Following are the impacts of the issues contributing to the
municipality’s budget deficiencies for the city of Vallejo-
- Borrowings- There has been an increase in the borrowings due to
the budget deficiency. For the state to function properly it needs
appropriate amount of money and for that, it has to be borrowing
from the other states or from the central government.
- Interests- Due to the increased borrowings, the interest
payments have to be made also. This further makes the government in
the deficit and traps into the vicious circle. This is what had
happened. Due to the shortage of funds, the municipality had to
borrow money and is now making interest payments on that too.
- Taxes- The tax rates have been increased due to this. Taxes are
the major source of Income for the government,. Now that there is a
budget deficit, the government had to increase the taxes collected
from the citizens of the country. Taxes hikes include municipality
tax, income tax and service tax etc. This in turns create problems
for the citizens also and overall impact the economic development
of the country.