Forecasting, according to Menifield (2009), is an important component of budget preparation and analysis. Using the Putnam police department (Putnam, CT) as an example, I will show how forecasting can benefit the budget process.
The Putnam police department is a small local department that relies heavily on public support. In order to forecast the economic condition that provide insight to the budgetary needs of the department, I would normally suggest using simple time-series forecast model. Due to the wavering economy over the last few years, however, I would start to consider using a multiple regression model that could take into account decreases in property taxes, real inflation, and the poor business environment for many of the small businesses that contribute a sizable portion of the tax base (Spencer, 2009). Menifield (2009) suggests that many localities can get by using the simpler, non-multivariate analysis, though as I point out, economic trends should be considered, lately.
The Putnam police department has annual purchases very typical of other similar sized departments and the single capital program (for the K-9 division) is being paid for by grants and donations. It is these donations that promote the need for additional fiscal responsibility; the public may be less willing in the future to offset major purchases through donations if property taxes rise significantly.
Menifield, C. E. (2009). The basics of public budgeting and financial management: a handbook for academics and practitioners. Lanham, MD: University Press of America.
Spencer, M. (2009, January 5). Current economic situation vs. the Great Depression: Striking comparisons with the current economic situation to the Great Depression. WTVY.com. Retrieved from http://www.wtvy.com/home/headlines/29813759.html
When preparing an agency or department budget, two strategies may be employed, usually in combination: political budgeting and technical budgeting (Menifield, 2009). While most budgets are defended politically, the technical budgeting stategy is most useful when defending mandatory and base expenditures of a legally mandated service, such as a police or fire department (Menifield, 2009). New programs, especially those viewed largely as ancillary, or “nice to have,” would be largely defended using a more polital than technical strategy.
Menifield (2009) explains the technical budgeting strategy as “[concentrating] on the numbers or budgetary facts [and] split into two categories: mandatory, [sic] and discretionary spending” (p. 43) with base expenditures “to maintain the same level of service” (p. 44) identified for each. Efficiency and productivity are foci of the technical budgeting strategy. The political budgeting strategy, according to Menifield (2009), is used to “sell” a program based more on its merits or public demand than on mandate or efficiency and productivity.
In the emergency medical services, since its provision is usually not a legal requirement of the government, it would make sense to defend the budget politically if the service was started within the last few years; however, a more technical budget in continuing years might help to buttress the perceptions of the public that it is actually a needed service. Continuing to defend an emergency medical services budget with a more political strategy could make it actually appear less important and subject to tighter budget controls. Additionally, as the emergency medical service is the only public safety entity that routinely charges user fees, the structure of a technical budget would plainly show revenue offsetting expenditures, making it less likely to suffer cuts. Again, both strategies would be used proportionally to their need.
Menifield, C. E. (2009). The basics of public budgeting and financial management: A handbook for academics and practitioners. Lanham, MD: University Press of America.