16-06-2014, 03:04 PM
FISCAL POLICY
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INTRODUCTION
Definition and Purpose of Fiscal Policy
Fiscal policy is the combined practices of government with respect to revenues, expenditures, and debt management. Fiscal planning, generally done within the context of the Public Services Program (PSP)/Operating Budget and the Capital Improvements Program (CIP)/Capital Budget, reflects and helps shape fiscal policy. The budget process not only reflects those fiscal policies currently in force, but is itself a major vehicle for determining and implementing such policies. The fiscal policy statements presented on the following pages are not static. They evolve as the economy and fiscal environment change and as the County population and requirements for government programs and services change. The purposes of fiscal policy for the PSP/Operating Budget are
Fiscal Planning for Public Expenditures and Revenues.
Fiscal policy provides guidance for good public practice in the planning of expenditures, revenues, and funding arrangements for public services. It provides a framework within which budget, tax, and fee decisions should be made. Fiscal policy provides guidance toward a balance between program expenditure requirements and available sources of revenue to fund them. Fiscal planning considers long-term trends and projections in addition to annual budget planning.
• Setting Priorities among Programs.
Clearly defined and quantified fiscal limits encourage setting priorities by government managers and elected officials, thus helping to ensure that the most important programs receive relatively more funding.
• Assuring Fiscal Controls
Fiscal policies relating to County procurement of goods and services, to payment of salaries and benefits, to debt service, and to other expenditures are all essential to maintaining control of government costs over time.
Organization of This Section
Following are the major fiscal policies currently applied to the PSP/Operating Budget and financial management of Montgomery County (see the Recommended CIP for policies that relate more directly to the CIP). Numerous other fiscal policies that relate to particular programs or issues are not included here but are believed to be consistent with the guiding principles expressed below.
The presentation of fiscal policies is in the following order:
• Policies for fiscal control
The County maintains its accounting records for tax supported budgets (the General Fund, special revenue funds, and Capital Projects fund supported by general tax revenues) and permanent funds on a modified accrual basis, with revenues recorded when available and measurable, and expenditures recorded when the services or goods are received and the liabilities are incurred. Accounting records for proprietary funds and fiduciary funds, including private-purpose trust funds, are maintained on the accrual basis, with all revenues recorded when earned and expenses recorded at the time liabilities are incurred, without regard to receipt or payment of cash.
Internal Accounting Controls
The County will develop and manage its accounting system to provide reasonable assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition; and (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets. “Reasonable assurance” recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the evaluation of costs and benefits requires estimates and judgments by management.
Audits
The County will ensure the conduct of timely, effective, and periodic audit coverage of all financial records and actions inability of some citizens to pay the full costs of certain benefits, and the difficulty of measuring the relationship between public costs and public or private benefits of some services.
Tax Duplication Avoidance
In accordance with law, the County will reimburse those municipalities and special taxing districts which provide public services that would otherwise be provided by the County from property taxes.
Expenditure Reduction
The County will seek expenditure reductions whenever possible through efficiencies, reorganization of services, and through the reduction or elimination of programs, policies, and practices which have outlived their usefulness. The County will seek inter-agency opportunities to improve productivity
Shared Provision of Service
The County will encourage, through matching grants, subsidies, and other funding assistance, the participation of private organizations in the provision of desirable public services when public objectives can be more effectively met through private activity and expertise and where permitted by law.
Public Investment in Infrastructure
The County will, within available funds, plan and budget for those facilities and that infrastructure necessary to support its economy and those public programs determined to be necessary for the quality of life desired by its citizens.
Cost Avoidance
The County will, within available funds, consider investment in equipment, land or facilities, and other expenditure actions, in the present, to reduce or avoid costs in the future.
Procurement
The County will make direct or indirect purchases through a competitive process, except when an alternative method of procurement is specifically authorized by law, is in the County’s best interest, and is the most cost-effective means of procuring goods and services.
Use of Restricted Funds
In order to align costs with designated resources for specific programs or services, the County will, whenever possible, charge expenses against a restricted revenue source prior to using general funds.
Employee Compensation
The County will seek to provide total compensation (pay plus employee benefits) that is: comparable to jobs in the private sector; comparable among similar jobs in the several County departments and agencies; and comparable between employees in collective bargaining units and those outside such units.
• Decrease reliance on general taxation for discretionary but desirable programs and services and rely more on user fees and charges;
• Decrease the vulnerability of programs and services to reductions in tax revenues as a result of economic fluctuations; and
• Increase the level of self-support for new program initiatives and enhancements.
Revenue Projections
The County will estimate revenues in a realistic and conservative manner in order to minimize the risk of a funding shortfall.
Property Tax
The County will, to the fullest extent possible, establish property tax rates in such a way as to:
• Limit annual levies so that tax revenues are held at or below the rate of inflation, or justifies exceeding those levels if extraordinary circumstances require higher rates;
• Avoid wide annual fluctuations in property tax revenue as economic and fiscal conditions change; and
• Fully and equitably obtain revenues from new construction and changes in land or property use.
A 1990 amendment to the County Charter (Section 305), “Question F,” limits the annual increase in real property tax revenue to the rate of inflation plus that associated with new construction, rezoning, changes in property use, and development districts. This limit may be overridden by a vote of seven of the nine councilmember’s
County Income Tax
The County will maintain the rate for the local personal income tax within the limits specified in the Maryland Code, Tax-General Article, and Section 10-106.
Special Districts
The County has established special districts within which extra services, not performed Countywide, are provided and funded from revenues generated within those districts. Examples are the Urban, Recreation, and Parking Lot Districts. The County will also abolish special districts when the conditions which led to their creation have changed. Most special districts have a property tax to pay all or part of the district expenses. Such property taxes are included in the overall limit set on annual real property tax revenue increases by Section 305 of the County Charter.