Budgeting Process in the Public Sector

This research examines several different issues of the budgeting process in the public sector. Using the works of Donald Axelrod, Budgeting for Modern Government (1995), Robert Eisener, "Debunking the Conventional Wisdom in Economic Policy," Challenge (May/June 1990) and others, five questions on the budgeting process are answered.

Rational Budgeting v. Incremental Budgeting

Rational budgeting and incremental budgeting are two very different perspectives on the budget process. The former tends to be a grand-scale approach to budgeting with medium-term and long-term ramifications, while the latter focuses on small and immediate steps in adjusting budget plans.

Since colonial times, the traditional approach, which emphasized incremental budgeting, has dominated budgetary practices in government. Until the early part of this century, line-items were approved piecemeal by the legislature. For the most part, Congress had control over which items would be funded and the amount of the funding. Under this system, no idea existed regarding the total anticipated budget for a particular fiscal year. The Taft Commission on Economy and Efficiency played an important role in changing the system. The Commission's 1912 report argued the need for establishing an executive budget. The report, however, gave as much emphasis to budget execution and management as to budget formulation. Outputs became as important as inputs. In essence, the 1912 report recommended a performance-type approac

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Category: Economics - B