Looking Forward to Cuts: A Simulation Decision Tool for Cutback Management

Abstract

This study addresses managerial strategies to adapt public spending in anticipation of fiscal stress. It simulates a cutback to a federal agency, providing a decision tool that applies normative recommendations from the cutback management literature. Using agency data, we develop a menu of options that illustrate how organizational goals will be affected by different distributions of budget reductions. We show five alternatives that consider the political, legal, and fiscal implications of the agency’s responses to anticipated budgetary pressure. This simulation demonstrates that public agencies can apply existing data to generate rational and viable strategic plans for weathering fiscal stress.

Keywords: Federal Budgeting, Cutback Budgeting, Management of Decline, Defense Budgeting

JEL Classification: H50, H56, H61, H68