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Municipal Budgeting Analysis

Municipal Budgeting Analysis Free Financial Essay Sample

It is becoming increasingly difficult to ignore the fact that budgeting is always a challenging task regardless the level of funding and objectives outlined for the following year. Shortage of funds, changes in policy-making, and other unnoticeable factors cause an extra need for budgetary expenses, so that responsible bodies encounter dilemmas concerning taking an appropriate course of action. At this point, consideration of various scenarios and models for sustaining a critical situation is much desired, but factors that determine the appropriateness of these solutions are often unknown. However, minor changes to budgetary expenses are not a reason for the implementation of considerable changes, and an adequate update may be sufficient. Thus, minor challenges with budgetary expenses should be not recognized as a strong need for deployment of new policy-making and related decisions, but can be useful for more sophisticated challenges with budgets.

To be more specific, the following paper provides an account of Cumberland county budgetary program devoted to the advancement of the county's social welfare, as it is particularly focused on the establishment of improved health, safety, and citizenship within the area. The initial estimates for the budget report about a shortage of funds devoted to expenses on employment, workforce, and staffing, so that the overall amount of funds has to be increased by 3%. In consequence, the county manager has taken a decision to oblige local organizations to increase workforce charges by 1%, since these extra earnings will cover new expenses (Edge et al., 2016). The change is not drastic for the communities and for the budget as such, but the tendency can be positioned at different angles. That is why the following paper focuses on the analysis of this decision and provision of alternative approaches to the problem. Additionally, estimates and projections for a more global scale are presented.

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The Problem

Concerning the problem of the budgeting program, a lack of funds for employee and staffing expenses must be indicated. The county manager was forced to reconsider these expenditures, once existing budget funds do not suggest the same resources in comparison with estimated revenues and earnings. The cause of this problem can be explained by a number of factors such as external economic fluctuations, shifts in taxation, and initial inadequacy of monetary policy-making (Klukowski, 2010). All employed citizens of the county will be affected by a decrease of salaries approximately on 1% regardless provision of any insurance policies and organizational advocacies in this regard (Edge et al., 2016). At any rate, it was a final decision of the county manager, and it seems to be the most reasonable response (Edge et al., 2016). As a result, the devotion of larger expenses to all employed population is required, and the county manager has come to a conclusion that charging all employees with extra 1% from their wages will be a fair decision, once these extra funds will be devoted to servicing of the employed populations. In such a way, the county will be able to sustain its budget and performance of all agencies without major disruptions, even though at the expense of local employees (Edge et al., 2016).

Nonetheless, all employed populations are affected, and such decision may recognize as inadequate from the perspective of employee advocacy and basic civil rights, which is why such an outcome should be approved or at least supported with local communities. A close communication of governmental organs with communities is pivotal, especially in regards to such actions. However, the community seems to accept the decision, and the revised budgetary allocations have been adopted. As a matter of fact, this problem is not significant, but persistent for Cumberland County, so it has to be managed in the forthcoming future (Klukowski, 2010). The emergence of such issues is a common practice, and these problems occur on a regular basis, which is why a complex and systematized response must be ready for each specific deviation from the initial budget allocations (Klukowski, 2010). Otherwise, a further increase of expenses and related socio-economic complications are possible: inflation and decreased employment directly impact the primary objectives of the budgeting program such as safety, health, and improved citizenship of the county's populations. This perspective sheds the light on an ultimate significance of the problem, which is why its addressing and provision of alternative courses of action are critical to the aforementioned situation.

