Critical Reasoning

Uva@90 wrote:Hi All,

Could you please help me with this question.

The administrative budget in the Central Valley school district is proportional
to the value of the valley's property tax base, the chief source of funding for
the school district. As revenue from property taxes increases, each budget
segment of the school district is increased proportionately.
Which of the following statements, if true, is the best basis for a criticism of
the Central Valley's budgeting policy as an economically sound budgeting
method for school districts?
(A) The school district might continue to pay for past inefficient allocation
of funds.
(B) The revenue from property taxes has remained relatively unchanged
for the last decade.
(C) Student performance is affected by fluctuations in the overall school
district budget.
(D) Many Central Valley taxpayers have complained about the high
property tax rates in the area.
(E) The current budgeting system has little impact on whether parents
decide to take their children to non-district funded classes.

OA: A

Thanks.
Regards,
Uva

Ian Stewart wrote:We want to identify the "best basis for a criticism of the Central Valley's budgeting policy as an economically sound budgeting method". So the right answer absolutely needs to give a reason why the policy might not be "economically sound". That's a vague phrase, more vague than you'd see in a real GMAT question, but if you identify it as the key to the problem, you can eliminate all of the wrong answers. The distribution of funds comes after revenue is collected, so B is wrong. And we are only concerned with 'economic soundness', so student performance, taxpayer opinions, and non-district classes are irrelevant, and C, D and E are wrong.

A is correct, because we know the budget for each 'segment' (I think they mean to use a word like 'department') of the school district increases by the same proportion or percentage when revenue goes up. So if the budgets for each 'segment' were set badly originally - if some segments were dramatically overfunded and others dramatically underfunded - under this policy, they will continue to be set badly.

Uva@90 wrote: The administrative budget in the Central Valley school district is proportional
to the value of the valley's property tax base, the chief source of funding for
the school district. As revenue from property taxes increases, each budget
segment of the school district is increased proportionately.
Which of the following statements, if true, is the best basis for a criticism of
the Central Valley's budgeting policy as an economically sound budgeting
method for school districts?


The policy is to increase the budget as revenue increases

The question is why would this not be a good practice for budgeting?

Uva@90 wrote: (A) The school district might continue to pay for past inefficient allocation
of funds.

CORRECT - Increasing a budget solely on revenue would not hold anyone accountable for how the budget is used.

Uva@90 wrote: (B) The revenue from property taxes has remained relatively unchanged
for the last decade.

We don't care about the level of revenue, only if the budgeting policy is sound.

Uva@90 wrote: (C) Student performance is affected by fluctuations in the overall school
district budget.

We don't know anything about how the fluctuations correlate. While you expect a positive correlation, it is not guaranteed. Also, this might be considered a positive reason to increase budget when it is available.

Uva@90 wrote: (D) Many Central Valley taxpayers have complained about the high
property tax rates in the area.

Uva@90 wrote: (E) The current budgeting system has little impact on whether parents
decide to take their children to non-district funded classes.

Uva@90 wrote: The administrative budget in the Central Valley school district is proportional
to the value of the valley's property tax base, the chief source of funding for
the school district. As revenue from property taxes increases, each budget
segment of the school district is increased proportionately.
Which of the following statements, if true, is the best basis for a criticism of
the Central Valley's budgeting policy as an economically sound budgeting
method for school districts?


The policy is to increase the budget as revenue increases

The question is why would this not be a good practice for budgeting?

Uva@90 wrote: (A) The school district might continue to pay for past inefficient allocation
of funds.

CORRECT - Increasing a budget solely on revenue would not hold anyone accountable for how the budget is used.

Uva@90 wrote: (B) The revenue from property taxes has remained relatively unchanged
for the last decade.

We don't care about the level of revenue, only if the budgeting policy is sound.

Uva@90 wrote: (C) Student performance is affected by fluctuations in the overall school
district budget.

We don't know anything about how the fluctuations correlate. While you expect a positive correlation, it is not guaranteed. Also, this might be considered a positive reason to increase budget when it is available.

Uva@90 wrote: (D) Many Central Valley taxpayers have complained about the high
property tax rates in the area.

This has nothing to do with the school's budgeting policy

Uva@90 wrote: (E) The current budgeting system has little impact on whether parents
decide to take their children to non-district funded classes.

Again, nothing to do with the argument.