Using the Resource development analysis concepts, select an option from the case that best addresses the revenue shortfall. You are free to recommend multiple options or a hybrid solution. Please provide proper reasoning and explanations.

Read the Revenue question and select the best proposal out of the 5 given options below.

The Revenue Question These problems spell impending financial shortfalls for the county government in the next fiscal year. According to experts, Kimu County is heading towards serious fiscal crisis unless it takes draconian measures to address the looming shortages. In the past three years, the county barely balanced its operating budget by tapping into its budget stabilization ac- counts ("rainy day" funds). Although the budget stabilization accounts provided a cushion against expenditure cuts in the past, the current fund balance will not cover projected bud- get deficits during the next fiscal year. And the revenue base is shrinking. Squeezed by a shrinking revenue base, county offi- cials face a major dilemma next fiscal year-whether or not to: (1) reduce current levels of service provision by cutting spending; or (2) increase taxes in order to balance the operating budget. To avoid serious political fallout, county officials must quickly resolve the approach ing fiscal crisis. State law mandates that all local governments must balance their operating budgets. The Kimu County charter vests the responsibility for spending cuts and tax hikes in the hands of the elected governing body-the board of commissioners. The board of com- missioners is composed of five members serving four-year staggered terms with each member representing one of the county's five districts. The charter further stipulates that the chief administrative officer of the county-the appointed administrator-shall recommend to the board of commissioners new revenue sources and both budgetary and expenditure control measures necessary to balance the operating budget. Other formal responsibilities of the ap- pointed administrator include: preparing of the annual operating budget proposal and sub- mitting it to the commissioners for consideration and approval; making administrative appointments to county offices; and advising the board of commissioners on policy matters. To assess the gravity of the county's revenue shortfalls, the board of commissioners convened an executive session to hear an update on the revenue forecasts for the next fis- cal year from Tom Liki, county administrator, and Rachel Timons, the budget director. In her presentation, Timons, who is also the chair of the budget committee, noted that her office projected a deficit of $1.5 million for the next fiscal year if no additional revenues were raised. In light of the grim revenue estimates, the board of commissioners directed Liki to make recommendations for how to resolve the impending imbalance in the next fiscal year's operating budget. The board of commissioners may accept or reject such recommenda- tions or it may issue directives about what specific taxes to raise and/or what services to cut. In good economic times, the budget committee meets twice a year to study departmental budget requests and recommend the budget to the county administrator for final review prior to its transmission to the board of commissioners for perusal and consideration for approval. The county charter, however, states that the county administrator may call upon the budget committee to work on emergency situations such as the current projected revenue shortfalls.The Budget Committee's Proposal In response to the commissioners' request. Liki called on the budget committee to analyse, review, and propose new revenue sources and expenditure cuts for next scal year's operat- ing budget and report its proposal to him within the next two months. Alter forty ve days of hard work, the budget committee. under the direction of Tim- ons. proposed ve options to the county administrator. The following are the Budget Corn- mittee's recommended options. Option 1: Make across the boa-rd Cuts. The budget committee proposed a 5 percent across- the-board cut in all of the county's spending units or departments. This Strategy. according to the budget committee. w0uld generate an estimated savings of up to $990,000. The bud- get committee. however, noted that acrossrtherhoard cuts do not provide safeguards For high priority programs. For example, to realize the estimated savings. a pay raise freeze {or all county employees must be implemented to avoid a direct reduction of compensation benets. Such a scenario, however, would most likely trigger opposition From organized la bor, including workers in the sheriff's department who gave up pay raises and cost of living adjustments in the past two years with the understanding that they would be given pay raises of up to 5 percent spread'out over the following three years. Option 2: Impose new taxes on "outsiders.\" Taxing Outsiders. or non-constituents (those without voting rights}. is attractive and 3 Far less controversial approach to generating new revenues among local governments. Knowing that the burden of proposed new taxes is not home by local taxpayers, policy makers do not have to worry about voters' wrath at the hai- lot has in Future elections. The budget committee identied hotels. motels, local theme parks. and shopping centers as potential sources for generating additional revenues from politically weak outsiders. it was noted. however, that there are sobering implications cf taxing tourism and travel in the long run if the proposed new taxes are perceived by would- be visitors to be excessive. For instance. levying new hotel room taxes, which the average customers consider excessive. can reduce tax: revenues if tourists shift dieir dollars to nearby communities without such taxes. Option 3: Downsize the county workforce. The budget committee identified temporary hiring Freezes for all vacant and proposed new positions as an option that, coupled with a reduction in force of the Corrections Department, would reduce the county's work- force. Citing some positive Hawks in spending reductions in neighboring counties real- ized through prison privatization, the budget committee recommended that Kimu Countv privatize its main correctional facilitythe county prison. 1t estimated that prison privatization would generate an annual cost saving of approximately $500,000 per yearan equivalent of 15 percent in annual reduction of the cost of incarcerating prisoners. Most importantly, by privatizing the main county prison. the couriti,r govern- ment would not have to meet the previous additional spending costs mandated by the courts. lt was noted1 however. that this option would likely be challenged by various groups including the correcnons department, the American Federation of State, County, and Municipai Employees {AFSCME}. and the American Civil Liberties Union {ACLU} 3851313] on What happened in Other counties, these groups might argue that prison privatization not only threatens the jobs of pUblit employees, but puts prof its ahezd of inmate rights, jeopardizes public security. and diffuses responsibility and ac- ccuui-ttal-rilin.r of the county government. 1' l 'i I Option 4: Temporariiy increase sales and sin taxes. The budget committee proposed Lhis : strategy with the knowledge that temporary taxes are usually easier to pass. as taxpayers are more wiliing to accept them than permanent taxes. I: was noted. however. that this strata egy stands a greater chance of success if die funds are earmarked for a specic and impcp tant issue such as public safety. The estimate is diet a half-percent increase in local. sales taxes would generate up to $1.4 million. However, mindful of voters1 tendency to resist tax hikes. the committee understands that proposing a sales tax increase in the midst of rising unempiovrnent can be politicallyI exploited by anthrax interest groups and politicians. Yet, the budget committee deems sin taJtcs [adult entertainment services. tobacco. and alcohol] easier to pass because society generally feels that there is something immoral about them. it is estimated that $250,000 can be generated dirough this approach. Option 5: Postpone spending on capital improvements. The budget committee recommended shifting Funds from the capital budget to the Operating budget in order to balance the latter. This proposal is attractive because it would not involve major cuts in the operating budget or layoffs. The downside is that delaying construction and repair of infrastructure facilities would increase future capital improvement costs