and Budgeting 4 UNIT x STUDY GUIDE Title Public budgeting presents the financial health of an organization or government based on resources and expenditures. Revenue is yielded from citizens’ payment of taxes. Expenditures result from demands of services and goods. The process of public budgeting involves fiscal governance and management by public officials. References Anderson, S., & Harbridge , L. (2010). Incrementalism in appropriations: Small aggregation, big c hanges. Public Administration Review , 70 (3), 464 -474. doi:1 0.1111/j.1540 -6210.2010.02160.x Associated Press. (2012, June 26). Stockton, California to become largest U.S. City to declar e bankruptcy. Retrieved from http://www.nydailynews.com/news/national/stockton -california -largest -u-s-city -declare - bankruptcy -article -1.1102972 Callahan, R. F., & Pisano, M. (2014). B ankruptcy : The divergent cases of the city and the county of San Bernard ino. Public Finance & Management , 14 (1), 84 -105. Campbell, A. L ., & Sances, M. (2013, November). State fiscal p olicy during th e Great Recession: Budgetary impacts and p olicy responses. The Annals of the American Academy of Political and Social Science, 650 (1), 252 -273. Elder, E. M. , & Wagner, G. A. (2013, December). Revenue cycles and risk -sharing in local governments: An analysis of state rainy day funds. National Tax Journal , 66 (4), 939 -960. Hayes, P. J., Pangallozzi, J. R., & Erbec k, J. (2013). Stat e of the states and local governments: Municipal bond market report. Retrieved from https://www.blackrock.com/corporate/en - fi/literature/whitepaper/state -of-states -and -local -governments.pdf Hyman, D . N. (2014). Public finance: A contemporary a pplication o f theory to p olicy (11th ed.) . Stamford, CT: Cengage Learning Joyce, P. G. (2011). The Obama a dministration and PBB: B uilding on the legacy of federal performance - informed b udgeting?. Public Administration Review , 71 (3), 356 -367. doi:10.1111/j.1540 - 6210.2 011.02355. x Marcel, M. (201 3). Budgeting for fiscal space and government performance beyond the great recession. OECD Journal On Budgeting , 13 (2), 9 -47. McGahey, R. (2013). The political economy of a usterity in the United States. Social Research , 80 (3), 717 - 748. Meyers , R. T. (2014). The implosion of the federal budget p rocess: Triggers, commissions, cliffs, sequesters, debt ceilings, and shutdown. Public Budgeting & Finance , 34 (4), 1 -23. National Association of State Budget Officers . (2011 , October 5 ). Impact on states of federal deficit r eduction. Retrieved from http://www.nasbo.org/sites/default/files/Impact%20of%20 Federal%20Deficit%20Reduction%2010052 011_0.pdf Pryor, C. S. (2014). Municipal bankruptcy: When doing less is doing b est. American Bankrup tcy Law Journal , 88 (1), 85 -125 . Rfc1394. (2014. September 10). Detroit bankruptcy [Photograph]. Retrieved from http://commons.wikimedia.org/wiki/File:Detroit_bankruptcy.svg Richardson, M. (2015). The disguise of municipal bonds: How a s afe bet in investi ng can become an unexpected uncertainty d uring municipal b ankruptcy. Campbell Law Review, 37 (1) , 187 -206. Skeel, D. A. (2015). From Chrysler and General Motors to Detroit. Faculty Scholarship , 1420 , 121 -148. PUA 5305, Public Finance and Budgeting 5 UNIT x STUDY GUIDE Title Souza, P. (2009, February). Budget meeting in the Roosevelt Room February 2009 [Photograph]. Retrieved from http://commons.wikimedia.org/wiki/File:Budget_meeting_in_the_Roosevelt_Room_February_2009.JP G Williams, R., & Fadairo, S. A. (2013). Severe fiscal stress in local g overnments. Journal Of Govern ment Financial Management , 62 (2), 42 -47 Suggested Unit Resources For assistance in comparing and contrast ing the fiscal problems of various cities to events in their jurisdictions , please see the following article that can be located in the Academic Search Com plete database in the CSU Online Library . Moringiello, J. M. (2015). Bankruptcy and beyond: E xploring the causes of and solutions to municipal financial distress. Widener Law Journal , 24 (1), 1 -8