Public Budgeting is a field of Public Administration

Public administration

Public Administration houses the implementation of government policy and an academic discipline that studies this implementation and that prepares civil servants for this work. As a "field of inquiry with a diverse scope" its "fundamental goal.....

 and a discipline in the academic study thereof. Budgeting is characterized by its approaches, functions, formation, and type.

The authors Robert W. Smith and Thomas D. Lynch describe public budgeting through four perspectives. The politician sees the budget process as "a political event conducted in the political arena for political advantage". The economist views budgeting as a matter of allocating resources in terms of opportunity cost where allocating resources to one consumer takes resources away from another consumer. The role of the economist, therefore, is to provide decision makers with the best possible information. The accountant perspective focuses on the accountability value in budgeting which analyzes the amount budgeted to the actual expenditures thereby describing the "wisdom of the original policy". Smith and Lynch's public manager's perspective on a budget is a policy tool to describe the implementation of public policy. Further, they develop an operational definition:

A "budget" is a plan for the accomplishment of programs related to objectives and goals within a definite time period, including an estimate of resources required, together with an estimate of resources available, usually compared with one or more past periods and showing future requirements.

Leading Definitions

• Practical: "A plan for financing an enterprise or government during a definite period, which is prepared and submitted by a responsible executive to a representative body (or other duly constituted agent) whose approval and authorization are necessary before the plan may be executed." ~Frederick A. Cleveland
• Theoretical: The leading question: "On what basis shall it be decided to allocate x dollars to activity A instead of activity B?" ~V. O. Key Jr.

Leading Theorists and Contributions

• Frederick Cleveland: constructed a practical definition of budgeting.
• William F. Willoughby
  William F. Willoughby
  William Franklin Willoughby was an author of public administration texts including works on budgeting. He often worked with his twin brother, Westel W...
  
  : describes the purpose of a budget document.
• V. O. Key, Jr.
  V. O. Key, Jr.
  Valdimer Orlando Key, Jr. , usually known simply as V. O. Key, was an influential American political scientist known for his empirical study of elections and voting behavior.-Biography:...
  
  : sparked the normative question regarding how scarce resources ought to be distributed to unlimited demands.
• Verne B. Lewis: argued for a budgeting theory based on economic values; strongly contributing to the study of public finance.
• Richard A. Musgrave: the Father of Public Finance; identified the three roles of government in the economy: allocation of resources, distribution of goods and services, and economy stabilization.
• Aaron Wildavsky
  Aaron Wildavsky
  Aaron Wildavsky was an American political scientist known for his pioneering work in public policy, government budgeting, and risk management....
  
  :suggested that budgetary decision making is largely political, rather than based on economic conditions.
• Allen Schick
  Allen Schick
  Allen Schick is a governance fellow of the Brookings Institution and also a professor of political science at the Maryland School of Public Policy of University of Maryland, College Park...
  
  : outlined the three functions of budgeting:

1. Strategic Planning; deciding on the goals and objectives of an organization.
2. Management Control; management's process of assuring effective and efficient accomplishment of goals and objectives laid out via strategic planning.
3. Operational Control; focused on proper execution of specific tasks that provide the most efficient and effective means of meeting the goals and objectives ordered by management control.

• Irene S. Rubin: facilitated the discussion of the dichotomy between theory and practice of public budgeting.

Approaches to Budgeting

A brief note on Systems Theory

Systems theory

Systems theory is the transdisciplinary study of systems in general, with the goal of elucidating principles that can be applied to all types of systems at all nesting levels in all fields of research...

 applied to Political Science: Inputs enter the governmental system that produces outputs which--in turn--are related to outcomes. The conversion of inputs to outputs is a measure of efficiency as the measurement of contributing inputs to impacting outcomes is a measure of efficacy.

• Line Item Budgeting is arguably the simplest form of budgeting, this approach links the inputs of the system to the system. These budgets typically appear in the form of accounting documents that express minimal information regarding purpose or an explicit object within the system.
• Program Budgeting takes a normative approach to budgeting in that decision making--allocating resources--is determined by the funding of one program instead of another based on what that program offers. This approach quickly lends itself to the PPBS budgeting approach.
• PPBS Budgeting or--Program Planning Budgeting System--is the link between the line-item and program budgets and the more complex performance budget. As opposed to the more simple program budget, this decision making tool links the program under consideration to the ways and means of facilitating the program. This is meant to serve as a long-term planning tool so that decision makers are made aware of the future implications of their actions. These are typically most useful in capital projects. The planning portion of the approach seeks to link goals to objects or expected outcomes from specific outputs, which are then sorted into programs that convert inputs to outputs; finally, the budgeting of PPBS helps determine how to fund the program. A leader in the promotion of PPBS was Robert McNamara's use in the United States Government's Department of Defense in the 1960s.
• Performance Based Budgeting
  Performance Based Budgeting
  Adopting public sector’s performance-based budgeting to the private sector using the CPM framework. In performance-based budgeting first the goals and objectives of organization or department are identified, then measurement tools are developed and the last step is reporting.-Introduction:Today,...
  
  attempts to solve decision making problems based on a programs ability to convert inputs to outputs and/or use inputs to affect certain outcomes. Performance may be judged by a certain program's ability to meet certain objectives that contribute to a more abstract goal as calculated by that program's ability to use resources (or inputs) efficiently--by linking inputs to outputs--and/or effectively--by linking inputs to outcomes. A decision making--or allocation of scarce resources--problem is solved by determining which project maximizes efficiency and efficacy.
• Zero-based budgeting is a response to an incremental decision making process whereby the budget of a given fiscal year (FY) is largely decided upon by the existing budget of FY-1. In contrast to incrementalism, the allocation of scarce resources--funding--is determined from a zero-sum accounting method. In government, each function of a department's section proposes certain objectives that relate to some goal the section could achieve if allocated x dollars.
• Flexible Freeze is a budgeting approach pioneered by President George H. W. Bush as a means to cut government spending. Under this approach, certain programs would be affected by changes in population growth and inflation.
• Program Assessment Rating Tool
  Program Assessment Rating Tool
  The Program Assessment Rating Tool, or PART, is a program run through the United States Office of Management and Budget instituted by President George W. Bush in 2002 to rate all federal programs on their effectiveness...
  
