Public Budgeting and Finance - Research Paper Example

Introduction For the purpose of this research paper the adopted public budget chosen for detailed analysis and examination is from the Bureau of Fire& Police Disability & Retirement (FPDR). The main responsibility of this bureau is to direct and oversee the provision of disability, death, and retirement benefits to firefighters, law enforcement agency officers and their fighter working in Portland. An analysis of the budget requirements of the bureau will help us understand the disbursements and cash requirements of the bureau against its various functions. This will help us comprehend and get a better picture of FPDR’s plan for financing enterprise and resources during the period 2013-2014.The organizational working of Bureau of Fire & Police Disability & Retirement (FPDR) is organized into four programs namely Administration and Support, Disability and Death Benefits, Retirement System Payments and Oregon Public Employees Retirement System (PERS) Contributions. This research paper guides us through the functions and the objective of each program along with their budget requirements and also analyses how the budget requirements of the organization have varied from time to time. For the year 2013-2014 the Bureau of Fire & Police Disability & Retirement (FPDR) adopted a budget of 162,853,770. In this paper it is analyzed how the bureau reached this figure and what were the steps involved in the process. It is also examined how the budget requirement for the year 2013-2014 has varied compared to previous years Literature Review A lot of research is done on Public Budgeting and administration. Schick (1966) wrote that, depending upon conditions at a given time in history; budgets have tended to emphasize financial control, managerial improvements, or planning. Rubin (1996), writing thirty years later, suggests that two additional emphases should be added to reflect dominant trends in the 1970s and 1980s, and the 1990s: prioritization and accountability respectively (Tyer and Willand, n.d) In the last decade of the nineteenth century, budgeting was defined as "a valuation of receipts and expenditures or a public balance sheet, and as a legislative act establishing and authorizing certain kinds and amounts of expenditures and taxation" (Schiesl, 2013: 89). The idea of a budget as a control mechanism, however, had been developing since the 1830s but gained momentum after the Civil War with the growth of cities and the expansion of municipal services. By the end of the 1890s there were three basic forms of municipal budgeting. Some cities simply used a tax levy, an approach disliked by reformers due to the lack of control through inattention to the expenditure side of budgeting, coupled with dominance by the city council. Another approach was a tax levy accompanied by detailed appropriations. Missing there, of course, were details regarding revenue estimates. Still others used a tax levy but preceded it with detailed estimates of receipts and expenditures, a practice which found favor with business and middle-class reformers. However, city councils were not legally bound to adhere to these estimates. Even in today’s world of communication and globalization the public sector organizations operate in a fast-changing environment and are often exposed to ambiguous settings but still many public sector agencies have opted for traditional organizational structures. These tend to give considerable attention to streamlining and strengthening organizational procedures, and have relied extensively on processes of standardization, formalization, normalization, and systemization (Bourgon, 2011). Methodology Analyzing the budget adopted by the Bureau of Fire & Police Disability & Retirement (FPDR) during the year 2013-2014 it becomes clear that the organization is using a program budgeting technique to estimate its requirements. According to Oxford Policy Management the basic elements of program budgeting included long-range planning, goal and program identification, quantitative analysis and performance analysis (Oxford Policy Management, 2013). The adopted budget of FPDR includes all these elements. The overall goal is the creation of a peaceful society in Portland and to achieve this goal the bureau working is organized into four programs namely Administration and Support, Disability and Death Benefits, Retirement System Payments and Oregon Public Employees Retirement System (PERS) Contributions. The performance of the bureau is also monitored and evaluated. Evaluating the budget technique used by the Bureau of Fire & Police Disability & Retirement (FPDR) during the year 2013-2014 it can be concluded that the Incremental budgeting technique has been used to draw the budget for the year 2013-2014 which basically means that the new budget is projected based on the preceding year budget and Increments or deductions are made in order to address the expected requirements for the year 2013-2014 using the previous year budget as a starting point. Financial year 2013-2014 is the first full year during which the 11 amendments to the FPDR plan approved by the Portland voters in November 2012 will be applied. The final pay definition, on the basis of which the pension benefits for FPDR members hired before January 1, 2007 are calculated, is explained and clarified through these amendments. These amendments also applied a six-month service requirement for new employees before they are covered by the FPDR Plan and approved interim disability benefits while a claim