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Solution Manual for Fiscal Administration, 9th Edition

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    1 SOLUTION MANUAL: FISCAL ADMINISTRATION, ANALYSIS AND APPLICATIONS FOR THE PUBLIC SECTOR JOHN L. MIKESELL INDIANA UNIVERSITY NINTH EDITION

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    2 Chapter One Questions and Exercises 1. 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 v ote yes; C, D, and E would vote no. d. Revise cost shares so that Residents A and B pay more and reduce c ost shares borne 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 is not able to capture the full benefit of the service. 4. No – the bread is rival and exhaustible. Chapter Two Questions and Exercises . 2. a. Defense outlay change: (693,586 / 294,362) – 1 = 135.6 Nondefense outlay change: ( 658.2 / 319.7) – 1 = 105.9 Defense prices: (1.1327 / 0.8147) – 1 = 39.0 Nondefense prices: (1.1256 / 0.89) – 1 = 26.5 Defense real: [(693,586 / 1.1327)/(294,362 / 0.8147)] – 1 = 69.5 Nondefense real: [(658.2 / 1.1256) / (319.7 / 0.89)] – 1 = 62.8 b. Deflator: 2000 = 1.00; 2010 = 1.1256 / 0.89 = 1.2647 Nondefense outlay, real: 2000 = 319.7 Nondefense outlay, real: 2010 = 658.2 / 1.2647 = 520.4 Change (2005 = 1.00): 584.8 – 359.2 = 225.6 Change (2000 = 1.00): 520.4 – 319.7 = 200.7 Percent change (2000 = 1.00): (520.4 / 319.7) – 1 = 62.8 3. Strategies: a. Spend to save b. All or nothing c. Matching the competition d. Cut the popular program e. Spend to save f. It’s the local economy

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    3 g. It’s so small h. Spend to save i. Washington Monument j. Crisis k. You pick l. Dire consequences m. Washington Monument n. Cut the popular programs o. Dire consequences

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    4 4 . Hurricane damage, adjusted with GDP deflator: Damage, Current Dollars Deflator, 2005 = 100 Constant (Real) Damage Category Katrina 81000 100 81,000.00 3 Andrew 26500 76.598 34,596.20 5 Wilma 20600 100 20,600.00 3 Charley 15000 96.786 15,498.11 4 Ivan 15000 96.786 15,498.11 4 Rita 11300 100 11,300.00 3 Hugo 7000 69.577 10,060.80 4 Frances 8900 96.786 9,195.54 2 Agnes 2100 26.657 7,877.86 1 Jeanne 6900 96.786 7,129.13 3 Betsy 1421 19.936 7,127.81 3 Camille 1421 23.119 6,146.46 5 Allison 5000 90.727 5,511.04 0 Frederick 2300 43.798 5,251.38 3 Floyd 4500 86.842 5,181.82 2 Diane 832 16.601 5,011.75 1 Fran 3200 83.159 3,848.05 3 Opal 3000 81.606 3,676.20 3 Isabel 3370 94.135 3,579.96 2 Alicia 2000 57.652 3,469.09 3 Juan 1500 61.628 2,433.96 1 Dennis 2230 100 2,230.00 3 Elena 1250 61.628 2,028.30 3 Bob 1500 74.824 2,004.70 2 Gloria 900 61.628 1,460.38 3 Georges 1155 85.584 1,349.55 2 Lili 860 92.196 932.80 1 Bonnie 720 85.584 841.28 0 Erin 700 85.584 0

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    5 817.91 Allison 500 69.577 718.63 0 Alberto 500 79.94 625.47 0 Frances 500 85.584 584.22 0 Ernesto 500 103.231 484.35 0

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    7 Chapter Three Questions and Exercises 1. The Office of Management and Budget website address is http://www.whitehouse.gov/omb/ a. Historical Tables: http://www.whitehouse.gov/omb/budget/Historicals/ 2. The Budget of the United States Government is available on the OMB website at http://www.whitehouse.gov/omb/budget/Overview/ Chapter Four Questions and Exercises No answers provided.