Current Objectives and Evaluation Criteria

One of the main goals of Cumberland county budget program was ensuring safe and healthy community throughout the provision of needed services to the county's citizens in a timely manner. To be more specific, the goal includes a number of objectives as follows:

  • Objective 1. Provision of youth development program to create and promote opportunities for positive citizenship. Education, cultural development, recreation, sports, and other intelligent spheres must be developed in order to foster good and adequate attitudes of youth to their attitudes towards community (Edge et al., 2016).
  • Objective 2. Assistance in the reduction of crimes, especially by individuals previously imprisoned for committing a crime. This aspect renders both safeties as well as welfare perspectives, as a reduction of crime rate means lower incidence of crime and advanced well-being of former prisoners (Edge et al., 2016).
  • Objective 3. Enhancement of emergency services. This consideration is of paramount importance, and it should be improved on a regular basis.
  • Objective 4. Foster a healthy community via the establishment of educational, health, and human services available for diverse populations of the county (Edge et al., 2016). This objective is also a regular aim for the municipal social welfare program, and hence it should be not neglected.
  • Objective 5. Cooperation with partners of the community in order to address the problems related to homelessness. This issue is often ignored by local governments, so its adequate approaching is much needed because the county's communities bear a formal as well as informal responsibility for homelessness in the area (Edge et al., 2016).

Concerning evaluation criteria, conventional frameworks can be applied:

  • Analytic validity of each objective. Understanding whether the problem is adequately approached directly affects the allocation of budget funds, as long as each activity must spend a minimum of costs and bring the most expected outcomes (Bhatia & Werham, 2009). Such a strategy is not always possible, which is why indicating of a well-balanced margin is mandatory.
  • Issue relevance. It is imperative to measure a general relevance of the suggested goals to real and objective issues within the county, and estimate required expenses and expected outcomes (Bhatia & Werham, 2009).
  • Public involvement. These criteria touch upon public positive as well as negative involvement in attaining of the aforementioned objectives. Provided that a certain objective does not receive sufficient public engagement, its scope should be reconsidered, as it is likely not to correspond the public expectations (Bhatia & Werham, 2009).
  • Impacts on decision-making practices. It is becoming increasingly apparent that individual objectives may trigger decision-making that is not congruent with other objectives, so that it is critical to find alternatives or incentives for a complex attainability of all objectives (Bhatia & Werham, 2009).

Current Activities and Agencies Involved

Concerning involved stakeholders of the issue, the county manager should be noted first of all. The decision regarding updates in the budget of the county has been taken by this party, so that the county manager is expected to initiate all relevant activities aimed at the adjustment of the budgetary performances to new expenses and charges. The other party is other regulatory agencies and organizations, which can lead the related policy-making and monitor its fair enacting (Laubach, 2009). In addition, private industries are particularly involved in this process, since the county governments implement policies for an increased charge of the workforce. Beyond a doubt, communities themselves are also expected to participate and monitor all mentioned processes in order to guarantee fair and valid resolving of the issue (NAIR, 2014). It is no surprise that the county manager must take a responsibility for the final adoption of the budget updates because he/she is cognizant of all implications and available funding resources. At the same time, governmental agencies are supposed to supplement this decision and provide adequate policy conditions for a smooth transition of the update to the practice (Laubach, 2009). As it has been already mentioned, a number of policy changes are expected. Private industries, in turn, are required to enact appropriate internal policies at the organizations and companies, and provide reporting framework for potential leverage of employee payouts (NAIR, 2014). Eventually, local communities are better to be focused on active monitoring and advocacy of their rights in this difficult situation or propose alternative ways of sustaining the county's budget.

The suggested projections on the budget update report about the increase of employee-related expenses on 3% for the budget, and respective increase in workforce charges on 1%. The latter increase will be recognized as a contribution of workers to the sustainability of funding of the related services, procedures, and agencies. As a result, these changes will leverage the county's budget to a normal state and marginal norm of the estimated revenue. This will enable the county to implement all solutions regarding the aforementioned objectives at the expense of community effort, private industry involvement, and governmental response management (Laubach, 2009). These changes are not drastic and hardly threatening in a short run, but a long run budget debt may be associated with risks for employment, infrastructure funding, and general welfare of the communities within the county.

