Budget Critical Thinking/ Problem Solving

Paper instructions:

Critical Thinking/ Problem Solving

You are the lead policy analyst for a Southern California municipality of approximately 200,000 people. This is a blue-collar city that has never been known to be

particularly affluent. The past two years, due to an economic downturn, have been especially rough for the city. Over the past decade the nature of the local economy

has also gone through significant changes. Historically, it was dominated by large labor intensive industries. Currently, however, most of the large employers are

technology-driven and are not necessarily as labor intensive. The unemployment rate, which has traditionally fluctuated around 10%, has risen over the past two years

to 20%. The worsening condition of the city has become the focal point of local and national attention.

The federal government has decided to award the municipality a $10 million grant to address the growing unemployment problem. The city council, however, is divided

on how the funds should be spent. Half of the members believe that the funds should be spent on attracting new businesses. Their main argument is that new businesses

will provide additional jobs. Such a strategy would also increase revenues for the city. The other half believes that money should be spent on education. Their main

argument is based on the fact that education leads to more innovation, which in turn creates more business opportunities and jobs.

You have been tasked with evaluating these two perspectives and providing a conclusive recommendation to the council for spending the grant money.

In your answer:

a) Clearly articulate the problem and identify the major stakeholder groups. What are their interests?
b) Identify an alternative explanation (other than the economic downturn) to the rise in the unemployment rate.
c) Define the management objectives and analyze the merits of both approaches (e.g., effectiveness, opportunity cost) in achieving the objectives. Do you have

sufficient data or would you need additional information/research to make your decision? What additional information do you need and how would you go about

obtaining/conducting it?
d) Make a recommendation and justify it.

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