Zero-based budgeting procedures

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Zero-Based Budgeting or "ZBB" procedures is an approach to budgeting that requires all government budgetary line-items to begin each budgeting cycle at zero, as opposed to typical, incremental budgeting approaches that focus on a percentage increase or decrease relative to the item's prior year budget total. As compared with a traditional, incremental budgetary approach, the allocation of funds under ZBB is intended to be based only on the merits of each potentially-funded item's policy goals, performance, etc. without respect to the amount of funding a program received previously . ZBB procedures involve asking for detailed identification and evaluation of all potential budgetary items and potential alternatives, along with the spending necessary to achieve desired plans and goals. The pure version of ZBB found in theory appears to be very rare in practice. More commonly, two variations of ZBB called "Zero Line-Item Budgeting" and "Service Level Budgeting" are adopted. Three other major alternatives that address some of the planning and budget questions that ZBB is often intended to address are "Priority Budgeting", "Target-Based Budgeting" and "Program Review."[1]




State X is planning to systematically review all the programs and activities within the state government and cut the spending on some inefficient programs. State X decides to adopts the zero-based budgeting procedures in place of the old incremental budgeting procedures. To implement the new budgeting procedures properly, State X first divide all programs and activities up into “decision units” – the lowest level at which budget decisions are made. Then managers in each decision unit then prepare a detailed description and evaluation of all activities it performs, including alternatives to current service delivery methods and the spending plans necessary to achieve the decision unit’s goals. The completed decision-packages are gathered up and ranked from top to bottom within the organizational unit in which the decision unit resides. Finally, the ranking is used by central budget authorities as the basis for making allocations.[2]


Tradeoffs of implementing this policy may include:

  1. Creating a zero-based budget from the ground up is time-consuming and generates extra workload and expense of budget preparation.
  2. Managers and staff may lack commitment and professional knowledge to ensure proper implementation.
  3. Justifying every expense may not be feasible or practical for some programs that do not create tangible results. [3]
  4. There is no explicit planning process that is separate from the budget process.
  5. Managers may be reluctant to propose decision packages that are less than current spending.[4]

Compatibility Assessment

If answered yes, the following questions indicate superior conditions under which the policy is more likely to be appropriate:

  1. Is the organization faced with necessary budget cutting?
  2. Is the traditional incremental budgeting process not effective for the organization?
  3. Is the organization looking for systematic analysis, review and allotment of resources?
  4. Is performance data available to help make different funding levels meaningful?
  5. Are there staff available for the extra work of budget preparation?


The following questions should be considered when determining how to implement this policy:

  1. What level of programs, activities or organizational entities are appropriate as "decision unit" at which budget decisions are made?
  2. What budget and performance information should be included in the "decision package" for review?
  3. Who should prepare the package information, review and rank the priority of units, make the allocation of funds, respectively?
  4. How much time and expense will the whole budgeting process require?
  5. What is the appropriate frequency for a budgeting process that requires justification of every activity and program?


  • Has adoption of: Limited. In recent years, 17 States in U.S. have reported use of Zero-Based Budgeting in some form. [5]





  • [1]Cheek L M, Cheek Logan M. Zero-base Budgeting Comes of Age: What it is and what it Takes to Make it Work[M]. Amacom, 1977.
  • [2] Pyhrr P A. The zero-base approach to government budgeting[J]. Public Administration Review, 1977: 1-8.
  • [3] Clynch E J. Zero-base budgeting in practice: An assessment[J]. International Journal of Public Administration, 1979, 1(1): 43-64.
  • [4]McCafferry J. The transformation of zero based budgeting: program level budgeting in Oregon[J]. Public Budgeting & Finance, 1981, 1(4): 48-55.
  • [5] Lauth T P. Zero‐Base Budgeting Redux in Georgia: Efficiency or Ideology?[J]. Public Budgeting & Finance, 2014, 34(1): 1-17.

  • [6] Zero-Base Budgeting: Modern Experiences and Current Perspectives. 2011.
  • [7] Performance Budgeting: Past Initiatives Offer Insights for GPRA Implementation. 1997.
  • [8] NCSL Fiscal Brief: Zero-Base Budgeting in the States. 2012.
  • [9] Zero-Based Budgeting in the States. 2010.
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