Other Significant Factors

It is becoming increasingly difficult to ignore the fact that the issue with increased expenses on employees and related services can be justified with a number of external economic factors. In such a way, federal funding allocates resources according to a specific pattern, which is influenced by an overall outcome of the economic situation in the country. On a large scale, these pre-existing distributions can be justified with a debt-to-GDP ratio (Laubach, 2009). This means the allocation of funds according to the balance between potential debts of each state and their contributions to the general economic foundation. Thus, the state of North Carolina might have demonstrated certain hardships with the provision of sufficient contributions to a general economic development. Needless to say, such economic model is not always fair to individual states, so states are enabled to adjust to these changes with their independent policy making. To return to the subject of the budget shortages, it can be also explained with static revenue earnings for each year (Laubach, 2009). The matter is that a static revenue for a long horizon period leads to depreciation of sources of funding, as they must progress according to the external margins dependent upon the federal estimates for each industry or particular area.

The other important consideration is equity earnings of local private industries. Once they are tax-deductible, it is possible to consider redirection of these payments to coverage of local budget shortages instead of transitioning to the federal level (Laubach, 2009). It is no surprise that the county's and probably state monetary policy will require drastic amendments, so that initial idea may be not worth a further policy redesign (Laubach, 2009). Likewise, earnings from mortgages, real estate, and other non-current capitalizations are tax deductible in case they generate earnings higher than the settled margin. All these solutions, however, are possible in the event of such earnings, which is why Cumberland county needs to rely on some other sources, as well (Laubach, 2009). These sources are largely determined with the nature of horizon activities, as long as long-run static performance is reported to be susceptible to treasury yields and changes in the monetary policies (Furlong & Bakker, 2010). Actually, this approach can be used for sustaining the county's budget, as it has been explained above. At any rate, Cumberland county needs to initiate at least temporary policy change, otherwise, the budget risks to appear in economic jeopardy comprised with requirements of local and state policies (Furlong & Bakker, 2010). These factors are not primary, but their consideration is pivotal for long-term planning of the county's budget.

Alternatives

The county may also refer to alternative strategies and policy amendments, and it is quite reasonable to rely on the support of local businesses. Initiation of various incentives for private industry is the first step towards engagement with business entities. To be more specific, local organizations can take a responsibility for covering lacking funds in the county's budget or assist the government in fulfillment of the outlined goals (Furlong & Bakker, 2010). In turn, the governments may provide favorable environments for business performance or even issue at least minor tax deductions for business participants. At the same time, delegating specific response groups to governmental and organizational work sites can be effective, once the exchange of expertise and views on the development of a local community is the top priority for the program (Furlong & Bakker, 2010). These procedures can be initiated throughout a framework of the county' sustainability, which is comprised with the social, economic, and environmental well-being of Cumberland County (Furlong & Bakker, 2010). This alternative is suggested with an implication on major changes to local policies, which is why this model is not a temporary response but a permanent framework for governmental regulation of the business and budget contingency planning in the county.

The other effective but more radical alternative is an adjustment of local business policies with municipal objectives. This model can also offer various incentives for business entities, but within a limited area of interest. In other words, each industry is required to support a specific area of the county's well-being and receive a set of distinct incentives for a particular period or segment of business as well as municipal performance (Furlong & Bakker, 2010). This approach requires a well-managed division of responsibilities and adequate measurement of capacity for each organization and related sector of responsibility. At the same time, it is essential to consider external factors and reporting to the state and federal governments. It is becoming abundantly clear that both suggested strategies are alternatives to particularly exceptional situations, when the initial decision-making does not fulfill expectations of the stakeholders (Furlong & Bakker, 2010). They can be also deployed as permanent frameworks, but their prolonged effects are more complex, which is why numerous amendments to local policies are unavoidable. These solutions may be not coherent with external economic realities of the entire country, so the primary methods of response are more credible, in spite of the fact that they expose populations to minor hardships.

