General revenue is the income a government receives primarily from its taxing authority, and not including income from other sources, such as the sale of utility services like water or power, or from the sale of other goods, such as alcoholic beverages. Income from other sources, including the sale of real estate and other property, generally is not included in the general revenues but maintained separately, sometimes called “miscellaneous income.” Income earned from investments held by the government usually, but not always, is considered general revenue, as is the income derived from the payment of fines, unless they’ve been dedicated to some other purpose by statute. A government will typically maintain a number of different funds dedicated to specific purposes. General revenues will be deposited into a general fund out of which routine expenses are paid.
Governments generally operate as not-for-profit entities, but to be successful, they must operate efficiently, which includes properly accounting for all income and expenditures and presenting that accounting to the people served. Knowing the general revenue, as opposed to income derived from special sources and one-time transactions, is a critical component of a realistic and efficient budgeting process, because routine operations should be funded by general revenues, which are generally more predictable and reliable. That is, not only must governments realistically anticipate the costs of their operations and projects, they must also be able to predict their general revenue with a high degree of accuracy.
When considering the total revenue received by governments, though, care must be taken to account for inter-governmental transactions, so as to avoid the distortions of overlapping revenue. An example of this would be the fees paid out of its general revenues by a city to a county for fire and police protection services. To count the revenue as general revenue at both the city and county levels would distort the actual amount paid by the taxpayers, as the city acted only as a conduit for the funds to the county treasury.
When governments undertake special projects, they’ll often raise the necessary funding by selling bonds. If the project is designed to make money — for example, a public transportation facility or a toll road — the bonds will usually be paid for by the income generated by the project, and not with general revenues. Other projects, though, like schools and streetlights, aren’t money-making in nature, yet must be paid for. The bonds issued for such projects are called “general revenue bonds.”
The principal and interest charges of general revenue bonds are repaid from general revenues, and the bond’s prospectus will very clearly illustrate not only how general revenues are defined and calculated, but also how much general revenue is expected over the bond’s lifetime and what other encumbrances are on it. Like a loan application, the prospectus illustrates the bond issuer’s ability to pay the note.
Most jurisdictions include in their general revenues the income they receive from the payment of fines, including traffic fines. This is a controversial practice because it’s alleged that when they find their general revenues not meeting expectations, some cities and counties will routinely instruct their law enforcement agencies to increase their fine collection activity. This has prompted some to call for a new approach to accounting for fines received, perhaps dedicating it to a specific purpose and depositing it to a fund other than the general fund.