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Rainy day funds (or budget stabilization funds) are the most common method of minimizing the negative impact of short-term periods of fiscal stress and cyclical deficits. Although Arkansas is one of few states without a rainy day fund, it does have a unique revenue stabilization policy that responds to revenue fluctuations with prioritized fund distributions. This article examines how the state reacts to revenue fluctuations through budget allocation and distributions. The most important, mission-defined functions within an agency (making up approximately 90 percent of the budget) are the most protected during economic downturns. Approximately 10 percent of the budget is allocated to lower-priority categories, in effect giving the state a 10 percent contingency plan, which is twice the 5 percent rule of thumb for rainy day funds. Therefore, the Arkansas Revenue Stabilization Act is used to minimize the programmatic impact caused by a decline in revenue, which limits the impact on current services provided by the state. Adapted from the source document.

AbstractPunctuated equilibrium theory (PET) is an agenda‐based theory that offers a theoretical
foundation for large budget shifts. PET emphasizes that the static, incremental nature of agendas is
occasionally interrupted by punctuations. These punctuations indicate shifts in priority among the agenda items,
and with those agenda shifts come trade‐offs. This article expands the discussion of punctuated budgets
to the level of local government by determining that local government expenditures have the characteristics
espoused by the punctuated equilibrium theory. The article also determines the frequency of punctuations and the
probability for future punctuations. The findings show that some budget functions and policy types are more
prone to punctuations and, therefore, have a less stable agenda. The practical significance of extending PET to
local government budgeting is the implication on planning, forecasting, and the agenda‐setting process.
© 2003 by the Association for Public Policy Analysis and Management.

The consequences of revenue shortfalls for cities are particularly dramatic due to the balanced‐budget requirement. Revenue diversification is one method of stabilizing revenue streams because diversified revenue structures can mitigate the revenue fluctuations often associated with single source revenue. Using audited financial reports, this study examines the impact of revenue diversification in Arkansas cities over 10 years. To address the issue of revenue adequacy, this study examines diversification's impact on current year budget changes in revenue and expenditures as well as its impact on tax effort.

List of figures -- List of tables -- Editor biographies -- Contributor biographies -- Acknowledgements -- Chapter 1: teaching public budgeting and finance / Bruce D. McDonald, III and Meagan M. Jordan -- Chapter 2: public budgeting and finance in context / Meagan M. Jordan and Merl Hackbart -- Chapter 3: revenue / Justin M. Ross and Denvil R. Duncan -- Chapter 4: public budgeting mechanics -- Katherine G. Willoughby and Colt Jensen -- Chapter 5: capital budgeting and debt financing / W. Bartley Hildreth -- Chapter 6: financial management / Craig L. Johnson and Yulianti Abbas -- Chapter 7: auditing and internal controls / Carl J.Gabrini -- Chapter 8: financial condition analysis / Craig S. Maher -- Chapter 9: pensions / Kenneth A. Kriz -- Chapter 10: nonprofit budgeting and financial management / Carol Ebdon -- Chapter 11: incorporating social equity / Bruce D. McDonald, III and Sean McCandless -- Chapter 12: case studies and service learning in public budgeting and finance / Meagan M. Jordan and Bruce D. McDonald III.

Most governments issue annual financial reports; in the US, state and local governments issue the Comprehensive Annual Financial Report, or its equivalent. However, these reports have been found to be neither readily accessible nor particularly informative to non-financial experts such as the general public. In response, professional associations such as AGA, the Governmental Accounting Standards Board (GASB), and the Government Financial Officers Association, have promoted the use of different types of popular financial reports as an alternative reporting mechanism. According to GASB, financial reporting plays a critical role as a tool for public accountability in a democratic society. Yet, various statistics point to citizens' general distrust of and dissatisfaction with financial reporting and the information provided by their governments. Surveys conducted by AGA have found that the majority of citizens believe that government needs to be responsible for providing financial and accounting information, but that government, at all levels, have failed to be transparent.

For a variety of reasons, performance budgeting has gained new life in the 1990s. Initially introduced in the 1950s by the Hoover Commission and others, performance budgeting efforts, in the 1990s, go beyond the workload productivity and efficiency focus of earlier phases and place greater emphasis on outcomes and accountability. This study reports on a survey of state executive‐branch budget officers designed to determine the current status of state performance budgeting efforts including performance budgeting processes used by the states, their perceived impacts on budget decision making, and their probable future use. In addition, the study assessed the emerging role of performance funding as a further extension of performance budgeting processes. The linking of performance to the allocation or distribution of appropriated funds may be emerging as the next iteration of performance budgeting in the states. In addition to reporting on the survey, relationships between performance budgeting and various aspects of state budgeting practices are analyzed through crosstabulations, and regression analysis is employed to examine the states' organization, fiscal, and political capacity to implement performance budgeting and funding.

This study focuses on the accessibility of Management's Discussion and Analysis (MD&A), a key part of the GASB 34 financial reporting framework. We analyze MD&As extracted from Comprehensive Annual Financial Reports issued by the 50 state governments to answer the question: How accessible is the MD&A to citizen users of government financial reports? Using three dimensions of accessibility—size, readability, and timeliness—our results point to the inadequacy of MD&As in providing information to citizens about government's finances and financial condition. Our results make the case that existing financial reporting is neither transparent nor user‐friendly for citizens.

A negative revenue variance (also known as a revenue shortfall) is generated when the actual inflow of revenue falls short of the budgeted revenue. In an environment constrained by a balanced budget requirement, a negative revenue variance may result in a compensating cut in program expenditures. As such, it is imperative to explore the drivers of negative revenue variance. To answer these questions, we take a look at the states' revenue mix, specifically, the diversification and elasticity of a state's revenue structure. We establish a quantitative model to capture factors that affect the occurrence and magnitude of negative revenue variance. Our findings suggest that revenue diversification reduces both the occurrence and the size of a negative revenue variance. Elasticity, on the contrary, increases the occurrence but reduces the magnitude of the negative revenue variance. These findings provide additional evidence for the importance of fiscal planning and design of revenue structure that includes consideration of both diversification and elasticity of the revenue portfolio. Specifically, elasticity and diversification can be used in tandem to address an existing revenue shortfall.

The article presents a study that investigates the views of citizens on the efficiency of financial reports in the U.S. Researchers did a survey to discern the perspectives of respondents about the effectiveness of the said reports in informing other individuals about government finances. Moreover, results reveal that 80% of respondents believed that the reports are effective. [Associates Programs Source, EbscoHost database]