The first tool employed by the federal government when coming up witha budget is the revenues and the expenditures for the past fiveyears. The information about the same needs to be part of the annualor the biannual plan when coming up with a budget. Fiscal notes arealso required as tools by the federal government, and it givesinformation on the savings of the bills and the costs for upcomingyears. Finally, the federal government needs the current servicesbaseline as it serves to inform the public and the analysts determinethe effect of the policy changes and the funding of the programs(Berman, 2015).
Impactof market inefficiencies on the federal government
Market efficiency can be defined as the state when it can maximizethe benefits through achievement of the level in which the marginalbenefit does equal the marginal cost. However, in particular,circumstances, the same is not achieved. In such circumstances whenmarket inefficiencies are experienced, the federal government has tocome up with interventions that will focus on moving the productionof the goods to levels that are close to the adequate quantities.
Federalgovernment and the use of the rainy funds
The rainy day funds may not work out for the government as it doesfor the state. The federal government tends to have high costs ofexpenditures with allocations set aside for specific activities. In astate where the government runs short of the funds, it can be achallenge especially when it comes to the decision to use the rainyday funds because of the inability to choose appropriately on sectorsto prioritize. Further, it is almost unlikely for the government torun short of such funds.
Stateof California Budget
The first tool that is employed by the state of California when doingbudgeting is the rainy day funds. The funds may serve as a reservesuch that if the state were to run short of the revenues that hadbeen budgeted for, it could resort to the funds that have been setaside to cater for the same (Rubin, 2015). Next, oversight of thevarious tax expenses such as the tax credits is the other budgetarytool used by California State. It helps the state in making the sounddecisions regarding the tax expenditures that they can forego.Finally, the state utilizes tools that enable it to manage thelong-term funds commitments such as pension to the retired employees.
Impact of the market inefficiencies of California State Government
Market failures is a common phenomenon. However, California Stategovernment has a framework through which they respond to suchinefficiencies. One of the ways through which the state governmentensures that the same is through coming up with interventions thatseek to alleviate the effects of the market inefficiencies.
Use of the rainy day funds by the state
California State Government has set aside the rainy day funds tocater for unforeseen eventualities especially during incidences ofbudget deficits. The rainy day funds may be seen as a reserve throughwhich the government seeks to cushion itself if they run short offinances (Martin, 2015). The state has taken the initiative offilling the funds in advance to ensure that they have enough of thesame if they were to experience challenges with funding. The rainyday funds are helpful in avoiding situations where service cuts andan increase in tax is experienced.
Berman, L. (2015).The Office of Management and Budget and the presidency, 1921-1979.
Martin, C. (2015).Fixing Sequestration and Improving the Budget Process. Center forAmerican
Rubin, I. (2015).Past and Future Budget Classics: A Research Agenda. PublicAdministration