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Positive and Negative Externalities

Week 2 Discussion 2

Instructor wrote:

Budget decisions will typically have more than one impact.  For example, if you select spend funds on a police car, you’ll gain a police car, but this will take away funds from some other project, personnel expense, or piece of equipment.  Negative externalities are included in such impacts.  This is why careful planning is needed in all decision packages.  Auburn University explains it a bit further here:  http://bit.ly/1w9eBpk.

Whose input would be helpful to budgets, law enforcement in order to avoid some of these negative externalities as in the case of Madison Wisconsin? and where would they get the excess funds for the downfall

In the city of Madison, Wisconsin found that out. The year 2005 they had over expended their “operating budget by about one million dollars” (Stuart, n.d., p.1). This was explained as routine by the mayor’s spokes person. There are those agencies that have to abide and live within an amount approved by the controlling authority. A sound budget preparation would be necessary

Local government or budget staff. Interest groups can help build support for a budget request. Surveys, the public can also help. . Budget limits are usually et by the mayor, and or finance director, or even the governor,

In any given case of externality, society may well be better off by simply leaving the externality in place, unless the third-party effects of the externality are truly massive

A negative externality (likewise called “outside expense”), and is a monetary action that forces a negative impact on an irrelevant outsider. It can emerge either amid the creation or the utilization of a decent or administration. According to Terri Genin Finance Manager  (2015) “ It is the police department that has the largest City budget, In addition to management of payroll and purchasing, the Finance Section develops the annual budget.

A budget decision is normally a key factor when it comes to making a budget which will be most effective. In budget decision there is budget planning which assists the government on controlling its expenditures. When it comes to “gaining approval with their budget, either there is a lack of sufficient justification, explanation for items in the approved budget” (Stuart, n.d).

Not all items (or their expenses) can be anticipated into a financial plan. Take as examples, extra minutes, fuel, lawful charges, and payouts for resigned or resigned staff. The quantity and cost of these type items must be anticipated as close as possible to derive a realistic projection. A decent starting point  is former years budget. However, this alone is normally not sufficient. Thought needs to be given to what circumstances are a huge increase in salary for work force is going to imply that your extra time plan must be expanded by a comparable amount. This will make sufficient funding for an equivalent number of extra time hours. More precisely, government policy-makers need to devote their attention to the problem of lowering total transaction costs, rather than simply focussing on “fixing” this or that externality problem regardless of costs, if their intention is to maximize social welfare.

The government in most cases usually majors on law enforcement which is important when setting a good budget strategy which is affected by the laws made by the government.


The constitution is part of the inputs which are implemented by the government which place great effect when it comes to budget decision making. It clearly states of the financial relations between countries and other financial markets. Constitution also states that various funds which are allocated for specific jobs are supposed to be deposited to specific accounts. This will ensure that there will be no other project which will be left out without funds. There is also the organic law which is determined to usually guide on the matters pertaining the budget decisions (Khan, 2002). These include the preparation and approval of the budget.

  There are also the financial regulations which are usually implemented in the case of budget decisions. The government or other authority bodies are mostly issued with the power to issue in details the regulations and the rules inclusive in budget making. This usually gives out the expenditure estimates and the revenue income. It will be of great assistance when it comes to matters of allocating funds. This will help to avoid most of the externalities involved with budget decision.

hen preparing budget requests, administrators have to estimate expenditures 18 to 24 months in advance. Because of this need for estimations, agencies commonly experience unanticipated shortfalls in various areas of the budget. Usually, when shortfalls happen, surpluses in other areas are used to cover the expenditures. When fuel prices increased during the past year, most agencies were able to adjust their operations to accommodate the shortfalls. Now, however, agencies are forecasting continued increases in operational costs. With a limited amount of funds available, leaders are being forced to seek alternative ways to cover these costs. order to fund increased expenditures, one solution is for governing authorities to find additional sources of revenue. Increasing the cost of government operations in the form of fees and property taxes is seldom popular. These increases usually have the most impact on those who are the least able to afford them, the poor and those on fixed incomes. Still, it is important for agencies to explore innovative funding sources. Earlier this year, the Holly Springs, Georgia, Police Department received national attention when it implemented a fuel surcharge of $12 to every traffic citation.1 Much like adding a tax to cigarettes, this fee passes the cost of operations to those persons who are causing the problem, traffic violators. Because this fee has generated so much attention and support, many cities are starting to explore similar options. Critics, on the other hand, argue that law enforcement agencies should not be part of the revenue-generating process. Bike Patrols, and Foot patrol are two ways a officer wouln’


Khan, A. (2002). Budget theory in the public sector . Westport, Conn.: Quorum Books.

Gain, T. (2015). Finance – Administration – Police Department – City of … Retrieved from https://www.cityofmadison.com/police/support/finance.cfm

Stuart, R. D. (n.d.). PDF] Budgeting Basics for Law Enforcement – Institute … Retrieved from www.icje.org/articles/BudgetingBasics.pdf

i have the instructors question in bold, i started to answer but not sure how to finish with less references thanks

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