Public Sector Budgeting (PAD 6227) Budget Analysis Project Fall 2018

Public Sector Budgeting (PAD 6227)

Budget Analysis Project

Fall 2018

A. Assignment

Each student will analyze the budget and budgetary trends for a local government (city or county

government). The paper will be formatted as follows:

1. Overview and budget process and format 2. Expenditure and revenue trends 3. Conclusion and Recommendation

Below are the due dates for the components of the project:

1. Selection of government: October 28 (Canvas message notification to the instructor) 2. Draft of the first section (overview and budget process/format section): November 4 3. Draft of the second section (expenditure and revenue trends section): November 18 4. Final paper: December 9

The primary source of data will be the budget of the government that you are analyzing. You

may be able to get copies of these from the government. Many governments now also have

budget documents posted on their Web site. You may also want to review Census data for socio-

demographic information about the area. Finally, you might search newspaper indexes to find

information on major recent budget issues.

If you work with one or two partners, you may divide the project up in a number of different

ways. Generally, all of you will receive the same grade for the project. However, it is possible

that grades will vary if one member has not performed adequately, or if one student’s

performance is exemplary.

There is no “cookie-cutter” approach to this project. Each government is different, so the focus

of the analyses will vary somewhat. The following sections are intended to provide guidelines

for you to consider, but your paper may be quite different from this. You are expected to

organize the report in the manner best suited to the entity you are studying.

B. Overview and Budget Process/Format

The paper should be written as if you were briefing a new budget director for this government.

The new director is moving here from another part of the country, and knows very little about the

area or the budget issues. This section should first include a brief overview of the state or

locality, including factors/trends that may affect the budget (e.g., location, population, income

levels, primary types of employment, etc.)

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This section should also address the budget process and the format of the budget. You may

include the following, for example:

1. Is the budget annual or biannual? 2. What is the fiscal year? 3. Brief description of the process 4. Form of government (e.g., a city could be operated by a council-manager, mayor-

council, or commission form)

5. Elected officials (number and term of legislators, executive) 6. Do citizens appear to play any role in the budget process? 7. What budget format is used? 8. Does the executive (e.g., Mayor or Governor) have veto authority? 9. Does the budget include performance information? If so, does it appear to be

primarily related to workload/activities, or results/outcomes?

10. Does the budget include forecasts for future years, and/or data for prior years? 11. To what extent do you find the budget document to be a readable communication

tool?

12. What type of budget information, if any, is included on the government’s web site?

C. Expenditure and Revenue Trends

This section will analyze major sources of expenditures and revenues, as well as trends over

time. For trends, use the most current budget year available as well as one prior year (most

budgets will include data for at least one or two prior years; it will probably be most interesting

to use the oldest year and the most recent year for comparison). For the “older” comparison year,

you can use either actual or budgeted revenues and expenditures.

Use tables or graphs to help display key information. You should have at least one table for

expenditures and one table for revenues, using the same format as the first homework

assignment. Some jurisdictions may have a large number of departments and/or revenue sources,

so it may be helpful to aggregate some data in your tables (for example, in an expenditure table,

you could list the largest departments, then combine the other departments into an “other”

category). You may want to show the breakdown of expenditures in different ways, such as the

following example:

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Table 1

City of Somewhere

2014-2015 Expenditures

2014 Actual 2015 Budget Change

Amount % of Total Amount % of Total $ Change % Change

Expenditures

by Department

Personnel

Executive

Public Safety

Other Depts.

Total

Exp. By Fund

General

Utilities

Roads

Total

Exp. By

Category

Personnel

Equipment

Other Non-

Personnel

Capital

Total

Following are the major questions you should answer regarding expenditures:

1. What is the total expenditure budget? a. It is often helpful to relate this to something else to give the reader some

perspective – e.g., how much is this per capita (total budget divided by

population)?

2. Where does the money go? a. Which are the largest departments/activities? b. Which are the largest funds? (this will require breaking down the total budget

by fund).

3. What are the major sources of growth or decline over this period? a. If the budget has increased by $10 million over the past two years, you should

be able to explain where most of the increased expenditures have occurred

(your tables will tell you which areas have experienced the most change; the

message at the beginning of the budget, or detailed discussion within the

budget document, may help explain the reasons for the change).

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These are the general questions regarding the revenue structure and trends:

1. Where does the money come from? a. What are the primary sources of revenue? (e.g., property tax, sales tax, etc.) b. See the note above about aggregating revenue sources in the table if necessary

2. How much have total revenues changed over this period? 3. Which revenue sources have experienced the most change over this period? To the

extent possible, attempt to explain why the changes occurred.

4. For major tax sources, try to provide detail on the tax rates, and any pertinent changes in the tax base or rate over the period studied.

D. Conclusion and Recommendation

This section should draw conclusions about the overall fiscal health and future outlook for this

government, based on your analysis. Do they appear to be in good shape? Is there structural

balance between revenues and expenditures? If they are experiencing fiscal stress, how have they

responded to it (e.g., service level reductions, increased tax rates and/or user fees, etc.)? What are

the major issues facing this organization in the near future? What effects has the recession had,

and/or what difficulties might it present soon? What are the key things the new budget director

needs to know?

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E. General Notes for the Analysis

1. In your analysis, start with the numbers. Prepare the tables before you begin writing the narrative about revenue and expenditure trends. The text should follow

from the tables.

2. Look at the BIG PICTURE! Do not spend time discussing a change in a department that is only 1% of the budget.

3. Document what you say with supporting numbers. For example, do NOT say, “the budget has grown a lot,” DO say, “the budget has grown 5% over this

period.”

4. Do not force the reader to look at and interpret the tables and charts. You need to tell the reader the key points from the table. One way to do this is to pretend that

you will not be including the table in the paper, so you have to write as if it will

not be there. The tables are there only as additional information, to support your

statements and analysis.

5. Label and title your tables and charts. 6. Include totals in your tables. 7. Think about what the numbers show. Do your conclusions seem logical? If not,

verify that the data and formulas in your spreadsheets are correct.