A BALANCINGThe challenge of creating the City of Springfieldâs operating budget using limited resources while maintaining core services A BALANCINGAbstractTodayâs economy is a difficult one. The cost of basic goods and services are rising, thedebt many individuals carry proves to be suffocating, and it becomes harder and harder to findgood jobs. Not only do individuals feel this sting, so do private and public sector organizations.Ever-rising healthcare and pension/retirement benefits, among many other factors, havesignificantly hindered the financial resources of many businesses. While this challenge in theprivate sector should not be overlooked, the difficulties faced by public entities are substantiallymore difficult. This document seeks to divulge in the complex world of todayâs governmentalentities, to evaluate the difficult challenges faced by cities and towns across the country, andmost importantly to assess the decision process made by administrators to ensure theirmunicipality can provide the core services its residents deserve while maintaining financialstability for years to come.IntroductionSpringfield, Massachusetts, has existed for nearly four hundred years and was officiallyfounded as a city in 1852. Springfield possesses a rich history, highlighted by becoming thebirthplace of basketball when it was invented at Springfield College in 1891. Today, the city ishome to approximately 155,000 people, and employs roughly, 6,500 employees betweenmunicipal operations and the public school system. While these individuals hold many differentroles, they share one important mission: to provide a high level of service to the residents,businesses, and visitors of the City of Springfield. This interest is driven not just by personaldevotion, but by the hard-working taxpayers whose taxes provide the funding needed for themunicipality to operate. With that in mind, itâs important to understand the impact of providingexceptional services to the very people that allow the city to function every day.As mentioned in the preceding paragraph, it is of vital importance that taxpayer dollars bespent properly. The City of Springfield, despite its up and downs, has worked tirelessly tostrategically utilize its financial resources in the best possible manner during recent years.Through the use of pragmatic thinking, combining both analytical and intuitive skills, theadministration has been able to provide as many services as possible despite very limitedresources. In other words, the theme of âdoing more with lessâ has been a consistent philosophy.This philosophy, however, proves very challenging to execute. Springfield finds itself in a veryprecarious position: it must provide essential services expected by its constituents while workingwith consistently dwindling resources. As each fiscal year passes, projected expensesincreasingly exceed anticipated revenues, forcing city officials to close an ever-growingbudgetary gap. This is not the fault of the taxpayers, but simply just an inability to secure enoughfinancial resources to meet rising costs.To further understand the challenge of producing a balanced spending plan that maintainscore services to constituents in the City of Springfield, itâs important to realize the trueconstraints that are present. While the imbalance of revenue to expenditures poses a serious problem, there are even deeper issues the administration faces in developing the annual operatingbudget. The most difficult constraint, beyond argument, is the lack of discretionary fundingavailable. Non-discretionary funding, as defined, is mandated by law or city ordinance. In otherwords, non-discretionary funding must legally be utilized for certain purposes and may not beallocated elsewhere. Of the estimated $625M operating budget for Fiscal Year 2018, or Funding Detail$125,000,000 DiscretionaryNon-Discretionary $500,000,000 (beginning on July 1,2017),$500M is considered non-discretionary, and is allocated primarily to educational services. Thisleaves a mere $125M, or 20% of the total budget, for discretional use (Figure 1). Unfortunately,the term âdiscretionaryâ in this sense is misleading. This limited funding must be used to fundthe other 80% of the Mayorâs top priorities, which are public safety, economic vitality, healthyneighborhoods, and fiscal and operational excellence.The Critical DecisionBased upon the information provided in the introductory paragraphs, the Chief FinancialOfficer (CFO), who serves as the key decision maker in this process, faces a very difficult task.How, with such limited discretionary funding, can a well-balanced spending plan be developedfor the next fiscal year? Considering the continuous increase in annual expenditures, coupledwith a lack of projected revenue, there are many challenging decisions ahead. Developing thebudget will be hard enough, but the CFO must also be mindful of public perception to it.Because so much of the operating revenue comes from taxpayers, consideration must be given tohow these individuals will perceive their hard-earned money being spent. Expense AllocationsDebt; 15%Capital ; 2% Personnel; 40% Benefits; 26%Supplies & Services; 17% Another layer adds to thecomplexity of the decision the CFO faces when constructing the operating budget for FY18. Perthe Mayor, who serves as the Chief Executive Officer of the city, has requested that no personnelby laid off as a means to balance the budget. While this makes perfect sense, as negativelyaffecting the livelihoods of these individuals should be avoided at all costs, personnel (salaries &wages) expenditures account for 40% of all spending (Figure 2). This represents the largest partof the budget, and is only amplified when you consider that employee benefits make up anadditional 26% of the total (Figure 2).Although many challenges are present, the ultimate goal of creating a balanced spendingplan for Fiscal Year 2018 must still be achieved. Through our research, we hope to provide athorough analysis of the Chief Financial Officerâs decision-making process as it relates topragmatic thinking. Using this model, we will evaluate the three essential phases of the decisionprocess: inputting and designing practices, drafting practices, and choice practices whileincorporating a hybrid strategy of analogical, heuristic, and habitual thinking.