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This article is a summary of a research report of the same title, recently released by GFOA and funded by a generous grant from the City of Calgary, Alberta. The report can accessed, free of charge, at www.gfoaconsulting.org under the research reports section of the resources tab.
When using zero-base budgeting (ZBB), a government builds a budget from the ground up, starting from zero. Though the apex of its popularity is long past, ZBB has seen renewed interest in today's environment of fiscal constraint, not least because the "zero" in zero-base budgeting sends a powerful message that taxes and spending will be held in check. However, the time lapse between the zenith of ZBB in the late 1970s and the present, as well as the political rhetoric surrounding the technique, has obscured the theory and practice of ZBB for many.
In elucidating this sometimes controversial and misunderstood budgeting method, this article will first describe the theoretical process of ZBB; however, because "textbook" ZBB is very rare,1 it will describe how GFOA research found ZBB is actually used in practice. Finally, the article will describe how public officials can decide if ZBB is right for their circumstances.
A BRIEF HISTORY
Zero-base budgeting first rose to prominence in government in the 1970s, when U.S. President Jimmy Carter promised to balance the federal budget in his first term and reform the federal budgeting system using zero-base budgeting, a method he had used while governor of Georgia. ZBB, as Carter and budget theorists envisioned it, required expenditure proposals to compete for funding on an equal basis - starting from zero. In theory, the organization's entire budget would need to be justified and approved, rather than just making incremental changes from the prior year.
Interest in ZBB had been in decline for many years. The large amount of paperwork and data the method generates, in addition to doubts about its ability to fully meet its theoretical promises, were at least partially responsible.2 Also, the improving economic conditions from the low points of the late 70s and early '80s, in the United States, and the early '90s, in Canada, probably reduced the perceived need for what was largely regarded as a "cutback budgeting" method.1
Pure ZBB might be largely...