Government financial news differsa bit from business financial news. Knowledge of some of those differenceswill help you find and correct errors in certain government stories.
For most government entities,the major revenue source is taxes. Taxes are imposed and collected by cities,counties, states, the nation, school districts and certain other specialdistricts.
Government budget makingis a topic for several news stories each year. Budget making is the processin which government officials decide how much they will spend on variousgovernmental activities for the coming year. In some places, laws requiregovernments to keep spending within budgeted amounts.
The second, third andfourth parts of the copy editor's responsibility with budget stories --making it easy to understand, getting the numbers right and doing the mathfor the reader -- require that you understand some basic procedures thatare best illustrated by walking through a detailed example. The followingwarm-up exercise will prepare you for our in-class editing exercise.
THE NEWS STORY:
Property taxes to rise 9 percent
The Lawrence City Council votedyesterday to adopt a budget of $12,910,300 for next year with a propertytax of $22.82 for each $1,000 in assessed valuation.
When you set out to edit such a story, your firststep should be to contact the reporter to obtain the budget handouts fromthe meeting. Such handouts will provide key clues as you verify all thenumbers in the budget story.
Note:Themeeting handout (Lawrencebudget information and thedepartment summaries) associated with this warm-up exercise budgetstory appears immediately below. (I suggest you copy it and print it outbefore checking the above numbers.) Note that the upper third of the documentsummarizes by category all of the Lawrence city government's expendituresfor the current year (left column) and the comparable proposed-budget amountsfor the coming year (right column). The bottom third of the page is entitledDepartment Summaries, and it is a more detailed explanation of the GeneralOperating Fund expenditures for the current year and the comparable informationfrom the proposed budget. The middle of the page contains several otherpieces of information about the city's financial circumstances and theproposed budget.
|General Operating Fund|
|Firemen's Pension Fund|
|Policemen's Pension Fund|
|Tourist Development Center|
|General Improvements (in lieu of bonds)|
|* Current year mill levy: 20.920|
|* Tangible assessed value of real property: $317,987,940 (Assessedvaluation is 50% of market value. Average home has market value of $60,000.|
|* Funds raised from ad valorem taxes are supplemented by fees, licenses,fines, etc., and the total makes up the total expenditure.|
|* Total indebtedness: $66,113,372.|
|* Ad valorem tax requirement for proposed budget: $8,211,750.|
|Department (or category)|
|Planning and Research|
|City Treasurer/Purchasing Agent|
|Buildings and Grounds|
| Often it is not possible to verify the numbersin the order they appear in the story. So as you are able to verify a numberin the above story, bold face it (or check it off on your printed copy)so you can keep up with which numbers you still need to verify. |
Look over the meeting handout to see if thereare any numbers from the story that can be verified immediately.
1. One that you should be ableto note is in the second paragraph: "last year's budget total was $11,613,130."Note that the same number appears at the bottom of the column headed "1996-97Expenditures." Once you understand this verification, check off $11,613,130in the story.
2. You can do the same thingfor this fourth-paragraph number: "Wildgen had recommended a budget of$13,864,260." That same number appears at the bottom of the column headed"1997-98 Expenditures (Proposed)" in the top third of the chart above.When you see this verification, check off the $13,864,260 in the story'sthird paragraph.
3. Note that the story's leadsays the council voted to adopt a budget of $12,910,300. The handout doesnot reflect this number, and the story does not explain the differencebetween the $13,864,260 proposal and the $12,910,300 adopted. So you needto ask the writer to explain.
When you do so, you learn that council members decidedto eliminate the $953,960 for General Improvement (in Lieu of Bonds) fromWildgen's proposal. You find that the $953,960 is the last item in the1997-98 Expenditures (Proposed) column, so you subtract it from the $13,864,260total proposed budget. Doing so, you confirm that the $12,910,300 in thestory lead is the correct amount for the adopted budget. So you check offthe $12,910,300 in the story.
4. Note next that the seconditem in the section below the smaller chart says, "Tangible assessed valueof real property: $317,987,940," and the last item in that section says"Ad valorem tax requirement for proposed budget: $8,211,750." These twopieces of information equip you to see if the lead of the story is correctwhen it says that the adopted budget will call for a property tax of $22.82for each $1,000 in assessed valuation.
To use this information, you need to understand thesefactors:
Note: The assessed valuemust be divided by $1,000 because the tax is levied per $1,000 of assessedvalue.
Given that you want to verify the tax rate mentionedin this story's lead, you need to recast this formula to solve for thetax rate as follows:
Tax Rate = Revenue Potential ÷ (AssessedValue ÷ $1,000)
As noted above, you know the assessed value ("Tangibleassessed value of real property: $317,987,940"). You also can see (fromthe information below the smaller chart) that the revenue potentialanticipated in the original budget proposal ("Ad valorem tax requirementfor proposed budget: $8,211,750"). However, you also know from your conversationwith the writer that the council cut the proposed budget by $953,960. Soyou need to subtract $953,960 from $8,211,750, which gives you $7,257,790.This is the ad valorem tax requirement for the adopted budget, and it isthe number you need to use in the formula for verifying the tax rate. Thus,your calculation is:
Tax Rate = $7,257,790 ÷ ($317,987,940÷ $1,000) = 22.8241 or $22.82
When you do this calculation, you learn that theresulting tax rate is $22.82. This is the number given for the tax ratein the lead, so you can now check off that number.
