MATTHEW GAGNON

Building a budget from zero finds the waste

Posted Aug. 25, 2011, at 3:30 p.m.

Lost in all the kerfuffle over congressional redistricting has been a rather interesting tidbit of news. Gov. Paul LePage has asked his cabinet to institute a new (for Maine) way of drawing up state budget numbers, something called “zero-base budgeting.”

There probably isn’t a drier topic on earth than the budget process, but for Maine, there probably isn’t anything more critical to the healthy functioning of the state than how the budget is drawn up.

Zero-base budgeting has been a desired policy by many in Maine for a long time, and there is a good reason why. Put simply, it directs department heads to use a cost-benefit analysis when looking at department programs and expenditures. For every budget.

Voters of all parties have long felt that Maine spends money inefficiently, and wastes a lot on things that don’t really help. In a poor state, this means that taxes have to be higher than they should be in order to support that inefficiency. This, in turn makes it more difficult for people to get by, puts less money in the state economy and makes it harder to start and grow a business.

This new way of doing things will hopefully begin to address that.

State agencies will now be required to prioritize and justify all the programs, activities and expenditures that they are responsible for, starting from — you guessed it — zero. In other words, every time a budget is drawn up they essentially start from scratch and build from the ground up.

During the review process, no reference is made to the previous level of expenditure, and the resulting budget will be much more realistic and efficient.

Currently, Maine uses what is known as “incremental budgeting,” which only asks departments to justify new additions or deletions to their budgets. As such, the only thing that matters year to year is the variance between the last budget — the baseline — and the new one.

The new budget process is a child of the private sector, where ZBB, as it is known, is used to more efficiently allocate resources, find bloated budgets and obsolete operations and force managers to look for more cost effective ways of operating.

It is no surprise that LePage, himself a businessman and one who operated his business on a shoestring budget, would be interested in trying something like this in state government.

The reason that the implementation of zero-base budgeting is such a welcome idea is because it essentially rejects any assumptions that the things that were funded in previous budgets deserve to be funded again.

Under normal budgeting, governments often fall into lazy traps whereby they assume previously funded programs deserve to continue, simply because the problems they were intended to address persist. Bureaucrats assume need without looking deeply at what the money is spent on and if the benefit of that spending is really worth it. This, of course, leads to waste.

Under the new system, Maine will actually be forced to look at the money it spends, what it spends it on and whether or not what it is spending money on is actually worth it. Several commissioners have already suggested that this move will force significant restructuring and savings.

Believe it or not, it was none other than Democrat Jimmy Carter, while he was serving as Georgia’s governor and later as president, who was the first major proponent of zero-base budgeting in government.

While Republicans like this idea more than Democrats, there is no doubt it has appeal across parties. After all, who can really argue with looking more closely at what we spend money on and evaluating things based on effectiveness?

In an age of shrinking economies, budget cuts and austerity, simple but important steps like this can go a long way toward building the best state possible in extraordinarily difficult times.

Matthew Gagnon, a Hampden native, is a Republican political strategist. He previously worked for Sen. Susan Collins and the National Republican Senatorial Committee. You can reach him at matthew.o.gagnon@gmail.com and read his blog at www.pinetreepolitics.com.

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