Public Budgeting & Finance Examination 2 Sabrina Dahlke
Budget Deficit
Budget deficit is the difference between how much revenue you have verse expenditures.
A deficit is when you have more expenditures than revenue. Budget deficit is critical in the
budgeting process as the main goal of any budget is to spend the exact amount you earn, while
accomplishing the needs and goals of the agency. Budget deficit is a factor used when comparing
the fiscal health of a business or organization. It is used to determine the health because as an
agency is able to spend within their revenue and not have a deficit, yet still maintain their goals
and objectives, they are in considerably better health than one who needs to borrow money to fill
the gap between there revenue and expenses. The severity of the deficit then makes a good
comparison point between agencies.
When creating a budget the previous year’s deficits are typically account for in a
repayment plan. Like credit cards they debt will build interest and minimum payments on
amounts borrowed typically needs to be paid. During the budget process there are many ways to
avoid having a deficit. One is to have hard stop in spending and allocated funds to be using only
for certain items. Another way is to budget accordingly, may be to split a project over years, or
under budget with a list of projects to be on the “back burner” that can be brought up to spend
access funds. In my personal option it is better to spend less than budgeted and make sacrifices
through the agency.
