Public and Private Financial Administration: A Great Dance

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Martin Sellers
December 12, 2020

Introduction

Having formally studied both public administration and business administration, and having worked in both sectors for a length of time enough to believe myself experienced, I’ve found it interesting that most finance and budget program directors in public sector agencies have an MBA or business related degree. At first, I believed this to be so because there are many more MBA programs available than MPA programs, so more students would graduate and be available with that credential. However, after looking a little more closely, I found that MPA programs do not teach finance, or at least, not the kind of finance content public sector finance, auditing and budgeting departments want and need.

The Tennessee Textbook Experience

Located in Harrogate Tennessee, I reviewed public finance positions in this state’s government agencies to determine how directors of finance, budgeting and auditing departments are formally educated and came up with some interesting findings. Also, I reviewed colleges and universities in Tennessee to determine which of them have MBA and which have MPA programs. Nearly all have MBA programs, all having concentrations in finance. Only six institutions have MPA programs, all teaching at least one course in public finance. The most popular core textbooks used in the public finance courses in MBA programs are very different than those used in public finance courses within MPA programs.

All 23 MBA programs in Tennessee were reviewed, as well as the six MPA programs, to determine how public finance courses are being taught. We found public finance learning outcomes in the MBA finance courses to be very different from the MPA programs’ learning outcomes, having a distinct perspective and theoretical framework. The texts used in MBA programs have titles such as; Investments, Financial Accounting for MBAs, Financial Management Theory and Practice, Principles of Corporate Finance, Investment Analysis and Portfolio Management. The texts used in MPA programs have titles such as; Financial Strategies for Public Managers, Fiscal Administration, Public Budgeting Systems, Public Finance and Public Policy, and The Basics of Public budgeting and Financial Management. The flow and direction of the academic content of these textbooks may not be obvious from reading only their titles, so we reviewed the contents of the texts and found something quite interesting.

Public finance course textbooks in MBA programs are slow to discuss public policy, public budgeting or the politics of budgeting, but are quick to approach the subject from an entrepreneurial and investment perspective. Their focus is corporate finance, cash flow, the time value of money and investment strategies. However, textbooks used in MPA programs focus on public policy and public budgeting in their first chapters, presenting discussions about how public budgeting occurs, the politics affecting budgeting, planning and taxation and spending for public goods. In all, 18 Public Finance course textbooks were reviewed.

Survey of Budget Directors

We reviewed information about officials who direct budget and finance offices in Tennessee state agencies to determine what formal degrees they hold. We found that of 28 budget or finance directors, 12 hold degrees in economics, accounting or finance from a business program. Six hold an MBA or MS in Business. One budget director has an AS degree in business (with a lot of experience). Four hold a BS or BA in a field not related to business or administration. Two have an MS in the sciences and three hold JD degrees. No director of a Tennessee public finance or budget office holds an MPA degree. When we asked human resource officials why they thought this was so, the most frequent response was that MBA programs have courses that are more rigorous in financial training, utilize statistical and formulaic financial information, provide learning outcomes that are numbers driven, spreadsheet assembled and require higher level calculation. MBA public finance courses focus on financial accounting, managerial accounting and investment and portfolio management.

Why Is This Important

There are many examples of how the knowledge taught in MBA public finance courses would be significant for a financial manager in the public sector. Municipal managers must understand the municipal bonds market, which requires a thorough understanding of the bond and equities markets, including risks and investments. Awareness of growth and decline in the manufacturing and non-manufacturing segments of the economy are reported in market indexes. Trade deals with China and other countries may suggest changes in prices and availability of markets, which affect state and municipal purchasing, timeframes for purchases to be made or competition that may arise. A government shutdown impacts the markets, pay and the bond market. Local job loss due to private sector business decisions—for example, General Motors’ 2019 decision to close several plants—impacts state and local employment which affects health, welfare, education and unemployment funds. A decline in small business economic confidence (sales, employment and expectations) can have an impact on jobs, taxes and transfer payments.

Summary

If we believe it valuable that public officials be trained in MPA programs, then more MPA programs should implement finance tracks that are rigorous and market-focused. It would be of significant value to public agency finance directors to be knowledgeable about public sector administration and policymaking by having access to an MPA that includes a rigorous finance track.

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Author: Martin Sellers is Professor of Political Science and Dean of the School of Arts, Humanities, and Social Sciences at Lincoln Memorial University, Harrogate, Tennessee. In addition to his PhD, he has acquired both MPA and MBA degrees. He has been an administrator and taught at Campbell University, the College of Saint Mary and Cox College and can be reached at [email protected].

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