5. The story's second paragraphrefers to last year's tax rate of $20.92 per $1,000 in assessed value.The information below the smaller chart shows "Current year mill levy:20.920," and you know from the previous page that a mill levy of 20.920is the same as a tax rate of $20.92 per $1,000 in assessed value. So youcan put a checkmark by the $20.92 in the story's second paragraph.
6. That second paragraph alsosays "That tax rate ($22.82) is an increase of $1.75 per $1,000 in assessedvaluation." You can verify that rate by subtracting the current year taxrate ($20.92) from the adopted budget tax rate ($22.82). The resulting$1.90 differs from what the story says. Your reaction should be to lookback over the analysis that has yielded this conflicting number. Once youare confident your analysis is reliable, you should edit out the $1.75and replace it with the correct $1.90 (and put a checkmark beside the $1.90).
7. The second paragraph alsosays the newly adopted tax rate ($22.82) is an increase of 9.3 percentover the current year's rate ($20.92). You recall from the Questfor Accurate Numbers section of this course packet that the formulafor percent change calculations is:
% change = (new rate old rate) ÷ oldrate
So you can calculate the percent the adopted taxrate has increased over the current rate as follows:
% change = ($22.82 $20.92) ÷ $20.92= .0908221 or 9.1 percent
When you subtract $20.92 from $22.83, you get $1.90.When you divide that by the old rate of $20.92, you get .0908221. You knowthis means the rate increase is 9.1 percent. This is a slight differencefrom the 9.3 percent that appears in the story. If you feel you need precisionto a third decimal place (remember, a whole-number percentage representsa value of two decimal places), you need to change the 9.3 percent in thesecond paragraph to 9.1 percent. If you prefer to simplify the story forreader understanding, you might opt for a change to 9 percent. In eithercase, you can put a checkmark where you edited the 9.3 percent.
8. The next unverified numberin the story is in the fourth paragraph, where it says the city manager'soriginal proposed budget would have required a tax rate of $26.32 per $1,000in assessed valuation. You can verify this number using the same formulaused to verify the tax rate in the story's lead:
Tax Rate = Revenue Potential ÷ (AssessedValue ÷ $1,000)
The revenue potential for the tax rate associatedwith the proposed budget is given in information below the smaller chart:Ad valorem tax requirement for proposed budget: $8,211,750. And alreadyyou know that the assessed value is $317,987,940. So you can calculatethe tax rate that would have been required for the proposed budget as follows:
Tax Rate = $8,211,750 ÷ ($317,987,940÷ $1,000) = 25.824098
The resulting 25.824092 tells you that the tax ratecalled for in the proposed budget was $25.82 per $1,000, not the $26.32contained in the story's fourth paragraph. So once you are confident ofyour analysis, you should edit out the $26.32, insert the $25.82 and checkoff this number.
9. The fifth paragraph says,"The council's rejection of Wildgen's recommendation saved the taxpayers$2.43 per $1,000 in assessed valuation." To verify this number you mustsubtract the adopted budget's tax rate ($22.82) from the proposed budget'stax rate ($25.82). The result is $3. So the $2.43 in the story is incorrect,and it should be changed to $3 and checked off.
10. The third paragraph ofthe story says, "The new budget means that owners of property assessedat $45,000 will pay $912.80 in taxes, and owners of property assessed at$95,000 will pay $1,824.60 in taxes." To verify these two numbers, youneed to employ this formula used earlier in #4:
Revenue Potential = Tax Rate x (Assessed Value÷ $1,000)
Note: The AssessedValue must be divided by $1,000 because the tax is levied per $1,000 ofassessed value.
When you apply the property values from the fifthparagraph, you get these calculations:
Revenue Potential = $22.82 x ($45,000 ÷$1,000) or $1,026.90
This tells you that both of the third-paragraph numbersyou are seeking to verify are incorrect. So, after you are confident youranalysis is correct, you should edit the story to include the correct numbers.
11.The story's final paragraph says the adopted budget contains sharp increasesfor several expenditure categories, including these:
Planning and research, up 107.69 percent; generaloverhead, up 75 percent; and airport maintenance, up 103.3 percent. Toverify these three numbers you again recall from the Questfor Accurate Numbers section of this course packet that the formulafor percent change calculations is:
% change = (new rate old rate) ÷ oldrate
So you can calculate the percent these expense categorieshave changed as follows:
|Planning and research % change||($151,600 $73,350)||÷||$73,350||=||1.0668029||or|
|General overhead % change||=||($144,000 $82,950)||÷||$82,950||=||0.7359855||or|
|Airport maintenance % change||=||($61,600 $21,000)||÷||$21,000||=||1.9333333|
| These calculationsindicate that all three of the numbers in the story's last paragraph needto be corrected. Once you are confident your analysis is sound, you shouldchange these three numbers. |
Congratulations. Younow have succeeded in verifying all of the numbers in the Lawrence citybudget story. Once you have mastered the techniques discussed here, youwill be in a position to verify the important numbers in most budget stories.
Updated on Aug. 13, 1999.