Aurora Beacon News - Letter to the Editor: Federal Government Needs to Embrace Zero-Based Budgeting

Op-Ed

By Randy Hultgren

Imagine sitting at your kitchen table or in your study planning out your family's annual budget. You don't really know what all your expenditures will be. In fact, you're not exactly sure if you need some of the things you normally budget for or actually used all of what you bought last year. Just in case, though, you add in all these costs to this year's budget anyway. Oh, and that car and refrigerator you purchased last year gets lumped into this year's overall spending as well.

Of course, this is a ridiculous approach to financial planning. Nobody in their right mind budgets this way. Unless, that is, you are the federal government.

Unlike most hardworking American families who each year account for every incoming and outgoing dollar, the federal government assumes ongoing expenditures and rolls them over from year to year. Through a process known as incremental budgeting, existing government programs perpetuate from one year to the next simply because they were there the year before, with their need and effectiveness seldom analyzed and underlying assumptions rarely questioned.

While incremental budgeting retains the advantage of simplicity, it doesn't lend itself to cost control and program justification, a big reason why our national debt is now eclipsing $15 trillion. As long as the underlying budgetary foundation remains calcified and prone to protect existing expenditures, Congress and the federal agencies will have a difficult if not impossible time cutting spending.

Can the federal government formulate a budget the way most American households do? Well, yes, it can and it should. Instead of incremental budgeting, the federal government ought to adopt a zero-based budgeting system, or at least a variation of it.

Under zero-based budgeting, every program and expenditure is reviewed at the beginning of each budget cycle and must be justified in order to receive funding. No spending is taken for granted.

Zero-based budgeting requires planners to evaluate programs from "dollar zero" to determine if they are needed, continue to serve a useful purpose, and contribute to overall goals within available resources before funding is committed.

In the words of Carol Gurvitz, a former financial analyst at the Congressional Research Service, with zero-based budgeting, "Activities, methods of performance and levels of effort are evaluated on the basis of their contribution towards achieving the desired objectives of the organization. … (It) thus tries to see how well the organization as a whole works towards accomplishing its goals and how efficiently each part of the organization operates." Hmmm… sounds like a formula the federal government could use.

In fact, the federal government in the past and on a limited basis has experimented with zero-based budgeting. Fifty years ago, the White House Budget Office directed the Agriculture Department to "justify from zero" its budget requests for the fiscal year 1964.

Not too surprisingly, the zero-based approach offered tangible benefits. It led to more thorough planning, better budgetary information, more efficient allocation of resources and a greater understanding of how programs related to the agency as a whole. And, yes, it did identify areas of unnecessary and wasteful spending.

Problems surfaced as well. The biggest was the difficulty to completely scrutinize all of an agency's programs within the time constraints of a budget cycle -- a valid complaint, but one that speaks volumes about the size and growth of a bureaucracy.

Still, a zero-based budget need not be accomplished annually. It could be used periodically, say, every five years. Agencies could also implement it on a staggered basis so that some use it one year and others in subsequent budget cycles. Another possibility is to utilize zero-based budgeting on a partial basis most years with a more thorough undertaking every few years. Whatever the routine, zero-based budgeting offers the opportunity to address an inherent problem in the current budget process and presents a more accurate assessment of how scarce federal dollars should be spent.

You don't have to be an economist to know that the federal government has a spending problem. Washington's tendency to overspend won't change as long as the basis of its approach to budgeting enables growth in spending to become an intrinsic result of the process.

You simply can't cut spending when sizeable portions of your expenditures are carried over from one year to the next without any regular accountability. That's something every American who sits down at their kitchen table to balance their own budget already knows.

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