General Revenue is a critical financial term used by state and local governments when organizing and reporting their finances. It encompasses the total revenue collected by these entities, excluding income generated from utilities, the sale of alcoholic beverages, and insurance trusts.
Definition and Components
General Revenue is best described as:
“The portion of state and local government revenue that remains after subtracting revenues from utilities, sales of alcoholic beverages, and insurance trusts. It primarily includes taxes, fees, grants, and licenses.”
Key Elements
- Taxes: This includes all forms of taxes collected, such as property tax, income tax, sales tax, and other local taxes.
- Fees and Charges: Revenue from services provided by the government, like park entry fees, court fees, and public facility rentals.
- Grants and Aid: Funds received from federal or higher-level state agencies aimed at supporting specific projects or overall budget stabilization.
- Licenses and Permits: Income collected from licenses (like business licenses) and permits (like construction permits).
Exclusions
The definition of General Revenue intentionally excludes the following:
- Utilities Revenue: Income from publicly operated utilities such as water, electricity, and sewer services.
- Alcohol Sales: Proceeds from government-operated liquor stores or regulated alcoholic beverage sales.
- Insurance Trusts: Revenue from government-administered insurance programs like employee retirement systems.
Historical Context
The classification of General Revenue versus other types of revenue has long roots in public finance, which aims to streamline government budgeting, increase transparency, and enable comparability across regions and time periods. Decoupling utility and specialized revenues allows for a more precise understanding of a government’s fiscal health regarding core public services and responsibilities.
Applicability in Budgeting
In public budgeting and financial planning:
- General Revenue provides the foundation for budgeting essential government services such as education, health care, public safety, and infrastructure.
- It helps policymakers understand the fiscal capacity of their jurisdictions and plan accordingly without conflating operations with non-core services.
Examples and Case Studies
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Example A: A city generates $50 million from property taxes, $20 million from sales tax, $5 million from park entry fees, and receives $10 million in federal aid. If the city also runs a water utility generating $15 million and a liquor store generating $2 million, its general revenue would be:
$$ \text{General Revenue} = \$50M + \$20M + \$5M + \$10M = \$85M $$ -
Case Study: Comparing cities with similar population sizes, differentiating general revenue from total revenue allows for an accurate assessment of financial management and service provision.
Related Terms
- Special Revenue: Revenue collected for specific purposes, like education or transportation, often coming with use restrictions.
- Total Revenue: The overall income of a government, including utility revenue, alcoholic beverage sales, and insurance trusts.
- Operating Revenue: Income from regular government operations and services.
Frequently Asked Questions
Q1: Why exclude utilities and alcohol revenue from general revenue? A1: Excluding these allows for a clearer depiction of revenue available for general governmental functions, enhancing transparency and comparability.
Q2: How is general revenue used in financial reporting? A2: It is used to demonstrate the financial capacity and health focusing on the core government operations, separate from commercial-type operations and specific funds.
Q3: What impact do grants have on general revenue? A3: Grants increase general revenue, providing additional funds for critical services and projects, often coming with usage conditions.
References
- Government Finance Officers Association (GFOA). (2021). Best Practices in Public Budgeting.
- U.S. Census Bureau. (n.d.). Definitions for Government Finance and Employment Classification Manual.
- Smith, R. & Robinson, D. (2020). Public Budgeting Systems. Routledge.
Summary
General Revenue is a fundamental concept in state and local government finance, representing the core income available for general use, separate from specialized or commercial revenue streams. Accurate accounting of general revenue ensures efficient resource allocation, effective financial planning, and transparent public reporting.
De-constructing income into general revenue allows for a nuanced understanding of government finance and better informed fiscal decision-making, ultimately facilitating a stable and effective public service delivery system.
