Baseline Budget Better Than Base-Bloated Budget

This is a good development.

The “Present Law” budget that is the normal starting point for building a new biennial budget is basically the previous one plus an inflation factor plus a case load factor, plus any changes that were required during the biennium plus…, well you get the idea. The result is that it guarantees the starting point for a new budget is larger than the old one, and any reductions in that budget are treated as cuts, even though the actual spending amount is probably more than last year’s. That’s just dishonest.

The feds do the same thing. They budget a billion dollars for a program to search for green cheese on the moon and then ‘cut’ that program and claim a billion dollars in savings even though it had never been spent before and nobody ever really intended it to be spent in the future. It’s purely political gamesmanship meant to allow politicians to claim they cut spending when in reality they probably raised it.

So…when someone says they’re making a cut to the budget be sure to ask them if they’re cutting hypothetical spending or if they’re actually cutting spending, i.e. will this year’s spending be less than last year’s. And then watch as they take out their hanky and explain how complicated the whole process is and that you should just take their word at face value.

Even baseline budgeting doesn’t solve the problem of waste, though. It assumes, for example, that every nickel spent last year was both efficiently and effectively expended. That’s not necessarily the case. The real answer is performance-based budgeting, which allocates dollars based on a program’s demonstrated ability to achieve agreed-upon government missions and functions, and then prioritizes available dollars to get the biggest bang for the buck. In short, it’s how you and I allocate our spending every day. You can read a lot more about it, along with a pension system primer and tax analysis in our new Budgeting For Results study.