is being reviewed. Analyzing the amendments in effect it can be seen that some of these changes result in increasing costs slightly. However, collectively all these amendments translate into significant cost saving mainly because of altering the final pay definition. Findings and Discussion In this particular section it is analyzed how the Bureau of Fire & Police Disability & Retirement (FPDR) researched and estimated their budget requirement for the year 2013-2014. The bureau has disintegrated its overall budget requirement under two heads; the operational requirement and the capital requirements. The operating requirements are directly related to the Administration and Support, Disability and Death Benefits, Retirement System Payments and Oregon Public Employees Retirement System (PERS) Contributions programs of the bureau. On the other hand the capital requirements are associated with infrastructure development and maintenance needs of the organization. In the year 2013-2014 the bureau has planned to undertake the capital project of applying and implementing a new and improved database which will help the bureau in the long run and ensure better working of the organization. In order to implement the new system the FPDR required upgrading and improving its existing database. The new software would allow the organization to meet the City Charter needs for comparable recordkeeping with the Citys Workers Compensation records. This process of integrating the new software in organizations working was initiated at the end of year2012. Evaluating previous records of the organization it is known that the new database went live in October 2012, after which all expenses related to the project are charged or recorded as capital improvements to the new database. In the financial year 2012-2013 the estimated Capital improvement expenses were $20,000. However in the year 2013-2014 this expense is expected to amount to $30,000 and remain the same ($30,000) in 2014-15. On the other hand after the financial year 2014-15 as opportunities for further enhancements decline the capital expense associated with the new system are expected to reduce as well. The Bureau of Fire & Police Disability & Retirement FPDR estimates the new databases total operating and maintenance costs at roughly $35,000 per year until the warranty expires in FY 2015-16, when they are expected to rise to approximately $45,000 per year. These costs include $15,000 per year for two new servers required to run the new database. Making this kind of expense for a database is justified as it will ensure efficient working of the bureau and will help with correct, accurate and consistent tracing and administration of pension data for the Portlands public safety sworn employees. Providing the public officers with such benefits will motivate them to perform better which in turn will result in law and order prevailing in the city and the creation of a safe and peaceful community. Since the funding for this project comes from property taxes it is important that the taxes paid by people are utilized in such a manner that they result in some kind of benefit to them. Due to these reasons the Bureau of Fire & Police Disability & Retirement FPDR gives priority to the database project and ranks it crucial because it is obligatory for delivering fair benefits and is a step forward towards the establishment of an improved society However the$30, 000 is not a one time annual expense rather it is a capital investment which will help the bureau in the coming years as well. Keeping this in mind it is estimated that the new database will cost around $111,375 ($30,000 initial installation cost + maintenance cost) in total five years (the useful life of the new system). A brief summary of the capital budget requirements of the bureau is given below: Bureau Capital Program Revised Adopted FY 2014-15 FY 2015-16 Capital Plan FY 2017-18 5-Year Total Project Prior Years FY 2012-13 FY 2013-14 FY 2016-17 Acquisitions Database Capital Improvements 148,834 175,500 30,000 30,000 18,750 16,125 16,500 111,375 Total Acquisitions 148,834 175,500 30,000 30,000 18,750 16,125 16,500 111,375 Total Requirements 148,834 175,500 30,000 30,000 18,750 16,125 16,500 111,375 Moving on, the operating requirements of the Bureau of Fire & Police Disability & Retirement FPDR are discussed. The operations of the bureau are divided into four segments which are discussed in detail hereafter. The pension benefits are provided to retired Police officers and firefighters hired before 2007 through a program named as Retirement system payments. Providing pension benefits to public servants is crucial for employing and retaining the most qualified and talented individuals. Such benefits ensure a higher a level of commitment and motivation to work for important public service operations which in turn results in the creation of a lawful and peaceful society. In other words, the goal of creating a peaceful society can only be met if the people responsible for public service are at peace in terms of their jobs and the remunerations it provides. Only then they will be loyal to their jobs and work relentlessly for the ultimate objective of a peaceful society. During the year 2013-2014 the bureau adopted retirement budget equal to $104,515,927 ($104,426,303 Pension benefits + $89,624 Retirement Administration and Support). In addition to the retirement benefits the bureau is also working to provide disability and death benefits to the workers of fire and police departments in Portland Oregon. These benefits