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Budget policy - Weaken Question

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Budget policy - Weaken Question

by Uva@90 » Sat Jun 13, 2015 7:16 am
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
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by talaangoshtari » Sat Jun 13, 2015 7:42 am
The argument says that "As revenue from property taxes increases, each budget segment of the school district is increased proportionately".
This means that:
increasing the revenue => increasing the budget
We should find the answer choice that says that increasing the revenue, does not lead to increase in budget.
Hence aswer choice A is correct, because it says that with increase in revenue, the school has still other expenses. Therefore refute that the budget will also increase.
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by theCEO » Sat Jun 13, 2015 7:59 am
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
In essence, the question is asking what is the worst reason for valley to practise its budgeting policy.

(A) The school district might continue to pay for past inefficient allocation
of funds. This may mean the school district is trying to recoup from its bad decisions. For example a company is going to charge alot for a product to cover the salary of the CEO. This is a bad reason and this is a possible correct choice
(B) The revenue from property taxes has remained relatively unchanged
for the last decade. This has nothing to do with the budgeting policy. Wrong
(C) Student performance is affected by fluctuations in the overall school
district budget. This is a possibly answer however we dont know if the performance is positively affected or negatively affected. We will keep this choice for now.
(D) Many Central Valley taxpayers have complained about the high
property tax rates in the area. This has nothing to do with the budgeting policy. Wrong
(E) The current budgeting system has little impact on whether parents
decide to take their children to non-district funded classes. This may mean parents don't care about how much they pay.If a customer is going to buy a product no matter how much it costs, it is reasonable for the company to charge as much as possible. Therefore this is not a bad idea so we can eliminate this choice. Wrong.

By comparing (A) and (C)we see that choice (A) is the worst reason. Answer = a
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by Ian Stewart » Sat Jun 13, 2015 10:01 am
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.
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by Uva@90 » Sat Jun 13, 2015 6:56 pm
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.
Hi Ian,

So conclusion can also come under question stem ?

Thanks.
Regards,
Uva.
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by gmat_for_life » Thu Jul 16, 2015 10:09 pm
Hi Ian,

Many thanks for your reply.

I do agree that option A is correct. However, my reasoning is that if the school districts keep on paying for past inefficient allocation of funds, this would lead to abnormal increases in the tax base thereby making the process economically unsound.

Could you please share your comments?

Amit
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by Jim@StratusPrep » Fri Jul 17, 2015 9:10 am
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.
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by Jim@StratusPrep » Fri Jul 17, 2015 9:11 am
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.
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-- Organized review that is tailored based on your abiility
-- 1,000s of unique GMAT questions
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-- 100% Free Trial and less than $20 per month after.
-- Free GMAT Quantitative Review

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