Budgeting and Forecasting

Point / Counterpoint: Zero-Base Budgeting

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Zero-base budgeting (ZBB) is a budgeting process that asks managers to build a budget from the ground up, starting from zero. Though the apex of ZBB’s popularity in the late 1970s is long past, there has been renewed interest in ZBB in today’s environment of fiscal constraint, not least because the “zero” in zero-base budgeting sends a powerful message that taxes and spending will be held in check. ZBB won’t fit all situations, but it is a potentially valuable tool.

ZBB has been the subject of a fair amount of controversy over the years, however, primarily because of questions about the value derived from ZBB analysis versus the cost required to put ZBB into practice. GFOA’s research found that “textbook” ZBB or ZBB systems that conform to the theoretical ideal are almost unheard of in present day financial management. But an increasing number of governments that exhibit leadership in budgeting practices (albeit still a minority) are considering elements of ZBB and incorporating them into their budget processes.

What are the pros and cons of Zero-Based Budgeting, especially during such tumultuous times? Using takeaways from recent research, we present both sides so you can decide if this approach is right for your government.