1. BUDGET TYPES PA 730 Prof. Janey Qian Wang September 20, 2009 Presented by: Cyndi Mulligan Sasha Jetton Amihan Makayan James Maclachlan

2. Line Budget Item

3. LINE ITEM BUDGET

4. “...budgets by organizational unit and object and is consistent with the lines of authority..” [National Center for Education Statistics] Relatively straightforward to prepare/understand Familiar/traditional method Disadvantages Lacks performance context - hard to evaluate appropriateness of allocations/expenditures Tendency to base this year’s request on last year’s budget, rather than true qualitative analysis of future short & long term needs Advantages of Line Item Budget

5. Performance Budget

6. Focuses on the outcomes and evaluation of programs by linking the resources needed to meet agency goals and results provided by a performance analysis. Assesses the performance of a particular policy and or program in terms of the programs effectiveness and efficiency Assists in future policy and program decisions Assist agencies in linking the budget recommendations to outcome measures. Advantages of Performance Budget

7. Additional resources and data are needed to meet objectives Data Collection is difficult and costly Disadvantages of Performance Budget

9. Program Budget

12. Funds are appropriated to programs rather than expense categories, as they are in line budget item. Ability to see the agency’s missions and goals in a simple easy to understand format. Allows anyone to see in detail costs associated to individual programs. Allows the program administrator to determine the amount of resources available for each program expense and help him/her guide decisions. Advantages of Program Budget

13. Tracking each program can be time consuming and costly to produce. Expenses are shared by different departments and programs, it harder to see the overall total resources being allocated for each expense. This can prove to be a challenge for legislators or administrators responsible for setting priorities. Disadvantages of Program Budget

14. Zero Based Budget

15. History Used in 1962 Dept. of Agriculture Budget. Popularized by Texas Instruments in the 1970's. Championed by President Carter. Not the same as personal budgeting system advocated by David Ramsey. The “Decision Package” Central to zero based budgeting is identifying organizational objectives, through the creation of decision packages, in three stages: 1. Identification of decision units. 2. Development of decision package. 3. Review and ranking of decision packages.

16. ZERO BASE BUDGETING EXAMPLE DECISION UNIT: SPECIAL PROGRAMS OFFICE DECISION PACKAGE 1: BOOKMOBILE 1. BASE (min) 90% 25 hrs. per week 36,000 2. CURRENT 100% 30 hrs. per week 40,000 3. ENHANCED 110% 35 hrs. per week 44,000 DECISION PACKAGE 2: IN SCHOOL PROGRAMS 1. BASE (min) 90% 8 hrs. per week 22,500 2. CURRENT 100% 10 hrs. per week 25,000 (2 elementary schools) 3. ENHANCED 110% 12 hrs. per week 27,500 DECISION PACKAGE 3: FOREIGN FILM SERIES 1. BASE (min) 90% 10 films per year 3,150 2. CURRENT 100% 12 films per year 3,500 (2 elementary schools) 3. ENHANCED 110% 16 films per year 3,850 RANKING 1. In-School - 1 22,500 22,500 2. In-School - 2 2,500 25,000 3. In-School - 3 2,500 27,500 4. Bookmobile - 1 36,000 63,500 5. Film Series - 1 3150 66,650 6. Bookmobile - 2 4000 70,650 7. Bookmobile - 3 4000 74,650 8. Film Series - 2 350 75,000 9. Film Series - 3 350 75,350 BUDGET = 65,000

17. Advantages of Zero Based Budget Organization programs are analyzed yearly from the ground up. Budgeting negotiations and decisions may involve more substantive policy debate. Eliminates automatic sense of entitlement to annual budget increases. Budget is easier to modify mid-year because rankings have already been established.

18. Disadvantages of Zero Based Budget Overestimates ability to calculate. Short budget cycle insufficient time to make comprehensive rankings. Extremely time intensive. Because of matching federal funds for many state and local programs, government budgets are not easily adapted to zero based budgeting. Political considerations make elimination of popular but low ranked programs difficult.