Solution Manual for Fiscal Administration, 9th Edition

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1SOLUTION MANUAL:FISCAL ADMINISTRATION, ANALYSIS AND APPLICATIONS FOR THEPUBLIC SECTORJOHN L. MIKESELLINDIANA UNIVERSITYNINTHEDITION

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2Chapter OneQuestions and Exercises1.a.Yes. Total project benefits (4,900) exceed total project cost(4,000).b.No. No individual has benefits greater than cost of project.c.No. Based on net benefits, A and B would vote yes; C, D, and E would voteno.d.Revise cost shares so that Residents A and B pay more and reduce cost sharesborne by C, D, and E.2.Many of the benefits of primary and secondary education are public or social(external to the recipient of the education). The entity paying for the service isnot able to capture the full benefit of the service.4.No–the bread is rival and exhaustible.Chapter TwoQuestions and Exercises.2.a.Defense outlay change: (693,586 / 294,362)–1 = 135.6Nondefense outlay change: (658.2 / 319.7)–1 = 105.9Defense prices: (1.1327 / 0.8147)–1 = 39.0Nondefense prices: (1.1256 / 0.89)–1 = 26.5Defense real: [(693,586 / 1.1327)/(294,362 / 0.8147)]–1 = 69.5Nondefense real: [(658.2 / 1.1256) / (319.7 / 0.89)]–1 = 62.8b.Deflator: 2000 = 1.00; 2010 = 1.1256 / 0.89 = 1.2647Nondefense outlay, real: 2000 = 319.7Nondefense outlay, real: 2010 = 658.2 / 1.2647 = 520.4Change (2005 = 1.00): 584.8–359.2 = 225.6Change (2000 = 1.00): 520.4–319.7 = 200.7Percent change (2000 = 1.00):(520.4 / 319.7)–1 = 62.83.Strategies:a. Spend to saveb. All or nothingc. Matching the competitiond. Cut the popular programe. Spend to savef. It’s the local economy

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3g. It’s so smallh. Spend to savei. Washington Monumentj. Crisisk.You pickl. Dire consequencesm. Washington Monumentn. Cut the popular programso. Dire consequences

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44. Hurricane damage, adjusted with GDP deflator:Damage,CurrentDollarsDeflator,2005 =100Constant(Real)DamageCategoryKatrina8100010081,000.003Andrew2650076.59834,596.205Wilma2060010020,600.003Charley1500096.78615,498.114Ivan1500096.78615,498.114Rita1130010011,300.003Hugo700069.57710,060.804Frances890096.7869,195.542Agnes210026.6577,877.861Jeanne690096.7867,129.133Betsy142119.9367,127.813Camille142123.1196,146.465Allison500090.7275,511.040Frederick230043.7985,251.383Floyd450086.8425,181.822Diane83216.6015,011.751Fran320083.1593,848.053Opal300081.6063,676.203Isabel337094.1353,579.962Alicia200057.6523,469.093Juan150061.6282,433.961Dennis22301002,230.003Elena125061.6282,028.303Bob150074.8242,004.702Gloria90061.6281,460.383Georges115585.5841,349.552Lili86092.196932.801Bonnie72085.584841.280Erin70085.5840

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5817.91Allison50069.577718.630Alberto50079.94625.470Frances50085.584584.220Ernesto500103.231484.350

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7Chapter ThreeQuestions and Exercises1.The Office of Management and Budget website address ishttp://www.whitehouse.gov/omb/a.Historical Tables:http://www.whitehouse.gov/omb/budget/Historicals/2.TheBudget of the United States Governmentis available on the OMB website athttp://www.whitehouse.gov/omb/budget/Overview/Chapter FourQuestions and ExercisesNo answers provided.

