Budget Formats

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Budget Formats

• Or, Budget Classifications and Reform

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Budget Classifications and Reform

• The story of the development of public budgeting
  in US is replete with tales of budget reforms,
  which replace bad old techniques with good
  new ones
• This is, believe me, 99 44/100 pure nonsense

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Information Demands

• Budget documents all contain information, some
  decisions must be made as to what info to
  include, and what to not include
• Typical budget info can deal with
• Inputs,
• Outputs, or
• Outcomes

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Information Demands, cont.

• A budget may focus exclusively on one sort of
  info, but
• Most modern budgets contain elements of two or
  more
• This is OK

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Information Demands, cont.

• Budget formats which are associated with each
  sort of information have been developed
• Over time, and
• In response to evolving budget theory and
  management needs

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Information Demands, cont.

• In other words, evolving budget orientations,
  lead to new budget formats, which contain
  information not carried by older formats

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Information Demands, cont.

• In practice, managers may select a budget format
  that mixes various info types, or focuses on one
• The decision can (should?) be made in response to
  specific, short term needs and in light of a
  broader orientation

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Budget Formats

• And Associated Orientations

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Line Item Budgets

• Control orientation
• Developed in late 1800's
• Focuses on elaborate identification of inputs, in
  order to discourage corruption facilitate its
  identification
• Key elements line items objects of expenditure

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Elements Common To All Budget Formats

• Revenue Classifications (where comes from)
• Expenditure Classifications (where goes)
• Narratives, justifications, etc

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Elements of Line Item Budgets

• Line items
• Specific items to be purchased
• May be shown in varying levels of detail
• Objects of expenditure
• General categories within which line items fall

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A Common Control

• Managers
• Can transfer monies from one line to another
  within objects of expenditure, but
• They need permission to make transfers across
  objects

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Program/Performance Budgets

• Management orientation
• An outgrowth of the scientific management
  movement, of the New Deal
• Reflected new attitudes towards government
  public managers
• Corruption no longer the primary focus

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Program/Performance Budgets, cont.

• Government as proactive, its programs enhance the
  public interest
• Public managers are to
• Manage programs efficiently (get the most bang
  for the buck)
• Facilitate rational decisions by linking spending
  with priorities
• By focusing on outputs, the public goods
  services produced by government

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Programs

• Programs, activities, functions, etc.
• The costs associated with the above

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Performance

• A program structure facilitates prioritization,
  etc, but it does little to show how well the
  individual programs are being managed
• This sort of info can easily (in some cases) be
  added to a program structure, via the use of
  performance measures

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Performance Measures Types

• Level of effort
• Level of demand
• Efficiency (e.g. unit cost)

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Performance Measures

• Are useful
• Are subject to criticism
• Trivialization
• Gamesmanship
• etc.

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Program/Performance Budgets

• Originally, program performance budgets were
  considered to be two different formats Now, it
  is legitimate to consider them to be two facets
  of Program/Performance budgeting

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Program/Performance Budgets, cont.

• To Work Well
• Good program identification
• Good cost accounting system
• Good sense of potential, limits, of performance
  measures
• etc.

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The Planning, Programming Budgeting System (PPBS)
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PPBS

• Planning orientation
• A response to Program/Performance budgets key
  flaw they can show how efficient a program is,
  but say little about its effectiveness
• Has an interesting important history

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PPBS History

• DoD, interservice rivalry, JFK, Robert McNamara
• LBJ the great expansion
• Nixon abandonment
• What happened then?
• Gone with the wind
• Evaporation

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PPBS Underlying Concepts

• Development of analytic capacity within agencies
  (departments, whatever)
• Long term (originally in DoD was 5 years)
  planning, evaluation, budgeting time frame
• Improved budget mechanism to link budget
  decisions to basic policy decisions

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Successful Implementation Requires

• Identify goals
• Link goals to specific programs
• Link programs resource demands
• Relate resource demands to dollars (cost it out)

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PPBS Key Features

• Rationalistic, not incremental
• Program oriented, not organizationally oriented
• Planning analysis emphasized, not management
• Top down, staff oriented

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Why Did It Evaporate

• Paperwork analysis burden,
• Legislative skepticism,
• Lack of sufficient numbers of trained analysts,
• Disregard of organizational lines
• Partisan politics,
• And many more reasons

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PPBS Why Did It Not Totally Disappear?

• Some agencies jurisdictions find it useful,
  often those with
• More receptive legislatures
• More, better, staff analysts
• More flexible PPBS systems
• Well defined missions, goals, objectives
• Many find parts of it very helpful
• Longer term (esp. future projections)
• Some analysis

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The Zero Based Budget System (ZBB)

• More Planning Orientation?

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First, A Little History

• Dept. Of Agriculture, 1960
• Texas Instruments, research geeks, Peter Phyrr,
  Harvard Business Review
• Georgia, Jimmy Carter, Presidential Politics
• Federal reality
• Another election, another change

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ZBB What It Isn't

• Zero Based

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ZBB What It Is

• Decision Units
• Decision Packages
• Rankings

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Decision Units (DUs)

• Not so low in the organization as to cause
  excessive paperwork
• Not so high in the organization as to mask
  important considerations /or to prevent
  meaningful review of work
• Normally
• Are within single budget account
• Reflect existing organizational program
  structures
• Can have measurable accomplishments
• Are a level at which policy decisions may be made

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Decision Packages Several Budgets For Each DU

• Below base
• Base
• Expansion

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Rankings

• What Can I Say?

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ZBB Today

• Not required in federal government
• Not common in federal agencies
• Remains popular among those state local
  governments which had adopted it in the 1970's
  1980's

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