MARYLAND SCHOOL OF PUBLIC POLICY

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1 MARYLAND SCHOOL OF PUBLIC POLICY PUAF Finance Fall 2013 Class Meeting Professor Discussion Section Wednesday, 4:15 to 6:45 P.M. Room: 1203 VMH Travis St.Clair Office: 1123 Van Munching Hall Phone: (301) tstclair@umd.edu Office Hours: Wednesday 2:30 4 pm and by appointment Thursday 4:15 6:45 during assignment weeks Room: 1107 VMH TA: Norman.Kittrell@gmail.com Course Learning Objectives Funding for public programs is inseparable from the operation of those programs. All public managers, therefore, find themselves needing knowledge and skills in the principles of public finance and budgeting. Whether you are an official who is immersed in public budgeting on a day-to-day basis, or you are one who must make policy based on the relationship between dollars and program goals and objectives, an understanding of these concepts is vital to both your personal success and the success of your organization. This course will survey two broad areas of finance and budgeting in the public sector - revenue analysis and management; and budgeting, public expenditure and financial management. At the conclusion of the course, students should: have a "generalist's" familiarity with each of these two key areas of governmental and non-profit finance; become familiar with a wide variety of analytical techniques appropriate for the analysis of revenue, spending and debt issuance; develop a greater capacity to conduct analyses using Microsoft Excel or some similar spreadsheet package; have a greater capacity to read quickly, analyze issues carefully and critically, and communicate effectively, particularly by developing their skills in professional writing.

2 Required Text Lee, Robert D., Ronald W. Johnson, and Philip G. Joyce, Public Budgeting Systems, 9 th Edition (Jones and Bartlett Publishers, 2013). In addition, a substantial number of readings will be posted on Canvas. These will include, periodically, current articles from newspapers and magazines, as well as topical government publications. Course Requirements There will be five components used in determining your final grade for the course. Each student will be required to complete three brief assignments, requiring application of analytical techniques. Two written (spreadsheet-based) assignments will be required; these assignments will each require the completion of a two-page memorandum. A mid-term quiz will be given in the first half of the course. A final examination will be given during the final examination period; it will cover material presented after the quiz. Specific instructions for the written assignments will be passed out at a later time (two weeks in advance of the assignment due date). The course requirements will be weighted as follows: Quiz 15% Brief Assignments (5% each) 15% Maryland Budget Projections Memo 20% Day Care Budget Memo 20% Final Examination 30% The quiz and final examination will be closed book (and closed notes). No late assignments will be accepted without prior permission of the instructor (an assignment not turned in on time or not accepted will result in a failing grade for that assignment). Even in cases where late assignments have been permitted in advance, they will be marked down, at the rate of one-half letter grade for each week or portion thereof that the assignment is late. The final exam must be taken during the final exam period; no make-up exam will be given without some documentation of dire emergency or prior permission of the instructor. While class participation will not formally be included in determining the grade, all students are expected to come to class having read the assigned material, and be prepared to engage in class discussion. Participation will be a factor in determining course grades in cases where a student is on the margin between two grades. 2

3 A brief word on academic integrity: Please note the university policy on academic honesty. The University of Maryland, College Park has a nationally recognized Code of Academic Integrity, administered by the Student Honor Council. This Code sets standards for academic integrity at Maryland for all undergraduate and graduate students. As a student you are responsible for upholding these standards for this course. It is very important for you to be aware of the consequences of cheating, fabrication, facilitation, and plagiarism. For more information on the Code of Academic Integrity or the Student Honor Council, please visit If you have any questions about what constitutes proper citation vs. plagiarism, please go to: Class Schedule at a Glance Week Date Topics Assignments/Exams 1 9/4 Course Overview and Budget Exercise 2 9/11 Role of Government in the Economy and Principles of Public Finance 3 9/18 Taxation Evaluation Criteria HW #1 Handed Out 4 9/25 Income and Property Taxes HW #1 Due HW #2 Handed Out 5 10/2 Sales Taxes and User Fees The Budget HW #2 Due Cycle 6 10/9 Budget Preparation Performance Mid-Term Quiz Budgeting Memo #1 Handed Out 7 10/16 Budget Preparation Cost Analysis 8 10/23 Budget Approval State/Local Experience Memo #1 Due Memo #2 Handed Out 9 10/30 Budget Approval the U.S. Congress 10 11/6 Budget Execution Budgetary Institutions Memo #2 Due 11 11/13 Accounting and Financial Reporting 12 11/20 Capital Budgeting and Cost-Benefit Analysis HW #3 Handed Out 13 11/27 Thanksgiving No Class 14 12/4 Debt Management, Cash Management HW #3 Due 15 12/11 Fiscal Federalism Course Wrap-up and Review TBA Final Exam Review December TBA Final Examination Week of December Final Exam 3

