Term Paper on "Tax Revenue Analysis"

Term Paper 10 pages (3540 words) Sources: 10

[EXCERPT] . . . .

Tax Revenue Analysis for the State of Pennsylvania and New York

Pennsylvania also known as the keystone state is one of the four commonwealth states in the United States. It earned the title of commonwealth due to its organization by the commonwealth consent of its citizens during the colonial period. The commonwealth of Pennsylvania offers a wide range of services to enhance the quality of life to its 12.6 million people. The commonwealth divides these services into seven broad program categories consisting of supportive and directive services, health and human services, protection of persons and property, economic development, public education, recreation, cultural enrichment and transportation. This approach enables the state of Pennsylvania to serve its citizens well.

The commonwealth of Pennsylvania apart from the defined primary state government is also account table for a number of legally separate component unit organizations. The main component units in Pennsylvania include, the Pennsylvania housing finance agency, Pennsylvania turnpike commission, the Pennsylvania higher education assistance agency, the state system of higher education and the Pennsylvania infrastructure investment authority. Even though commonwealth does not operate or control these component unit organizations it is still accountable for them and so includes them in the financial reporting and reports them separately within its government wide financial statements.

Pennsylvania government has three unique branches: the judicial branch, the legislative branch and the executive branch. The legislative branch is made up of senate and House of Representatives it develops and passes the laws. The judicial branch which is made of the supreme court and other courts which interprets the law and the executive which comprises of the elected governor, attorney general, state treasurer, auditor general and other appointed bodies.

How the annual financial report for the state of Pennsylvania is derived

The general fund, which is commonwealth's largest operating fund, is used to assess Pennsylvania's financial report and the activities of the financial year ended june30, 2010.it accounts for all the revenues and other receipts that are not needed by law to be accounted for or deposited in other special funds and reflects a significant expenditure of commonwealth. Personal and corporate income, tax revenues and sales and use taxes.

The economic condition of Pennsylvania

The worst economic recession since the great depression continues to adversely affect the national economy and Pennsylvania economic growth correlates directly to the national economy. Even though the effects of the economy may have affected the June 2009, the economy may not have rebounded as fast as expected. The national unemployment rate is still high at 10%. Pennsylvania economic performance depends on job growth whilst job losses were lower than the national average, all the sectors with the exception of education, health services and government experienced job loss. Increased unemployment will negatively affect projected revenue from the personal income tax. Consumer spending also remains weak given tight credit, high debt levels and depleted consumer wealth.

The general wide statement at a glance

Net assets-Government activities net assets totaled to $23.5 billion dollars at June 30, 2010 compared to $23 at June 30, 2009.this represents an increase of $0.3 billion. For business type, activities the overall net assets were negative $1.2 billion at June 30, 2010 a decrease of $1.8 billion compared to $0.6 billion at June 30, 2009.when combined the total net assets for government activities and business type activities decreased by $1.5 billion for the primary government during the financial fiscal year ended June 2010.

General obligation bonds-during the fiscal year, total general obligation bond indebtedness increased by $1.4 from $9.1 billion to $10.5 billion.

Fund statements at a glance

Government funds-total fund balances were $6.351 billion at June 30, 2010 compared to $6.089 at June 2009.

General fund-fund balance was $284.8 million at June 30, 2010 compared to $515.2 million at June 30, 2009.

Overview and discussion of financial statements

The financial section of Pennsylvania consists of a number of parts, the independent auditors report, managements discussions analysis, required supplementary information, basic financial statements, combining financial statements and statistical section. The basic financial statements have two sets of statements that present different views of the commonwealth the fund financial statements and the government wide financial statements.

Government wide financial statements

Government wide financial statements show commonwealths overall financial position that is statement of assets as at June 30,2010 and its aggregate revenues and expenses for the fiscal year ended June 30, 2010.the statement for net assets presents the assets, liabilities and net assets for the commonwealth as a whole. The statement for activities presents by program or function, offsetting revenues, the expenses and changes in net assets. Both statements highlight amounts by business type activities, government activities and component units.

The government wide financial statements are prepared using the flow of economic resources measurement focus and accrual basis of accounting.

Fund financial statements-governmental funds

Funds are groups of related accounts that are used to maintain control over resources that have been set aside for some specific objectives and activities. The commonwealth uses funds accounting to show compliance with finance related legal requirements. The commonwealth funds are categorized as proprietary funds, government funds and fiduciary funds.

The main differences between government wide statements and fund financial statements

While government wide statements focus on the government as whole fund financial statements disclose more detailed fund specific information for major government and proprietary funds.

Unlike the aggregated columns for government and business type activities in government wide statements, the fund statements report individual funds, which are established by state law and used to account for specific mandated activities.

The government wide statements use full accrual basis of accounting. In the fund statements, governmental funds use the modified accrual basis of accounting and current financial resources measurement focus.

Changes in assets and liabilities

During the fiscal year ended June 30,2010 total government activities and investment increased by $339.8 million even after deducting a year over year decrease in securities lending collateral holdings of over $230 million. The present fiscal years cash and investment increase is because of $4.1 billion decrease during the first year. The net capital assets increase of nearly $1.9 billion follows a $1.6 billion in the prior fiscal year. The current year increase in capital assets net of close to $1.9 billion consists of; an expansion of and improvements to commonwealth's reported high way and bridge infrastructure assets during the fiscal year ended June 30, 2010,an increase in buildings and increases in other depreciable general capital assets. Governmental activities accounts payable and accrued liabilities balances decreased by $0.1 billion due to lower reported accounts payable balances with the general fund.

Overall changes in net assets

During the year ended June 30, 2010 the overall financial position of the commonwealth including both governmental and business type activities decrease by $1.5 billion. The current fiscal year increase in governmental activities net assets represents a $2.4 billion increase from the prior fiscal years decrease of $2.1 billion. The current fiscal year of increase in governmental activities net, assets represents an improvement in the commonwealth overall financial position when compared to the prior fiscal year ended June 30, 2009.

Changes in revenues and expenses for governmental activities

The following chart provides a year-over-year comparison of governmental activities revenues and transfers:

For governmental activities, general revenues and taxes increased by over $588 million net during the fiscal year largely as a result of increases in reported general fund tax revenues, and increase in motor license fund tax revenues and an increase in gaming tax revenues.

Tax revenue decreases were reported for general fund personal income ($139) sales and use ($102) and corporation ($63 million) all of these decrease resulted from declines in overall economic activity during the fiscal year ended June 30, 2010 in comparison to the prior fiscal year.

The following chart provides a year-over-year comparison of governmental activities expenses:

For government activities, total expenses increased $3.4 billion largely due to significant increases in expenses for human services and health, transportation, direction and supportive and public education.

The following chart presents governmental activities revenues compared to expenses for the fiscal year ended June 30, 2010:

Changes in revenues and expenses for business type activities

During the current fiscal year, total business type activities expenses exceeded total revenues by $1.6 billion in the prior fiscal year total expenses were $2.2 billion higher than revenues.

Overall, expenses for business type activities increased by $5.3 billion based on increased expenses of $5.3 billion for the extended benefits in the unemployment compensation program, offsets by miscellaneous increases or decreases among the other business type activities expenses during the current fiscal year.

General fund economic factors during the fiscal year ended June 30, 2010

The continuing effects of the national economic recession again negatively affected the commonwealth economy during fiscal year 2010.while avoiding the contractions in the national economy from the prior fiscal year, the commonwealth experienced only minimal economic growth in fiscal year 2010.high unemployment levels and turbulent financial markets negatively affected the commonwealth revenues and receipts.

General fund

The general fund,… READ MORE

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