Budget Financing

the assignment by the state in accordance with the ratified budget and on a nonreturn basis of budget capital to enterprises, organizations, and institutions to carry on and develop their work.

In the socialist countries, budget financing includes estimate financing and the financing of economically accountable enterprises and organizations.

As a rule, the state budget is used to finance investments in fixed and working capital for newly built enterprises, and additional capital is also allocated to existing enterprises where their own resources are inadequate.

When they do not have enough of their own resources, enterprises which have been switched to the new conditions of economic management also make use of credit, which is paid back later from internal resources. The construction of part of new enterprises (for example, in the USSR, enterprises whose payback period for construction expenditures is not greater than five years) is also financed through these resources and through bank credits.

Estimate financing is applied to a majority of organizations in the nonproduction sphere (schools, hospitals, and so on). Expenditures to expand their work are covered entirely from the budget, and all incomes received by these organizations (if they do not go to the formation of their special capital) are withdrawn as budget income.

Budget financing is built on the following principles: the scientifically substantiated determination of the magnitude of expenditures; the release of capital for strictly defined purposes; consideration of the degree of plan fulfillment; and the audit of the correct and efficient use of the capital. (In the budget financing of enterprises and organizations on profit-and-loss accounting, the scientifically substantiated determination of the magnitude of expenditures means determining the economic necessity and efficiency of the expenditures and disclosing all internal savings reserves; with estimate financing it means developing and employing scientifically substantiated expenditure norms.)

In the capitalist countries, budget financing is done through estimate financing and involves using budget capital to cover expenditures for subsidizing monopolies, state capital investments, and development of the infrastructure; stimulating export; and maintaining the state apparatus, armed forces, and various administrative and social-cultural establishments.