include compensation for injuries and any kind of ailment and provision of any kind of medical assistance. In addition, medical leave, vocational restoration leave and arrangements for funeral in case of death are also included in the benefits provided by the bureau. Such benefits are important for the efficient working of the police and firefighters as it guarantees them that in case of any accident they will be looked after and cared for. During the financial year 2013-2014 the Bureau of Fire & Police Disability & Retirement FPDR adopted disability budget of $8,431,806, an increase of $0.2 million or 2.3% from the FY 2012-13 Revised Budget. This budget covers the costs associated with different benefits provided by the bureau as well as the administrative costs associated with providing these disability benefits. The heads included in this budget are Disability & Death Benefits, Disability Administration and Support, Funeral, Long-term Disability, Medical, Return to Work, Short-term Disability and Vocational Rehabilitation. How the budget is distributed in the various heads in provided in the Annexure. Another program that the organization is involved in is the Oregon Public Employee Retirement System (PERS) Contributions. This program is responsible for accomplishing the task of the reimbursing the PERS payments made by the firefighters and police officers hired after 2006. $6.7 Million is the estimated total disbursement of the entire program during the financial year 2013-2014. If this amount compares to the previous year (2012-2013) figures it can be seen that there is an increase of approximately $1.0 million or 17.7% Revised Budget. The reason for this increase may be the fluctuation in the rate of Public Employee Retirement System (PERS) Contributions which are expected to increase from 19.4% in financial year 2012-2013 to 20.25% of pensionable pay in the year 2013-14. In order to provide retirement and disability benefits to the firefighter and police officers in a timely, fair and accurate manner administrative support is required. This is where the fourth program of the Bureau of Fire & Police Disability & Retirement FPDR steps in. The administrative support program is responsible for the efficient working of the organization. This program works to achieve smooth operations that guide the organization towards its mission. The adopted budget for this particular program for the year 2013-2014 is $2,271,965 which happens to be $30,000 higher than the revised budget of the financial year 2012-13. A reason for this increase may be the reclassification of an office support specialist position in the administrative program to an assistant claims technician in the Disability & Death Benefits program. In addition the responsibilities of the office support specialist position were fragmented between the new position and other positions within the Administration Program. If the administration and support budget is compared to the total budget of the bureau it can be seen that it is only 1.9 % of total bureau requirements (Joyce and Simonsen, 2013). Conclusion Evaluating the budget of the Bureau of Fire & Police Disability & Retirement FPDR it becomes clear that budgets provide a strategic direction and a clear focus based on which the working of the organization can be aligned and executed. The process of creating a budget provides a longer-term orientation and outlines goals that need to be met. In other words it helps deciding in advance what the money is going to do for you and organizes spending and saving. Budgeting also helps in the allocation of a limited amount of cash available to areas that are crucial to organizations working and are at the highest priority. In short budgeting helps with prioritization and recognizes those public areas to which limited resources should be allotted. According to Aaron Wildavsky, a preeminent expert, a budget is: “a prediction of expenses; the link between financial resources and human behavior in order to accomplish policy objectives; a representation in monetary terms of governmental activity; a record of the outcomes of the struggle over political preferences; and "attempts to allocate scarce financial resources through political processes in order to realize disparate visions of the good life." (Wildavsky, Caiden, and Kettl, 2003) In addition to budget also performs the accountability function and makes people aware of how their tax dollars are put to use. Budgeting, in a way justifies the amount of tax paid by the public and clarifies that it is not taxed any further than that necessary for proper government functions. It makes the government or the public agency answerable to the people and this ensures their efficient working. References Tyer, C. and Willand, J. (n.d). Public Budgeting in America: A Twentieth Century Retrospective. Retrieved from: http://www.ipspr.sc.edu/publication/budgeting_in_america.htm Schiesl, M. (2013). Business Administration – A Perspective. Retrieved from: http://www.meierhaoffered.com/21342422/obituaries/larry-e-schiesl/ a Bourgon, J. (2011). A New Synthesis in Public Administration, Serving in the 21st Century. McGill-Queens Press - MQUP Oxford Policy Management. (2013). Public Expenditure Review. Retrieved from: http://www.opml.co.uk/issues/public-expenditure-reviews Wildavsky, A., Caiden, N. and Kettl, D. F. (2003). The politics of Budgetary Process. Longman Crises Series, ISBN-13: 978-0321159670 Joyce, P., and Simonsen, W. (2013). Public Budgeting and Finance. Public Financial Publications, Inc. Read More