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Common Budget Terms

State budget and accounting terms are often confusing to those outside government. This is because state and local governmental accounting differs, in some respects, from business or household budgeting and spending. The list below presents commonly used terms and their definitions.

Appropriation- Authorization by the legislature to spend money from the state treasury for purposes established in law. Appropriations typically limit expenditures to a specific amount and purpose within a fiscal year or biennial period.

Biennial Appropriation- The authority to spend an appropriation in either year of a biennium.

Biennium- A two-year period. The Minnesota state biennium runs from July 1 of an odd numbered year to June 30 of the next odd-numbered year. The biennial budget planning horizon covers three biennia - adjustments to the current biennium, the proposed budget for the next biennium, and estimates for the following biennium.

Budgetary-Basis Reporting- Minnesota budgets on a modified-cash basis. That is, revenues are counted when received, expenditures when paid or encumbered.

Cancellations- Money appropriated but unspent at the end of a fiscal year or end of biennium. Such amounts are generally cancelled back to the state fund from which they were appropriated.

Direct Appropriation- Authorization by the legislature to spend money from the state treasury for purposes established in law. Appropriations typically limit expenditures to a specific amount and purpose within a fiscal year or biennial period.

Entitlement- A service or grant that, under state or federal law, must be provided to all eligible applicants.

Fiscal Year- One-year budget period that begins on July 1 and ends on June 30. The state fiscal year extends from July 1 through the next June 30. The federal fiscal year runs October 1 through September 30.

Forecast Changes- Adjustments made to the base or planning estimates in a forecasted program as a result of a new budget forecast that predicts expenditure changes.

Forecast Programs- Expenditure estimates in most areas are shown at the level of the appropriations made for FY 2008-09 by the 2007 legislature, plus any authorized spending carried forward from prior years. Entitlement programs--such as K-12 general education, intergovernmental aids, health care, and family support--are forecast based on expected changes ineligibility, enrollment, and average costs. Wage and price inflation is included in the revenue estimates, which are based on current law tax rates. It is not included in projected current law expenditures.

Full-Time Equivalent (FTE)- A unit of measure of state employees: refers to the equivalent of one person working full time for one year (approximately 2,088 hours of paid staff time). Two persons working half time also count as one FTE.

Fund Balance or Fund Statement- Summary of revenues, expenditures, reserves and year-end balances for a fund or grouping of funds. Updated fund balances are prepared at the release of each state forecast, the release of the Governor's budget, and at the end of each legislative session.

General Fund- The General Fund is the source of the state's main operating funding and is used to support activities outlined in statute. Major revenue streams into the General Fund include state individual, corporate, and sales taxes among others. These are non-dedicated revenues and are available to be appropriated by the legislature.

General Obligation Bonds- Bonds whose repayment is guaranteed by the full faith and credit of the state.

Legislative Tracking- Legislative fiscal staff spreadsheets that detail the budget passed by the legislative committees. Tracking provides a level of detail, but does not have the same legal implications as appropriation bill language.

Omnibus Bill (Order)- The state budget is enacted through nine major omnibus appropriation bills that are determined by legislative committee structures. State budget presentation is commonly presented to the legislature in a format and order that parallels the last or proposed omnibus bill structure.

Open Appropriation- The authority to spend an unspecified amount of resources to meet a program's objective or a constitutional requirement. These resources are typically made available when an agency provides a forecast of the estimated need. Approval of the funding is made using agency estimates and documentation that establishes the funds in the accounting system. Rather than canceling at year-end, any excess dollars are processed as a reduction in the appropriation amount, rather than a cancellation.

Program/Activity- Minnesota utilizes program-type budgeting - that is, budget presentation agencies are broken down into programs and sometimes to a lower level of activities. Legislative appropriations are generally made at the program level.

Standing Appropriation- An appropriation made in statute (instead of session law) authorizing spending for a program of a pre-determined dollar amount for a specific period of time or indefinitely.

Statutory Appropriation- An appropriation made in statute (instead of session law) authorizing the ongoing spending for a program. In contrast to direct appropriations, statutory appropriations need not be reviewed every biennium for funding to continue. They are, however, presented and considered as part of the total operating budget.

Supplemental (Deficiency) Appropriations- Adjustments made on off-year legislative sessions to a previously enacted biennial budget. Commonly these represent budget changes designed to deal with projected budget shortfalls in the current year, any necessary reductions occasioned by state revenue forecast shortfalls, or increased allocations or initiatives allocating unexpected forecast balances.

Tail- Additional costs (or savings) that occurs in the future because a budget item in the current biennium is not fully implemented. Example: A program started in the last six months of this biennium might cost $100,000. If that program operates for a full 24 months next biennium, costing $400,000, then the current biennium budget decision is said to have a tail of $300,000.

Transfers- Authorized movement of monies between programs within an agency, between agencies for a designated purpose, between appropriations accounts within a fund or between state funds where authorized. By definition all transfers are two-sided, a source account (out) and a destination account (in).

 

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