Zero-Based Budgeting

Zero-based budgeting is a method of budgeting wherein all spending must be reviewed for its merit for the up coming fiscal period. In the terms of Federal budgeting, this would generally be for a fiscal year, though other periods are possible. There term derives from the concept of beginning with a base of “zero” and from that staring point, each expense is assessed as to the cost and benefit derived from it. The budgets, or the portion to which  the zero-based budgeting process is applies, are then built around what is needed for the upcoming fiscal time period. The important distinction to other forms of budgeting is to not base the starting point, in fact to disregard the previous year’s level, or only consider that among a variety of factors, in determining whether the level will be higher or lower than the previous fiscal period. 

Statement by Rep. Blanchard

A recent Brookings Institution study of the lifespan of governmental agencies that recently came out found that of 175 Government organizations existing in 1923, no less than 148, that is, 148 out of 175, or 85 percent, were still in existence in 1975, and fully 109, or 62 percent, existed in essentially the same status as they had 52 years ago. In addition, 246 new organizations had been established and the “birth rate” had more than doubled for new organizations. The Library of Congress, in a similar study, found that 329 bodies were created between 1960 and 1974, while 126 were abolished, for a new 14-year gain of 203. “Uncontrollable” spending is outstripping controllable areas of the budget in terms of growth, going from 59 percent of the budget in 1967 to 77 percent in 1977. And the most rapid growth of all has taken place in programs with -permanent appropriations, which have tripled from $55 billion to $165 billion. In 1973, Mr. Chairman, Congress enacted a major budget reform, the Budget and Impoundment Control Act. That has begun the task of gaining control over a fragmented and generally uncoordinated spending process. It appears to me that the process is working very well. I think certainly in the House, this committee is largely responsible for that success and should be commended, which makes it all the more exciting, and I think makes me all the more optimistic that your task force will consider what I think is the logical continuation of that budget reform; namely, zero-base review. I think it is a necessary step.

[Zero-Based Budgeting, Wednesday, June 30, 1976, House of Representatives, Task Force on Budget Process, Committee on the Budget, Washington, D.C. 20515]



Working Capital Fund