Question

For the city of Vallejo, CA Analyze the impact of the issues contributing to the municipality’s budget deficiencies.

Answer 1

Following are the impacts of the issues contributing to the municipality’s budget deficiencies for the city of Vallejo-

1. 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.

2. 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.

3. 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.