Economy of the public sector is based on welfare economy and it is used to improve citizen's life. It analyses public income, public expenditure and their impact on the level and a location of available resources, economic growth and redistribution of income and wealth. The government also has its functions with which beams available budgetary resources in an optimal way, change distribution of income which is generated on the market, impact on macroeconomic progress and development and bring new technologies for informing on the market by producers and consumers. Public sector implies general government, which includes central, regional and local government, social security funds and public companies. The size of public sector is demonstrated by participation of income and expenditure in GDP and also by number of public service employees. The budget as a government act which is brought by the Croatian parliament, displays the most important goals of government in fiscal year and it serves as an instrument of government influence on the economic state of the country. The most important incomes of government budget are taxes, contributions, aids, income of assets, while total expenditures are expenditures of business and expenditures for acquisition of assets. According to function classification of budget expenditures, expenditures are shown according to functional purpose, such as defense, public order and safety, education, social safety, health care system and so on.