Course objectives: This course is about taxing, borrowing, and spending. It builds on the financial management skills acquired in GSM 504, GSM 532, GSM 533, this course is designed to provide the basic tools of financial and budget analysis needed for a career in public management, including consulting, or for service as an appointed or elected official or a voluntary board member. This course is divided into two blocks of instruction:

1. Financial theory -- which is concerned with the sources and uses of funds, including taxing, borrowing, and the cost of capital, and cash budgeting.

2. Budgeting -- including the budget process, operational budgeting, and capital budgeting.

Students wishing to know more about responsibility budgeting and accounting are encouraged to take GSM 610 and GSM 645; capital budgeting, GSM 603 and GSM 608; investments, GSM 625; forecasting, GSM 616; management science, 619; or auditing and evaluation, GSM 670 and GSM 612.

Description: This course is based on three fundamental premises:

1. A student of public management must understand where the money comes from and how it is raised;

2. Learning public financial administration necessitates running the numbers; and

3. Modern public fiscal administration borrows liberally from the tools and concepts of business management, but there are limits to this borrowing that grow directly from nature of public services. Governments exist to provide people services that business is unwilling or unable to provide: macroeconomic stabilization, income redistribution, and correction of market failures.

The first substantive topic we take up will be is taxing and user fees. We will look at different tax bases (income, wealth, consumption) from a variety of perspectives -- efficiency as well as equity -- tax administration, and pricing public services. You will learn to compute tax incidence and administrative cost, as well as the income and price elasticities of various tax bases. Using revenue data, you will compare and contrast the tax base in Oregon with other Western states and the nation as a whole. You will then evaluate the Oregon tax structure from the standpoint of equity and efficiency.

The next topic we consider solvency, borrowing, debt administration and liquidity management.

The last section of the course is concerned with Budgeting. It begins with a discussion of the logic of public choice and public spending. This is followed by an investigation of budget form, logic, and process. The course also looks at budget methods and practices, including management of budget execution, and selected reform techniques. The class ends with a preview of capital budgeting and program evaluation.

Texts: John Mikesell, Fiscal Administration; National Budget Simulation; taxation issue of Oregon's Future.

Grading: Homework (40 percent), Performance on homework will be evaluated primarily in terms of meeting due dates and completeness, neatness and accuracy also matter, but where you must exercise analytical judgment, I am much more concerned with seeing the logic of your analysis than a perfect book solution -- some of the assignments merely require a careful reading of the text, there I will look for a book solution. Complete homework assignments will be graded "A," "B" or C. Late assignments will receive a maximum grade of B; all other late papers will receive a grade of C or less. PERMISSION TO TURN IN LATE AND MAKEUP ASSIGNMENTS MUST BE NEGOTIATED WITH THE TEACHER. Homework will be delivered and returned electronically via ClassTools as Excel or Word documents. Open GSM-632: Hand Ins; upload assignment to appropriate folder using no spaces in the document title. For example, if you were turning in a memo on options and derivatives, you would upload it to Section_1/_ as Options.doc. ClassTools will automatically recognize you, the sender, and log your identity and the date and time of submission. Your work will be returned using ClassTools' Handback function. Your grade will be in the document title. Comments and corrections will be on the document itself (you may have to compare your original with the corrected version to appreciate the corrections, but I will use another color to highlight the corrected figures).

Midterm examination. Take home examination. (25 percent)

Contribution to class discussion and presentation. (15 percent)

Class project. (20 percent -- due date to be negotiated)

August 28 Introduction, Cash flow cycle and basic bookkeeping, Preparation of basic financial statements

August 30 Differences between cash and an accrual basis of accounting -- how both differ from economic reality, Logic of fund accounting, Financial ratio analysis and the evaluation of financial condition. Read for class Mikesell pages 56-60

September 4 Labor Day -- NO CLASS SCHEDULED

September 6 Tax evaluation

a. benefits received and/or ability to pay

b. horizontal and vertical equity

Read chapter 7 of your text. Take home Midterm: Answer questions 7: 1 (a, c, d), pages 324-5, and evaluate state and local tax system in terms of equity and revenue production -- due October 15 (25% of class).

