Question

Explain about the concept of current service baseline and why it is useful in economics

Answer 1

An existing service baseline is a Budget phase fact test. This shows what the state will have to spend on a specific program, such as disadvantaged children's education, property tax cuts for senior citizens, or business growth aid, to sustain the system at its current pace, in the absence of any policy changes. It represents the influence of factors that cause year-to-year fluctuations in the cost of delivering a given service and the number of people using it, such as inflation, rising wage rates, population growth , and economic and demographic shifts, as well as implemented policy changes that have yet to take effect.

An existing service baseline  purposely removes the effect of potential policy changes, such as increases in support for the per-pupil school or Medicaid coverage. This strategy helps lawmakers and the public to equate the baseline to a planned or adopted budget plan and see whether the budget represents either a cut in expenditure or an rise in expenditure. Such clarification is particularly necessary at times when states struggle to maintain a balance between revenues and rates of expenditure, as they are likely to do for at least the next few years.

Present baselines of programs are important for budget transparency and accountability, as they allow the public to see what the budget really does and then keep their elected officials responsible for those adjustments. But unlike the federal government, which since the mid-1970s has provided statistics on the expense of providing public programs as part of the President's annual budget plan, most states do not observe this procedure. This report describes how a current baseline of services enhances the process of state budgeting, summarizes existing practices of states in this field, and proposes ways that statements could construct them without existing baselines of services.