ü expensive or changes in the economy or public

ü 
becomes
available.  Another option is to pad the
budget with additional funds   to reduce
the pain inflicted by a later reduction.

 

Techniques
of Budgetary Analysis

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One of the most dramatic
developments in public budgeting is the growing emphasis on using more
sophisticated analytical techniques in the budget process.  Budget reformers  have encouraged the use techniques to enable
decision makers to make more informed budgetary decisions. One of the most
important bundle of analytical methods in public budgeting is forecasting
because prepation of budget  requests
begins 6 to 18 months before a new budget will begin and another year before
the budget ends.  Failure to predict
future conditions means much time is wasted. 
Predicting the future ocer the longer run is critically important.  Budgetary decisions influence public
expectations for the future.Ifwe make poor decisions now, correcting or coping
with them in the futuremay make people very angry if they have planned their
lives on the basis of the budget decisions.

 

There are different methods of
forecasting.  To name them:

 

ü  Naïve projection.  The simplest approach to forecast is to
assume that the future will essentially be the same as the present.

 

ü  Simple extrapolation.  A slightly more complex technique.  The approach seeks to identify simple trends
in revenues and spending and to incorporate those trends into the forecast.

 

ü  Time Series Techniques.  This is a more complex approach which range
from the relatively simple to extremely complex.  A basic time series will try to break down a
series of revenue or spending figures into four components such as long term
trend, seasonal variation, cyclical trends and irregular or unexplained
variations.

 

ü  Multivariate Time series
analysis. This is a more sophisticated and complex approach. It explores the
recent past in hopes of finding factors that help predict revenues or expenditures.  If the analyst is successful in finding
variables, the decision makers have some advance warning if the revenue is
likely to rise or fall in the future. 
However, it presents some problems like developing a model is quite
expensive or changes in the economy or public policy will erode the accuracy of
the forecast.

 

ü  Delphi Technique. This is a more
complex judgmental method. Which tries to utilize the expertise of a number of
participants to develop a forecast.Predictions of experts are compiled by the
coordinator and prepares the summary of them.

 

Coping with
Complexity and Conflict

Public budgeting is an enormously
complex task in all but the smallest jurisdictions.  There are many programs and demands. The
volume and complexity of the information can be overwhelming.  Budgeting often involves considerable
conflict and controversy. Fortunately, a number of coping devices are
available.  These include:

ü 
Incrementalism.  If officials confine their attention to
budget proposals that are similar to what is being done now, they are spared
the work of assessing a huge number of more drastic budgetary changes.Sticking
to familiar ground reduces the amount of uncertainty decision makers must
face.  At the same time, incrementalism
reduces the amount of budgetary conflict by reducing the number and range of
proposals that are contending for political support.

ü 
Fair
share.  This techniques calls for giving
almost all programs some share of additional funding when the budget is growing
and giving almost all programs some share of 
the sacrifice when budget cuts are necessary.Exceptions occur as in the
case of major crises that call for dramatic action in some policy areas.

ü 
Separate
pools.  Dividing various portions of the
budget into separate pools  that are
treated separately from one another can help reduce complexity and conflict.  A particular revenue may be earmarked for a
specific program.  Some programs may be
taken out of the budget entirely are handled separately from other
programs.  A program may be assigned to a
public corporation or special authority. These techniques simplify budgetary decisions
by reducing the number of decisions that must be made in the regular budget
process.

ü 
Division
of labor.  The complexity may be reduced
by a division of labor among participants 
in the budget process.  It
involves the use of legislative committee that focus on different parts or
aspects of the budget.  It may involve
also two or more levels of government, each of which make some budgetary
decisions..  However, this presents a
number of risks also. Mistakes that will be committed may  complicate the work or cause decisions to be
faulty.

ü 
Avoiding
pragmatic decisions.  Budgeters may
reduce complexity and conflict in the budget process by avoiding, when
possible, making decisions regarding programs within the budget process. The
traditional practice of having one set of committees to process bills
authorizing the creation   of programs
and another set of committees to handle the spending legislation reflects an
effort to minimize the volume of pragmatic decisions.

ü 
Postponement.  Another technique for coping with complexity
and conflict  in public budgeting make
use of the fact    that budgeting is a
repetitive process, with a new budget being adopted  every year or two.  As a result, budgeters do not need to
deal  with every possible issue at any
given time.