UNIT VII STUDY GUIDE

Finance and Bureaucracy

Course Learning Outcomes for Unit VII

Upon completion of this unit, students should be able to:

1. Describe the key political institutions and processes in state and local politics.

4. Identify the types of services provided by state and local governments.

5. Explain the policy-making processes that occur in state and local governments.
5.1 Explain the concept of bureaucracies and their role in taxation, finance, and providing
governmental services.
5.2 Discuss the various forms of taxes on the local, state, and federal levels.

6. Describe the influences on state- and local-level public policy making.

Required Unit Resources

Chapter 4: Finance: Filling the Till and Paying the Bills

Chapter 10: Bureaucracy: What Nobody Wants but Everybody Needs

Unit Lesson
The Importance of Budgets

Budgets are a vital aspect of government and are not limited to the state level. Just as a governor has a
responsibility to set the budget for the state, local, and county, government officials must also set their
respective budgets. The process is the same, regardless of level of government. Each department is held
responsible for filling out the forms for their budget request for the next fiscal year (FY), which typically runs
July 1 through June 30. A department must show how last year’s money was spent and justify any requests
for an increase in spending. There are certain items within a budget that are earmarked or have a particular
purpose named within the state’s constitution. Money must also be set aside for uncontrollable expenses as a
result of prior commitments to existing programs. Uncontrollable costs include expenses for entitlements and
federal mandates—items in which the governor has no control. Many governments require a balanced budget
and must, at times, make mid-year cuts in programs and personnel if enough money is not generated. Once
the budget is prepared, it is formally presented to the governor, commission, or council for approval. There
are often multiple adjustments and changes made during the process before the final budget is approved.

Taxes

The United States has a great history of revolting against taxes, but in order to keep the government running,
taxes must be paid. While the federal government gets most of its money from the income tax, states know
that their citizens loudly oppose even minor increases, despite significant benefits to the community as a
whole. Learn about the historical views of taxation by participating in this short activity Historical Views of
Taxation, which is provided by the U.S. Internal Revenue Service (IRS).

The greatest expenditures by governments are for education and social services (Dye & MacManus, 2015).
At the state level, social services, insurance, and education are the largest expenditures; at the local level,
education expenditures are three times greater than the next-largest expenditure—utilities (Dye and
MacManus, 2015). Transportation, public safety, and infrastructure are also large financial responsibilities.

POL 2302, American State and Local Politics 1

You can see how the federal government breaks taxes down and disperses those UNITfunds to fill GUIDE
x STUDY out the national
budget in this short activity Citizen’s Guide to the Federal Budget, which is provided
Title by the IRS.
States typically rely on revenue from state income tax to fund their needs; however, there are seven states
that do not have an income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming
(Garcia, 2019). These states rely heavily on other taxes, such as sales and gasoline taxes. As an example,
Tennessee boasts the highest sales tax in the country at 7%. Washington taxes gasoline at an incredible 49.5
cents per gallon as of 2019, and they are only the third highest in the state behind Pennsylvania and
California (Garcia, 2019). The highest gas tax in the United States is found in Pennsylvania, with a whopping
56.7 cents per gallon as of January 2022 (Pennsylvania Department of Revenue, n.d.). California ranks
second highest with a gas tax of 51 cents per gallon (Wilson, 2022). Alaska and Wyoming benefit from coal
mining and oil drilling tax revenues (Garcia, 2019). States decide whether a local government may collect
taxes and which types are allowable. Local governments must generate enough money to pay for necessary
infrastructure, maintenance, and improvements through what is called a millage.

Millage is simply another term for tax rate and is used to calculate the amount of property tax that
homeowners must pay. One mill is one one-thousandth of a dollar and is the equivalent of $1 for each $1,000
of the assessed value of a homeowner’s property (Tax Foundation, 2009). The reliance on property tax leads
to issues with development and growth because more growth and more development leads to more property
tax revenue. It may be difficult to believe, but citizens loudly oppose even minimal increases of a few cents
per $1,000, despite the knowledge that such a small change generates significant amounts of money
necessary to pay for a city, district, or county’s needs. For example, in 2016 in Destin, Florida, the city council
voted in favor of the city’s first millage increase in more than a decade from 1.5 to 1.7 mills—an increase
equal to about 20 cents for every $1,000 of assessed value (Barlow, 2016). For a homeowner with a
$200,000 assessed property value, this was approximately a $40 increase that would yield the city
approximately $740,000 for critical infrastructure needs, such as the repair of failed stormwater systems. The
outcry was immediate with the newspaper headlines announcing a 13.3% increase in taxes (Barlow, 2016).

