Description

Creating the Governor’s budget proposal each new fiscal year is a long process that begins with the submission of spending requests and revenue estimates from each state agency to the Executive Office for Administration and Finance. As an A&F analyst, your job is to holistically and critically evaluate requests from the agencies, taking care to separate needs versus wants, in your account portfolio and make recommendations to the Budget Director. In this Case Study, you are to analyze a hypothetical Department of Public Health’s (DPH) submission for Fiscal Year 2016.

Based on the chart below (which is also in the accompanying Excel spreadsheet), please answer Questions 1, 2 and 3. (Questions 4 and 5 are not related to the chart or to each other.)

1.       With certain exceptions, state agencies should typically not have spending increases above 3% per year. Describe some general trends you notice, both within and across DPH’s various spending categories.

2.       If an agency does not budget sufficient funds in each spending category to make it through the year, a deficit is created. Part of the analyst role is to ensure a department’s initial spending request is sufficient to avoid deficits. Identify any spending categories at DPH that may cause concern and why.

3.       Based on your observations in Questions 1 and 2, what are a few questions would you ask the DPH Budget Director to better understand the agency’s submission?

4.       DPH has requested funding in FY16 for a new community health center at a cost of $2.0 M per year. Although the initiative is aligned with the Governor’s priorities, there is not enough funding this fiscal year so the Administration has informed DPH they cannot go forward with the project at this time. In response, DPH tells you that they can feasibly collect $2.0 M in additional revenue to offset the program’s costs by increasing the fees they collect from companies renewing their vending machine licenses. Although A&F does evaluate such revenue proposals, keep in mind that if the revenue proposal comes up short, the state will have to find a way to support the additional costs.

In FY14 and FY15 the fee for renewing vending machine licenses was $8,000 per company and 500 companies paid the fee each year to renew their license. Please fill in the chart below. What are two questions you would ask DPH to determine whether the proposed revenue proposal can support the new program?

5.       DPH is the sole tenant of a large commercial office building in downtown Boston and the lease requires a rental increase next year (FY16). Rather than pay the increase, the agency has proposed to move to a less expensive building in Roxbury, an economically depressed area of the state, and use the savings to fund a new substance abuse prevention program for teens. Based on the facts provided below, write a recommendation to the A&F Budget Director on whether DPH should move to Roxbury, factoring in any economic, budgeting or policy needs into your decision. Feel free to include any relevant Excel work with your recommendation.

a.       The building in downtown Boston is 250,000 square feet and costs $16 per square foot (annual). The rent will increase to $18 per square foot in FY16.

b.      The proposed building in Roxbury is 300,000 square feet and costs $13 per square foot (annual).

c.       The agency has 500 employees. Standard offices require 300 square feet of space per employee.

d.      The economic value of each employee to Roxbury is estimated at $500 per year above the value they bring to Boston.

e.      The cost to move to the new Roxbury office location is $600,000.

f.        The new substance abuse program costs $400,000 per year.