4 Course Outline and Reading List The following outline lists the topics and reading assignments by course session. Reading assignments include the text (Lee, Johnson and Joyce), or readings that are available on Canvas (designated with a C below). I. Introduction A. September 4 Course Overview and Budget Exercise Lee, Johnson, and Joyce, Chapter 1 C-V.O Key, The Lack of a Budgetary Theory, American Political Science Review 34 (December 1940), pp B. September 11 Government s Role in the Economy; Principles and Overview of Public Finance Lee, Johnson and Joyce, Chapters 2 and 3. C-Friedman, Milton, The Role of Government in a Free Society, from Edmund Phelps, Private Wants and Public Needs (Norton Press, 1965). II. Financing Government/Revenue Sources C. September 18 Revenue Evaluation Criteria Lee, Johnson and Joyce, Chapter 5 (pp ), Chapter 11 (pp ). C- Horizontal Equity, Incidence of Taxes, Vertical Equity, Encyclopedia of Taxation and Tax Policy, 2 nd Edition (J. Cordes, R. Ebel, and J. Gravelle, eds.), Washington: Urban Institute Press, 2005). D. September 25 Income and Property Taxes Lee, Johnson and Joyce, Chapter 5 (pp ). C - Congressional Budget Office, The Distribution of Household Income 4

5 and Federal Taxes, 2008 and 2009 (July 2012). C President s Advisory Panel on Federal Tax Reform, Nov Simple, Fair, and Pro-Growth, Ch. 3, Tax Basics. (Assignment 1 Calculating Effective Tax Rates Due) E. October 2 Sales Taxes, User Fees, and Gambling Revenues Taxes as Social Policy The Budget Cycle Lee, Johnson and Joyce, Chapters 4 and 6. C--Bruce, Donald, Fox, William, and LeAnn Luna State and Local Government Sales Tax Revenue Losses from Electronic Commerce. State Tax Notes. 52 (7): (Assignment 2 Calculating the Income Tax Due) III. Public Budgeting F. October 9 Budgeting Budget Preparation Performance Budgeting Lee, Johnson and Joyce, Chapter 7. C- Schick, Allen, "The Road to PPB: The Stages of Budget Reform," Public Administration Review 26, Number 4 (December 1966), pp C - Lewis, Michael (2009), The No-Stats All-Star, The New York Times. February 13, magazine/15battier-t.html?_r=3&ref=magazine&pagewanted=all (Mid-term Quiz) G. October 16-- Budget Preparation Cost Analysis Lee, Johnson, and Joyce, Chapter 8. C-Anthony, Robert, and David Young, Chapter 4, Cost Accounting of Management Control in Nonprofit Organizations (Irwin, 1984). C Pew Center on the States and Rockefeller Institute of Government, States Revenue Estimating: Cracks in the Crystal Ball, March,

6 H. October 23 Budget Approval State/Local Lee, Johnson and Joyce, Chapter 9 C Joyce, Philip, Linking Performance and Budgeting Under the Separation of Powers: The Three Greatest Obstacles Created by Independent Legislatures, Performance Budgeting: Linking Results and Funding, (Marc Robinson, ed., Palgrove Publications, 2007). (Maryland State Budget Projections Analysis and Memo Due) I. October 30 Budget Approval The U.S. Congress Lee, Johnson and Joyce, Chapter 10. C - Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years (February 2013) Read the Summary and Chapter 1. J. November 6 - Budget Execution Budgetary Institutions Lee, Johnson and Joyce, Chapter 11 (pp , ) C St.Clair, The Effect of Tax and Expenditure Limitations on Revenue Volatility: Evidence from Colorado, Public Budgeting & Finance 32 (3), pp (Day Care Analysis and Memo Due) IV. Public Financial Management K. November 13 Accounting, Auditing, and Financial Reporting Retirement Systems Lee, Johnson and Joyce, Chapter 12 C - Pew Center on the States, The Widening Gap Update (June 2012). C U.S. Treasury Department, A Citizen s Guide to the 2012 Financial 6

7 Report of the United States Government, available at L. November 20 Capital Budgeting and Cost-Benefit Analysis Lee, Johnson and Joyce, Chapter 13 M. November 27 Thanksgiving No Class N. December 4 - Debt Management, Cash Management Lee, Johnson, and Joyce, Chapter 14, Chapter 11 (pp ). (Assignment 3 Cost Benefit Analysis of Capital Project Due) O. December 11 Fiscal Federalism, Course Wrap-up Lee, Johnson, and Joyce, Chapter 15. C- Oates, Wallace, An Economic Approach to Federalism, in Wallace Oates, Fiscal Federalism (Harcourt Brace Jovanovich, 1972). P. Final Exam Review (To Be Announced December 12-16) Q. December (To Be Announced) Final Examination 7