It did not matter that there had been no increase in more than a decade, that there were critical needs, or that
the increase was the equivalent of one night at the movies. All that people heard was that there would be a
tax increase with numbers configured so as to put change in the worst possible light. Certainly, hearing your
taxes might go up $40 a year paints a far different picture than hearing your taxes are being raised 13.3%.
Learn more about how taxes evolve by participating in this short activity Formal Tax Legislation Process,
which is provided by the IRS.

One reason citizens are so opposed to raising taxes is the belief that many local governments, as well as
some states and even the federal government, are fiscally irresponsible. While the U.S. Constitution does not
mandate a balanced budget, many state constitutions and community charters mandate balanced budgets. In
fact, having a balanced budget is widely regarded as being fiscally responsible. However, there are some
states with various loopholes and interpretations of their laws in which the need for a balanced budget can be
disputed (National Conference of State Legislatures, n.d.). The National Conference of State Legislatures
(n.d.) noted the state of Vermont as the one clear exception to requiring a balanced budget, Alaska as an
example of a state without a definite requirement for one, and Wyoming and North Dakota as also being
exceptions. Many of us recall the infamous words uttered by then-presidential candidate George H. W. Bush
as he addressed the 1988 Republican National Conference: “Read my lips: No new taxes.” Most people do
not want to raise taxes or to pay more taxes, but such actions are a necessary part of American life. If taxes
are not increased in order to meet needs or rates of inflation, the quality of public services provided by the
government would decrease. Quite simply, as the cost of living, population, and development continue to
increase, so must funding for their support.

Bureaucracy

The term red tape, widely considered synonymous with bureaucracy, was derived from the actual red tape
used in Great Britain and the colonies to bundle legal and official documents. Today, red tape represents the
challenges—such as tedious paperwork, inefficiency, inaction, and postponement—associated with
navigating government procedures and processes. These red-tape challenges are created by bureaucrats—
the government workers who work in the departments and agencies who not only make the government
function but interpret how the government will function, thereby creating a self-sustaining phenomenon. In
order to understand how bureaucracy can affect us as individuals, imagine that you are fresh out of high

POL 2302, American State and Local Politics 2

school and land a job as a janitor in a local school system. You go to work every dayx and
UNIT get good
STUDY GUIDE
evaluations that lead to pay raises along with the good county benefits that goTitle
along with the job. You have
been working for the school district for 10 years when the school board decides to privatize all cleaning staff
throughout the county to save money. Now, after 10 years of dedicated work, you must apply with this
company that has been awarded the contract, and you do not have assurance that you will get hired. If hired,
you may have to take a pay cut as well as a possible cut in benefits, and your hours may no longer be the
same. The school board looked at this as a way to save money, but what happens to you now?

In order to access the following resources, click the links below.

Increase your understanding of bureaucracy by listening to this brief

podcast created by the Center for Civic Education.

60-Second Civics: Episode 679, Federalism, Part 9: Governors and

the State Bureaucracy podcast

60-Second Civics: Episode 679, Federalism, Part 9: Governors and

the State Bureaucracy transcript

Local Government

Government at the local level is not dissimilar to that at the state level. Most of the processes are the same as
are most of the duties, though the responsibilities are more community-driven, smaller in scope, and
applicable to smaller jurisdictions. Perhaps the greatest difference lies in the powers of the council or
commission. Local governments have many different compositions (e.g., strong mayor, weak mayor, council,
commission). Because of the concept of home-rule, many local governments are able to set their own policy
rather than have the state set it for them. Home rule places the decision-making, control, and authority into
the hands of local leaders who are more in touch with their constituents and better poised to understand
needs and appropriate measures.

In many cities, mayors function mostly as figureheads and do not have a vote while the power resides in the
hands of the elected council. Some mayors vote only in the case of a tie, while others are able to vote.
Another aspect of local government, which often adds to the bureaucracy, is the position of city manager. The
city manager is a hired position, not an elected one, and often serves as a middleman or conduit of
information. City managers do not vote but often have significant insight into the mindset of the council or
commission and have the ability to impact a vote. City managers manage staff and oversee the operations of
the city. This often includes the selection of contractors and issuance of permits and development orders. It is
often a fine line between serving a council and serving a constituent. Great care must be taken to ensure
impartiality by all.

