State Health Department Budget Cut During the Revenue Shortfall Case Study

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Health Department Budget Cut during the Revenue Shortfall

Yersey Yersinian, State Governor

FROM: Curtis Healy, Health Commissioner

Cutting Budgets during the Times of Revenue Shortfall

Our current fiscal budget has revealed that we have already run short of our project revenue and the issue requires immediate attention. In the present fiscal year, we are facing challenges of raising tax revenue for the projected fiscal year. By consequence, the tax revenue projected for the fiscal year between July and June is short of $30 Million. While the fiscal year has nearly run into half, the shortfall could increase by 7% if immediately solution has not been implemented to arrest the situation. The immediate problem that we are facing is the strategy we could adopt to raise up to $60 Million within six months. The solution is not to raise the government fees or taxes because implementing these policies will make us contradicting our promises that we have made few years ago. While an increase in the government borrowing may be politically feasible, however, we use this tool to criticize our predecessors and this option will not be appropriate as the best option. The only solution to raise the funds is to cut programs . We need to critically evaluate all the programs by choosing the programs that are less important and remove them from the list of all our funded program. The strategy will assist us to cut our expenses in order to effectively implement the remaining programs.

Approach and Framework for dealing Budget Cut

One of the approaches that we will employ in implementing the budget cuts is to list all the state programs and rank them based on their scale of preferences.

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We should list the most important programs first and rate them based on their level of importance to the public. The programs at the end of the scale of preference will be removed in order to raise the saving required to implement state health department program. Although, there was a suggestion that the state Health department is to reduce the agency budget by $2.3 Million, nevertheless, cutting expenses of the Medicaid program is not an option. Although, Medicaid takes 20% from state health department expenditure, nevertheless, the expenditure of the Medicaid cannot be reduced. While the Medicaid is the federal and state program, however, the state receives $2 from every one dollar spent on the program. If we decide to cut $1 Million from the Medicaid expenses, we will lose $2 Million of the federal government Medicaid allocation.

Moreover, we should not cut the expenditure on capital program. It is essential to realize that capital expenditures are very hard to reduce. By consequence, the builders may not be interested in bidding for the state projects if there is an anticipation that we are going to reduce the expenditure capital programs, the bidders would not be interested in bidding for our project.

The feasible option is to cut our expenditure on the non-capital program. Although, one of the governor's advisers suggests that the governor should layoff some workers in order to reduce the expenses of the health state department, however, this option is not a feasible option because the state governor can draw a bad image from this policy. Moreover, the option can lead to a….....

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