Recommendations

In fact, the decision taken by the county manager is quite appropriate in this situation, which is why there should be a little amount of scrutiny, as long as other drastic changes may lead to many-uncontrolled consequences, meanwhile a minor increase of expenses can be managed in a short run (Reese & Ye, 2011). It is hard to deny the fact that such issues stem from much-complicated problems, but at the level of a county, it was one of the most reasonable decisions. At the same time, a global scale of this problem suggests that major changes can be adopted. Provision of incentives for local business in order to sustain support and coverage of budgetary shortages can work for a single county, but its connection to state and federal organs means that they are also expected to recognize such an approach and devote a single regulatory body to monitor all processes outlined with new policies (Reese & Ye, 2011). Henceforth, the county budgeting mechanism as well as related policy making require a wide range of updates and alignments. In the same vein, focus on additional and alternative sources of funding is also an obvious alternative, and in the context of the current case, it does not require exceptional changes to the policies of the county, once these changes can be temporary and bring a timely impact (Reese & Ye, 2011). Although, the models described in the previous section can be adopted for a regular use, but they are likely to encounter much stronger challenges. Generally speaking, the county manager may take into account all the recommendations and make minor adjustments in each dimension. Still, this course of action will require a distinct framework, so feasibility and efficacy of these generic solutions must be measured or estimated prior to taking a practical action.

The rationale for these recommendations is based on the general fairness and pre-existing sustainability of the county, and implementation of these solutions will implicitly lead to improvement of social and civil welfare in one way or another. In addition, these models are likely to create more convenient conditions for business performance, as long as strong communal ties positively reflect on the financial and organizational performance of companies. All these suggestions are relatively credible, as the initial decision regarding the increase of budget expenses is the most appropriate outcome in this respect (Reese & Ye, 2011). The aforementioned recommendations are better practiced in case of adverse complications or relevant external changes in economic and political domains of the entire country.

Conclusion

It is appropriate to make a general comment on the fact that such situations occur on a regular basis, and addressing of them depends heavily not only on the existing socio-economic circumstances but also managerial skills of local governments. In the case reviewed within this paper, the county manager has taken an adequate decision, even though a number of stakeholders are affected. The extent of these effects, however, is minor, which is why the county manager estimated a long-term effect to weaken. The paper has introduced several alternative factors and related solutions to the problem, but they can be justified for more complex and prolonged shortages of the budget. Also, these solutions presuppose sophisticated policy amendments and implementation of new regulations, which are not perfectly congruent with state and federal monitoring frameworks. Therefore, these solutions are suggested as supplementary models or contingency plans for long-term outcomes.

All in all, such disruptions in the county's welfare program are not likely to thwart the government from the fulfilment of the objectives concerning advanced safety, health, and citizenship within the county. Shortage of budget can be explained by multiple external influences, so a minor change is not strong in the context of a single budget. It is more important to trace a trend in the context of several years and projections for the future, as long as static nature of budgetary revenues and associated expenses can change their value from year to year under influence of various impacts and updates to monetary policies. Cumberland county encounters a typical situation, which is why a considerable change of funding approaches is riskier than a 1% increase in employee and staffing expenses. Finally, it is worth saying that the county needs to trace its economic performance and transparency of public ties among private industries in order to distinguish potential causes of the budget shortage.

References

Bhatia, R., & Wernham, A. (2009). Integrating human health into environmental impact assessment: an unrealized opportunity for environmental health and justice. Ciencia & Saude Coletiva, 14 (4), 1159 - 1175.

Edge, K.S. et al. (2016). Adopted budget: The fiscal year 2016. Retrieved from //www.co.cumberland.nc.us/finance/FY2016/adopted/FY2016_Adopted_Budget.pdf

Furlong, K., & Bakker, K. (2010). The contradictions in 'alternative'service delivery: governance, business models, and sustainability in the municipal water supply. Environment and Planning C: Government and Policy, 28(2), 349 - 368.

Klukowski, L. (2010). Optimization of Public Debt Management in the Case of Stochastic Budgetary Constraints. Multiple Criteria Decision Making/University of Economics in Katowice, 5, 135-147.

Laubach, T. (2009). New evidence on the interest rate effects of budget deficits and debt. Journal of the European Economic Association, 7(4), 858 - 885.

NAIR, I. (2014). Challenges of Rural Development and Opportunities for Providing Sustainable Livelihood. International Journal of Research in Applied, Natural and Social Sciences, 2321-8851.

Reese, L. A., & Ye, M. (2011). Policy versus place luck: Achieving local economic prosperity. Economic Development Quarterly, 25 (3), 221 - 236.

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