Sensitivity analysis is a technique for understanding how changes in key assumptions affect financial projections or plans. For municipal budgets, sensitivity analysis might test how a 1% change in assessment growth, a $10 change in gas prices, or a 2% wage increase affects the budget. This helps identify which variables most significantly impact financial outcomes and where risks are greatest. Sensitivity analysis informs decisions by showing how robust projections are under different conditions. If small changes in assumptions dramatically change results, projections are highly sensitive and uncertain. More sophisticated analysis tests multiple variables simultaneously to understand combined effects.