Forecasting, according to Menifield (2009), is an important component of budget preparation and analysis. Using the Putnam police department (Putnam, CT) as an example, I will show how forecasting can benefit the budget process.

The Putnam police department is a small local department that relies heavily on public support. In order to forecast the economic condition that provide insight to the budgetary needs of the department, I would normally suggest using simple time-series forecast model. Due to the wavering economy over the last few years, however, I would start to consider using a multiple regression model that could take into account decreases in property taxes, real inflation, and the poor business environment for many of the small businesses that contribute a sizable portion of the tax base (Spencer, 2009). Menifield (2009) suggests that many localities can get by using the simpler, non-multivariate analysis, though as I point out, economic trends should be considered, lately.

The Putnam police department has annual purchases very typical of other similar sized departments and the single capital program (for the K-9 division) is being paid for by grants and donations. It is these donations that promote the need for additional fiscal responsibility; the public may be less willing in the future to offset major purchases through donations if property taxes rise significantly.

Menifield, C. E. (2009). The basics of public budgeting and financial management: a handbook for academics and practitioners. Lanham, MD: University Press of America.

Spencer, M. (2009, January 5). Current economic situation vs. the Great Depression: Striking comparisons with the current economic situation to the Great Depression. WTVY.com. Retrieved from http://www.wtvy.com/home/headlines/29813759.html