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    8 Chapter F ive Questions and Exercises 1. The analysis should begin with a test of ratios, shares, and trend, probably within a spreadsheet. The investigation could examine 1) how the categories have increased 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) the relationship (ratio) between components, e. g., clerical to faculty or travel to faculty. 2. Some questions about the memorandum: 1) The collection increase is about 50 percent, not 59 percent. 2) What are the separate contributions to numbers of calls from the automated phone system and from additional employees? Adding 10 employees is a 53 percent in staff, but calls increase by 100 percent. Can we assume that the remaining productivity increase is from the equipment? What would happen if either the new equipment or the new employees were added, but not both? 3) Doubling the number of calls represents a 100 percent increase in calls. Why is the yield increase so much less? Might most of the productive calls have already been made with the existing system/staff? 3. Grade Number Salary Total Salary Chief 1 $105,000 $105,000 Shift Commander 3 70,000 210,000 Firefighter 1 12 39,000 468,000 Firefighter 2 26 30,000 780,000 Clerical (part - time) 3 15,000 45,000 TOTAL 1,608,000 COST a. Salaries: 1,608,000 b. Social Security: Retirement: 0.062 x [1,608,000 – (105,000 - 90,000)] = 98,766 Medicare: 0.0145 x 1,608,000 = 23,316 c. Health Insurance: 180 x 12 x 42 = 90,720 d. Pension System: (1,608,000/2) x 0.20 = 160,800 e. Uniform Allowance: 750 x 42 = 31,500 Total: 2,013,102

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    9 4. a. Price Change: Postage $5,500 requested to cover a postal rate increase of $0.02 per ounce for 275,000 items per year. b. Other Continuing: Travel $15,000 to cover travel expenditures that were accommodated 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 in second year for second new examiner (salary plus fringes) to accommodate assistance file growth. d. Full Financing: $6,000 to external traffic fine col lection program through entire fiscal year ($18,000 had been appr opriated for three quarters of prior fiscal year). e. Methods Improvement: Equipment $3,000 to acquire PC - compatible com puter, better quality printer, work processing software, and associ ated cables. (Insert whatever cost estimate seems proper.) 1. Quarter I (July – September Usage) Gallons: 125,000 + 125,000 + 90,000 = 340,000 Share of Total = 340/843 = 40.3% Quarter II (October – December) Gallons: 60,000 + 50,000 + 40,000 = 150,000 Share of Total: 150/843 = 17.8% Quarter III (January – March) Gallons: 35,000 + 35,000 + 50,000 = 120,000 Share of Total: 120/843 = 14.2% Quarter IV (April – June) Gallons: 65,000 + 68,000 + 100,000 = 233,000 Share of Total: 233/843 = 27.6% Allotments: Q1: 0.403 x 8,000,000 = 3,224,000 QII: 0.178 x 8,000,000 = 1,424,000 QIII: 0.142 x 8,000,000 = 1,136,000 QIV: 0.276 x 8,000,000 = 2,208,000

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    10 2. The division has used up two - thirds of its travel account through the first three quarters of the year. Its operating plan requires that 40 percent of its budget be available to spend in the last quarter. Therefore, it has overspent its plan: $9,000 x .6 = $5,400 planned for the first three quarters; $2,500 + $3,500 = $6,000 actual for the first three quarters. The division will either need to restrain its travel in the last quarter or look for funds to transfer from other accounts to maintain travel at its 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 empty jargon. 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 for abused 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 the advantage of bringing together battered spouses? Explain. And why does this apparent objective require testing and special training? NOTE: As students start to get the idea, they will raise even more questions about the justification. a. An illustrative rewrite: Program Improvement – Biennial Cost: $84,300 Counseling programs for battered sp ouses achieve the objective of protecting that spouse and, eventually, allo wing that spouse to continue a life without outside assistance when that cou nseling is available locally. This request would provide two part - time psychologist / counselors trained in abuse management in each of the following state mental health centers: Baileyville, Needmore, and Tre vlac. Each team would counsel clients and refer them to other state and local social programs. (Then: separate Workload Change request for child abuse.) 4 . PROJECT TITLE: All emergency telephone system METHODS IMPROVEMENT CAPITAL: $4.5 Million OPERATING: $3.6 Million Establish and operate a single phone number to summon police and/or firefighter assistance, with complete tracking and recording of call, including dispatch of aid. The system will speed response, reduce assistance errors, accommodate evaluation of emergency response, and reduce cost of maintaining duplicate manual systems presently in use.

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