PAD 505 Week 3 Discussion 1

Week 3 Discussion 1

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Preparing the Operating Budget” Please respond to the following: From the e-Activities, discuss two (2) differences between Michigan’s budget and your state budget in terms of budget process, financial reporting, and costs analysis (fixed costs, step-fixed costs, and variable costs). Justify your response with examples.

Arkansas Budget Process consists of four components: Preparation, Authorization, Funding, and Review and Revise. Arkansas goes through different department requesting budgets with instructions from the Department of Finance, The Governor receives the request, then has a legislative council hearing. The Director of DFA is required by law to present the Official General Revenue Forecast no later than 60 days prior to the beginning of the legislature. By rule, the Joint Budget Committee introduces recommendations as the appropriation measures for the next biennium. The Legislature adjourns. The agencies prepare their operating budget for the next fiscal year which starts on July 1. Michigan Budget Process Consists of 3 stages: Development of Governor’s Executive Budget, and Enactment by the legislature, and Budget Revision. Michigan has the Appropriations Committees assign the budgets to specific subcommittees. These subcommittees then conduct a series of hearings. State department directors and their staff present an overview of the Governor’s proposed budget, followed by briefings from House Fiscal Agency and Senate Fiscal Agency staff. The legislative procedure for consideration of the appropriation bills is basically the same as for other bills except that appropriation measures receive priority on the legislative calendars. Each department prepares the allotment of appropriations and may request revisions, legislative or administrative transfers, or supplemental appropriations. The State Budget Office must approve revisions to allotments. Transfer of funds other than administrative transfers within a department must be submitted by State Budget Office to the House and Senate Appropriations Committees. The difference between the two is that Arkansas uses Different Departments and agencies to for Preparations and Michigan uses committees and subcommittees. With Michigan, the state budget is just like any other bill and Arkansas is not.

Discuss the pros and cons of forecasting over a five to ten (5-10) year period. Justify your response with examples

The Pros of forecasting over a five to ten-year period would be that you have an outline to build off with the widespread availability of data in virtually every department of the government, and the computer’s capability to process it, applications for different funding analysis seem almost limitless. Since a funding analysis is based on verifiable data, it can be subjected to thorough scrutiny for validation. The use of numbers makes the analysis more exacting. A funding analysis can be replicated, checked, updated and refined when necessary.

Example: Keeping Social Security stable, the numbers will not vary in large sums so that this can be easily forecast over five years.

Cons: A major problem in forecasting trends involves identifying turning points. With hindsight, turning points are clearly visible, but it can be difficult to tell in the moment whether they are mere aberrations or the beginning of new increases or decreases that will be needed in different programs of government funding. Long-term projections need more data to support them, and that may not always be available, particularly for a new business or product line. In any case, the further out one forecasts, the greater the possibility for error, because the passage of time will inevitably introduce new changes or funding. Also, the data might not give a true estimate. Example: The state decides to get rid of a program that would change the events that was included in the forecast in the previous years and would affect the future years in a large sum difference.