You can work on your findings and recommendations in groups. Be prepared to summarize your findings and recommendations in class (ppt), Mon. Oct. 11 (5 percent of grade). Individual reports/exams due Oct. 15. (Data sources: Oregon Office of Economic Analysis: National Tax Association Links; State Government Finance Data, Oregon Forecast; State and Local data; Federation of Tax Aministrators; Oregon specific data and the statistical sections of the Oregon Comprehensive Annual Financial Report; ACIR's Book of the States and Oregon Tax Research provide data and comparisons; The John Locke Foundation in North Carolina provides an interesting comparative analysis of state fiscal policy, see also Thompson and Green and Blue Oregon on tax reform and repeal of Measure 5. The best overall source of analysis is the Brookings/Urban Institute Tax Policy Center.)

September 11 Tax evaluation (cont.)

c. revenue production

d. collectability

e. distortions and other economic effects

September 13 Tax types: Income. Read chapter 8 of your text. Be prepared to discuss Oregon's Personal Income Tax Statistics. Answer questions 8: 1, 3, 4, and 6, due September 17 (5%) -- you will need to download tax forms from the IRS or pick them up at the local post office.

September 18 Tax types: Consumption. Read chapter 9 of your text. Be prepared to discuss Oregon's cigarette/tobacco taxes. Answer questions 9: 3 & 5, due September 24 (5%).

September 20 Tax types: Consumption

September 25 Tax types: Wealth. Read chapter 10, plus Oregon's Future tax issue. Answer questions 10: 1, 3 & 4 (all six parts -- part e is the hardest) due October 1 (10%).

September 27 Tax types: Wealth (cont.) Read Property Tax Statistics for tax year 2002-03, and Property Value Appeal Procedure.

October 2 Tax Administration and Intergovernmental Aid. Skim chapters 12 and 14.

October 4 Sale of services and user fees. Read pages 1-15 of your text and skim chapter 11.

October 9 Sale of services and user fees (cont.) Read Cost Analysis.

October 11 Team presentations (Midterms due midnight, October 15)

October 16 Return and discuss Midterms

October 18 Revenue estimation. Read chapter 13, also please see Oregon Economic and Revenue Forecast - entire document, Guest lecturer, Professor Mike Hand.

October 23 Debt administration. Read chapter 15, including Appendix A. Answer questions 15: 3 & 4, due October 24 (5%)

October 25 Debt administration (cont.) Guest lecturer, Harvey Rodgers, Partner, Preston, Gates, & Ellis, LLP.

October 30 Liquidity Management. Read chapter 16. Answer question 4.12, due Nov. 7 (5%). Guest lecturer, Professor Ken Smith (tentative).

November 1 NO CLASS SCHEDULED

November 6 Liquidity Management (cont.) Read State cash budget -- macro view,

November 8 Budgeting. Read chapter 2 of your text.

November 13 Budgeting. Please read Oregon's budget process overview, budget instructions and forms, governor's budget (Balanced and Revised), and the budget as enacted. Also, please review Oregon's local budgeting information.

November 15 Please read chapter 3 of your text. Guest Lecture: The Legislative Budget Process, by the Hon. Donald J. Homuth (former state senator and AGSM alumnus).

November 20 Please read chapter 4 of your text. Answer questions 4: 3 & 9, due November 29 (5%).

November 22 (Thanksgiving follows) Do BUDGET EXERCISE, justify only your change proposals, complete in class (5%).

November 27 Please read chapter 5 of your text.

November 29 Please read Responsibility Budgeting in the USAF Material Command.

December 4 Please read chapter 6 of your text and Capital Budgeting.