Budget Exercise

You are told that the financial support you receive will stay flat (i.e., will not include any revenue increases: One Exception noted in the instructions below)). However, you must give an across-the-board raise of 5% to all employees. In other words, your budget total (with the 5% raise) must not be different from the flat budget total.
A: impact of benefits on your calculation (NOTE: The total you need to cut from your budget is not just 5% of the salaries. Benefits are based on the salaries, so if salaries go up, so does the cost of benefits. So, in addition to calculating the 5% salary increase, you should calculate the benefits cost as well and calculate how you will adjust other lines. To do this, multiply the cost of the 5% by the amounts in the (1) Retirement, (2) Payroll taxes and (3) worker’s compensation lines. Then, add that total to the 5% of salaries total, and that will give you the total amount to increase salaries and adjust down the remaining line-items.
Normally, the benefits cost can be calculated by a formula that will yield a 25%-30% of salaries. Do not use that figure.
In a few paragraphs, discuss how the group would adjust the budget line items to accommodate the 5% raise in a budget with the pending flat budget.

– Use the budget in table form.
B. Revenues: Revenues must not be changed. Line items in red must remain the same as the 2020-2021 budget, except you may increase the following lines by up to 10%: (1) Book sales, (2) Photocopying/printing and (3) Miscellaneous
C. Salaries and benefits: As mentioned above, you must increase the following line items by 5%: (1) Salaries, (2) Retirement, (3) Employee Payroll Taxes and (4) Workman’s Compensation.

NOTE: Health benefits usually increase each year, but it isn’t tied to a mandated increase/decrease in the annual budget. Health benefit costs are at the mercy of negotiations with the insurance company. We will assume no change for this exercise
D. Don’t forget, your total Revenues must equal your total expenditures