Privatization

Privatization is one idea considered to reign in out-of-control bureaucracy. Privatization is the shifting of
government responsibilities to the private sector (Dye & MacManus, 2015, p. 238). Some of the most
common ways to privatize are contracting and franchising as well as employing grants and vouchers. While it
can be argued that privatizing can be cost-saving, government contractors often fall victim to the same
stereotypes and missteps as their government counterparts.

Many believe that when an economic downturn hits, those working for the government are safe in their jobs
and pay. The truth is that when the economy turns for the worse, it affects everyone. During this time, the
biggest changes within bureaucracies occur with many of the higher-paying administrators retiring or moving
on. Cities, counties, states, and even the federal government must tighten their belts and make cuts just like
any other entity (Dye & MacManus, 2015, p. 242). This has been especially true in recent years, as in the
case with federal, state, and local governments outsourcing specific services in an attempt to lower budgets
and lower the spending of tax dollars. While lowering costs is an important matter to address, the issue of
whether the privatization process is worth the loss of public bureaucrats becomes relevant. Is the quality of

POL 2302, American State and Local Politics 3

services equal, better, or worse under privatization? Smith and Greenblatt (2022) UNITnoted that several
x STUDY GUIDEstudies
suggest a mixed success of privatization of governmental services, and Sullivan et al. (2019) concluded the
Title
privatization of Veterans Affairs health services can result in a lower quality of care. The privatization push is
one that should be heavily considered on what services are being privatized and what are the costs savings
versus the negatives.

Governors have a difficult road to walk and need all of the powers (both formal and informal) that they can
gather in order to accomplish all that must be done to keep the state moving forward. While the bureaucracies
have become large lumbering monsters, they serve the purpose of instituting and enforcing the state
mandates and taking care of day-to-day business. No matter the level of government or the office, there will
always be challenges. The key to overcoming these challenges is remaining accountable and retaining the
spirit of cooperation for the greater good.

References

Barlow, K. C. (2016, July 21). Destin tentatively oks 13.3 percent ad valorem tax increase. Northwest Florida
Daily News. http://www.nwfdailynews.com/news/20160721/destin-tentatively-oks-133-percent-ad-
valorem-tax-increase

Dye, T. R., & MacManus, S. A. (2015). Politics in states and communities (15th ed.). Pearson.

Garcia, A. D. (2019, May 27). Is a state with no income tax better or worse? Bankrate.
https://www.bankrate.com/finance/taxes/state-with-no-income-tax-better-or-worse-1.aspx

Pennsylvania Department of Revenue. (n.d.). Motor fuel tax rates.

https://www.revenue.pa.gov/Tax%20Rates/Pages/MFT%20Rates.aspx

Smith, K. B., & Greenblatt, A. (2022). Governing states and localities (8th ed.). CQ Press.
https://online.vitalsource.com/#/books/9781544388649

Sullivan, J., Davila, H. W., & Rosen, A. K. (2019, December 2). The changing dynamics of providing health
care to older veterans in the 21st century: How do we best serve those who have borne the battle?
Public Policy & Aging Report, 30(1), 3–5. https://doi.org/10.1093/ppar/prz028

Tax Foundation. (2009, February 20). How to calculate property tax liability. https://taxfoundation.org/how-
calculate-property-tax-liability-2

Wilson, P. (2022, March 11). Newsom promised to address California’s high gas costs. But the politics are
tricky. Los Angeles Times. https://www.latimes.com/california/story/2022-03-11/gas-prices-rise-
california-lawmakers-squabble-over-the-state-gas-tax

Suggested Unit Resources

In order to access the following resources, click the links below.

Review key elements of the Chapter 4 reading by viewing the Chapter 4 PowerPoint Presentation. You may
also access this presentation in printable form by accessing the Chapter 4 PowerPoint PDF.

Review key elements of the Chapter 10 reading by viewing the Chapter 10 PowerPoint Presentation. You
may also access this presentation in printable form by accessing the Chapter 10 PowerPoint PDF.

Learning Activities (Nongraded)

Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit
them. If you have questions, contact your instructor for further guidance and information.

POL 2302, American State and Local Politics 4

 UNIT x STUDY GUIDE
Title
Check your understanding of the required unit
resources for this unit by working through this
nongraded activity. There are 20 multiple choice
questions.

Unit VII Knowledge Check

Unit VII Knowledge Check PDF

POL 2302, American State and Local Politics 5