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8Chapter FiveQuestions and Exercises1.The analysis should begin with a test of ratios, shares, and trend, probably withina spreadsheet. The investigation could examine 1) how the categories haveincreased over time, 2) how the share of the particular categories have changed, e.g., the faculty salary or student fellowship share of the total; and 3) therelationship (ratio) between components, e. g., clerical to faculty or travel tofaculty.2.Some questions about the memorandum: 1) The collection increase is about 50percent, not 59 percent. 2) What are the separate contributions to numbers ofcalls from the automated phone system and from additional employees? Adding10 employees is a 53 percent in staff, but calls increase by 100 percent. Can weassume that the remaining productivity increase is from the equipment? Whatwould happen if either the new equipment or the new employees were added, butnot both? 3) Doubling the number of calls represents a 100 percent increase incalls. Why is the yield increase so much less? Might most of the productive callshave already been made with the existing system/staff?3.GradeNumberSalaryTotal SalaryChief1$105,000$105,000Shift Commander370,000210,000Firefighter 11239,000468,000Firefighter 22630,000780,000Clerical (part-time)315,00045,000TOTAL1,608,000COSTa.Salaries: 1,608,000b.Social Security:Retirement: 0.062 x [1,608,000–(105,000-90,000)] = 98,766Medicare: 0.0145 x 1,608,000 = 23,316c.Health Insurance: 180 x 12 x 42 = 90,720d.Pension System: (1,608,000/2) x 0.20 = 160,800e.Uniform Allowance: 750 x 42 = 31,500Total: 2,013,102

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94.a.Price Change: Postage$5,500 requested to cover a postal rate increase of $0.02 per ounce for275,000items per year.b.Other Continuing: Travel$15,000 to cover travel expenditures that wereaccommodated by funds transfers in the last fiscal year.c.Workload Change: Personnel$56,625 in first year for new examiner (salary plus fringes) and $56,625 insecond year for second new examiner (salary plus fringes) to accommodateassistance file growth.d.Full Financing:$6,000 to external traffic fine collection program through entirefiscal year($18,000 had been appropriated for three quarters ofprior fiscal year).e.Methods Improvement: Equipment$3,000toacquirePC-compatiblecomputer,betterqualityprinter,workprocessing software, and associated cables.(Insert whatevercost estimateseems proper.)1.Quarter I (July–September Usage)Gallons: 125,000 + 125,000 + 90,000 = 340,000Share of Total = 340/843 = 40.3%Quarter II (October–December)Gallons: 60,000 + 50,000 + 40,000 = 150,000Share of Total: 150/843 = 17.8%Quarter III (January–March)Gallons: 35,000 + 35,000 + 50,000 = 120,000Share of Total: 120/843 = 14.2%Quarter IV (April–June)Gallons: 65,000 + 68,000 + 100,000 = 233,000Share of Total: 233/843 = 27.6%Allotments:Q1:0.403 x 8,000,000 = 3,224,000QII:0.178 x 8,000,000 = 1,424,000QIII:0.142 x 8,000,000 = 1,136,000QIV:0.276 x 8,000,000 = 2,208,000

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102.The division has used up two-thirds of its travel account through the first threequarters of the year. Its operating plan requires that 40 percent of its budget beavailable to spend in the last quarter. Therefore, it has overspent its plan: $9,000x .6 = $5,400 planned for the first three quarters; $2,500 + $3,500 = $6,000 actualfor the first three quarters. The division will either need to restrain its travel in thelast quarter or look for funds to transfer from other accounts to maintain travel atits planned fourth quarter level.3.a. Questions: 1) What are: new social procedures, valid test results and scores,sociological recommendations, evaluation professionals, specialty counselors,great strides, maximum effectiveness, and success factors? Don’t use emptyjargon. 2) What actually is being requested? What makes up a “counselor team”and where will the “teams” be located? 3) How did the case service funds forabused children get included in this request? That should be a separate request.4) Is this really a workload change–or a program improvement? 5) What is theadvantage of bringing together battered spouses? Explain. And why does thisapparent objective require testing and special training? NOTE: As students startto get the idea, they will raise even more questions about the justification.a.An illustrative rewrite:Program Improvement–Biennial Cost: $84,300Counselingprogramsforbatteredspousesachievetheobjectiveofprotecting that spouse and, eventually, allowing that spouse to continue alife without outside assistance when that counseling is available locally.Thisrequestwouldprovidetwopart-timepsychologist/counselorstrained in abuse management in each of the following state mentalhealthcenters:Baileyville, Needmore, and Trevlac.Each team wouldcounselclients and refer them to other state and local social programs.(Then:separate Workload Change request for child abuse.)4.PROJECT TITLE: All emergency telephone systemMETHODS IMPROVEMENTCAPITAL: $4.5 MillionOPERATING: $3.6 MillionEstablish and operate a single phone number to summon police and/orfirefighter assistance, with complete tracking and recording of call,including dispatch of aid. The system will speed response, reduceassistance errors, accommodate evaluation of emergency response, andreduce cost of maintaining duplicate manual systems presently in use.

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