The board of education follows two simple rules when creating the budget: tax revenue within a cap and revenue balance. Which option correctly states the two rules described?

• A. Tax revenue must be within a 2% cap; Revenue must equal expenses
• B. Local taxes must be capped; Grants must cover all expenditures
• C. The superintendent approves everything; Principals set budget line items
• D. State aid is always the sole funding source; Expenditures must be reduced

Answer: (A)

Budgets in many school systems are guided by two constraints: keep tax revenue under a cap and ensure revenues balance with expenditures. Limiting tax revenue to a cap prevents large jumps in taxes for residents, while a revenue balance means the total income available covers all costs without deficits. The option that states tax revenue must be within a 2% cap and revenue must equal expenses directly reflects these two rules, using the cap as an example and emphasizing that revenues should align with expenditures. The other choices describe governance steps or funding assumptions that don’t capture the required balance between what can be raised in taxes and what is spent.