Budgeting

Data
Sectors	Data
Contact	Wilfred Pinfold
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Municipal governments use a variety of approaches to create their budgets. Each method reflects different values and operational goals, such as efficiency, transparency, citizen involvement, or outcome measurement.

Municipal Budgeting Approaches

Below is a list of common approaches:

Line-Item Budgeting

• Description: A traditional method where expenditures are listed by category (e.g., salaries, utilities, equipment) for each department.
• Strengths: Simple to understand and monitor; provides detailed tracking.
• Weaknesses: Focuses on inputs rather than results; offers limited flexibility.

Performance-Based Budgeting

• Description: Links budget allocations to measurable outcomes or performance indicators.
• Strengths: Encourages departments to focus on efficiency and service quality.
• Weaknesses: Requires robust performance data and evaluation systems.

Program Budgeting

• Description: Organizes spending around programs or services rather than departments.
• Strengths: Helps align budget with policy goals and service priorities.
• Weaknesses: More complex to develop and maintain than line-item budgets.

Zero-Based Budgeting

• Description: Assumes no base budget; all expenses must be justified from zero each cycle.
• Strengths: Prevents automatic continuation of outdated or inefficient spending.
• Weaknesses: Resource-intensive and time-consuming to implement annually.

Incremental Budgeting

• Description: Adjusts the prior year’s budget incrementally, usually by a percentage or fixed amount.
• Strengths: Straightforward and consistent; ensures continuity.
• Weaknesses: May reinforce inefficiencies and lacks responsiveness to changing needs.

Priority-Based Budgeting (PBB)

• Description: Allocates funds based on how well programs align with community priorities and strategic outcomes.
• Strengths: Strategic, transparent, and responsive to public values.
• Weaknesses: Requires clear evaluation criteria and community input.

Capital Budgeting

• Description: Focuses on long-term investment in physical infrastructure, such as roads, buildings, and utilities.
• Strengths: Promotes long-term planning and asset management.
• Weaknesses: Needs long-term forecasting and separate funding mechanisms like bonds.

Participatory Budgeting (PB)

• Description: A democratic process where residents propose and vote on how to allocate a portion of the municipal budget.
• Strengths: Enhances civic engagement, transparency, and community trust.
• Weaknesses: Requires facilitation, public outreach, and sustained administrative support.

Outcome-Based Budgeting

• Description: Focuses on funding initiatives that achieve specific social outcomes (e.g., reduced crime or improved health).
• Strengths: Emphasizes long-term impact and cross-agency collaboration.
• Weaknesses: Demands comprehensive data, collaboration, and time to realize effects.