   (P.A.R.T.) is an instrument developed by the United States OMB to measure and assess the effectiveness of federal programs that review the program’s purpose and design, strategic planning, program management, and program results and accountability. The scores are rated from effective (ranging between 85 and 100 points), moderately affective (70-84 points), adequate (50-69 points), and ineffective (0-49 points).
• Priority Based Budgeting is a response to poor economic conditions. As opposed to incremental budgeting, where resource allocation is determined based on marginal shifts in costs, priority based budgeting fixes the amount of governmental resources and then allocates resources across the various programs. The programs receive their allocation based on their priority; priorities may include safe and secure communities, health, education, and community development among others. Outcome assessment then determines the efficacy of the programs. Although this approach is pro-democratic, critics suggest the administration of this process is extremely difficult.

Functions of a Budget Document

As a policy document, a government's budget is designed as a plan for implementing its policy. Traditionally, budgets served as a more rigid tool to implement policy in a retrospective setting. The functions associated with these values are listed under the Traditional Model and are control, management, and planning. The Modern Model, taking a less rigid approach, has replaced the control function with the monitoring function, the management function with the steering function, and the planning function with the strategic brokering function.

Traditional Model

Control: using the budget document to control expenditures to maximize accountability. This function is most commonly associated with line-item budgets.

Management:using the budget document to manage organizations and personnel. This function is focused on performance and efficiency. This function is most commonly associated with performance budgets.

Planning: using the budget document as a plan to achieve some goal. The focus of this function is on the outcome and effectiveness of a program. This function is most commonly associated with program and PPBS budgets.

Modern Model

Monitoring: as a response to the traditional control function, the monitoring function focuses on the consequences of expenditures.

Steering: as a response to the traditional management function, the steering function serves as a guide for managing.

Strategic Brokering uses the budget document as a means of constantly looking for possible directions and reacting to the environment.

Values in Budgeting

Three values are generally discussed in the literature of public budgeting; accountability, efficiency, and efficacy.

Accountability focuses on the inputs going into the system or program in action and is best characterized by the Line-Item budgeting approach. It is best suited for the control and monitoring functions of a budget.

Efficiency focuses on the process of the system or program and its conversion of inputs (resources) into outputs (policy). It's focus on the process makes this value appropriate for performance budgets and most in-line with management and steering functions.

Efficacy focuses on outputs and outcomes, measuring the impact of policy. This value follows both the program budget and PPBS budget approaches and coinsides with the planning and strategic brokering functions.

Six Steps of the Budgetary Process; simplified

Typically, the budget cycles occurs in four phases. The first requires policy planning and resource analysis and includes revenue estimation. The second phase is referred to as policy formulation and includes the negotiation and planning of the budget formation. The third phase is policy execution which follows budget adoption is budget execution—the implementation and revision of budgeted policy. The fourth phase encompasses the entire budget process, but is considered its fourth phase. This phase is auditing and evaluating the entire process and system. See the associated points below:

• Revenue Estimation performed in the executive branch by the finance director, clerk's office, budget director, manager, or a team.
• Budget Call issued to outline the presentation form, recommend certain goals.
• Budget Formulation reflecting on the past, set goals for the future and reconcile the difference.
• Budget Hearings can include departments, sections, the executive, and the public to discuss changes in the budget.
• Budget Adoption final approval by the legislative body.
• Budget Execution amending the budget as the fiscal year progresses.

Types of Public Budgets

• Operating budget
  Operating budget
  An operating budget is the annual budget of an activity stated in terms of Budget Classification Code, functional/subfunctional categories and cost accounts. It contains estimates of the total value of resources required for the performance of the operation including reimbursable work or services...
  
  s are those documents that describe the expenditures and revenues during a given period for the functioning of an organization.
• Capital budgeting
  Capital budgeting
  Capital budgeting is the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing...
  
  is the process of planning for future purchases above a certain cost threshold or extended life span. This budget is typically accompanied by a Capital Improvement Plan
  Capital Improvement Plan
  A Capital Improvement Plan , or CIP, is a short-range plan, usually four to ten years, which identifies capital projects and equipment purchases, provides a planning schedule and identifies options for financing the plan...
  
   that describes a timeline for acquisition and payment of debt.

See also

• Budget
  Budget
  A budget is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods...
  
  
• Budget process
  Budget process
  A budget process refers to the process by which governments create and approve a budget, which is as follows:* The Financial Service Department prepares worksheets to assist the department head in preparation of department budget estimates...
  
  
• Budget theory
  Budget theory
  Budget theory is the academic study of political and social motivations behind government and civil society budgeting. Classic theorists in Public Budgeting include Henry Adams, William F. Willoughby, V. O. Key, Jr., and, more recently, Aaron Wildavsky. Notable recent theorists include Baumgartner...
  
  
• Constitutional economics
  Constitutional economics
  Constitutional economics is a research program in economics and constitutionalism that has been described as extending beyond the definition of 'the economic analysis of constitutional law' in explaining the choice "of alternative sets of legal-institutional-constitutional rules that constrain the...
  
  
• Political economy
  Political economy
  Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...