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Can Zero-Base BudgetingBe Successfully App,lied to the

Federal Budget Process?'what has been intended by planning, programming,and budgeling coupled with current Office ofManagement and Budget directives concerningManagement by Objectives. What Zero-Base Bud­geting does do is structure a mechanism designed togive top management the capability to logicallymake judgments as to the relative priorities ofprograms competing for limited funds.

The Federal budget process currently involvesfour basic steps: (I) preparation and submission ofthe Budget of the United States by Federal agencies,the Office of M~age!11ent and Budget. and thePresident; (2) review. authorization, and appropria­tion of funds by the Congress; (3) exec'dliol! ofapproved programs by the various Federal agencieswithin approved funding levels: and (4) programaudit and evaluation by cadi agency internally aswell as the U.S. General Accounting Office as anindependent agency. Exhibit I attempts to sum­marize this process. Responsibility for Federalprogram authorization, oversight. and purse stringcontrol are vested in the Congress rather than theChief Executive. Recent passage of the BudgetReform Act of 1974 and the Budget andImpoum!ment Control Act reemphasize the congres­sional intention of menpbening that role. Thispresents an interesting complexity which theZero-Base Budgeting mechanism cannot easily dealwith - that of a lack of a single, high-leveldecisionmaking point to handle all priority rankingand budget administration decisions. Compoundingthis difficulty are the wide variety of program,budget, and appropriation mponsibilities exercisedby various commillees, eacb representing differentand often ,.:ontrasting political interests.

Federal programs are initiated and approved byaut orizing c.:lmmiuecs who also exercise an

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Zero-Base Budgeting as it is beir.g generallyaccepted throughout many business, State, and localorganizations is a mechanism structured to d~al withthe evaluation and prioritization of a wide variety ofprograms through the budget process. It is provingto be particularly useful in organizations wbere oneChief Executive makes the final program dir:\.iiooand financial management decisions. However, lheproposition of imposing a Zero-Base Budgf,l.ingmechanism on the Federal budget process is one thatmust be considered carefully in light of presentExecutive and legislative roles in that proc~s. Aspresently structured, the Federal budget proce.scannot readily accommodate the Zero-Base Budget­ing mechanism. The current congressional processof authorizing and funding Federal programs is toocomplex and cumbersome to accommodate awell-structured, definitive priority-setting system.This is not to say that many aspects of Zero-BaseReview as intended by S~92~, proposed Federal"Sunset" legislation, are not feasible. On thecontrary, Zero-Base Review can and should beapplied to the current Federal process. Themechanism used in executing that application mustbe carefully designed. To impose at the outset of anew budget cycle the Zero-Base Budgeting system asit has been adopted by Georgia, New Jersey, andother State and local governments would create animpossible administrative burden. Several majorchanges to the current budget administration andrelated political processes must be made if they areto accommodate a Zero-Base Budgeting system.

The present al'p!ications of Zero-Base Budget­ing in both the private and public sectors have beenprincipally mechanistic. Zero-Base Budgeling hasnot introdu::;,1 any significantly new budgetaryconcepls or financial management innovations over

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\oversight responsibility to assure that congressional the Appropriations Commillee~ and have not beenprogram intent is properly executed by various considered in light of specifically constrainedExecutive agencies. As various needs for Federal resources.programs develop, either through expression of The implementation of aI\ effective Zero-Basepolitical interest or practical public administration Budgeting system requires a structure which focusesdemands, appropriate congressional commillees program lIJld budgetary decision authority at oneconsider legislation which will authorize Executive high-level Point in the orgllnization. The Zero-Baseagencies to satisfy 'those needs. Even though 1001 compels the chief necutive or finan~al offiC!=rIl:gislation is passed authorizing a Federal program, to dedc$e whether or not a program will ~ funded;there Me no funds l!vailable to execule that program if it is, at what level; iaIld what the priority rankinguntil' ihe Executive agency responsible presents a of each program is in relationship to otller proll/llJJ1sbudgel to the Approprialions Comminee for their competins . for scarce resources. ProBl'llm \'Crfor-approval, and sepatate congressional action is taken mance trlde-offs must be made in the cOntext of .on that bUdget request. Recently, throush passage competing priorities IIIId alternatives to performingof the Budget Reform Act, Congress recognized the programs at recomtnellded levels. The diverse lindimportance of directly associating costs with uncentraJized power structure of the (::ongress doesGovernment functions and asscc;ating the authori- not presently satisfy that need. Each authoriZingzation process with the appropriUlion process by commillee has its own interests which are.· Sr~atl)' ,placing spending ceilings OIl the execution of those influenced by· their Cbairmen, who iJl' turn ,arefunctions. The Act requires each nuthorizing influenced 'by their constituencies .·and ',pian,committee to indicate in their reports on proposed affiliations. In applyi", ZBB t,o the Federal prQCCSS,legislation which would authorize new F'o'deral the Congress as a unit would need to ~me: the"programs the S-year costs of those programs. Up chief planningllnd budgeting officer Qf the' F~ei:aI" ..until now, program costs were chiefly the concern of Government, anll U SUfI! would need to ~velop"a;",: .

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j7Tiorily ranking system which would permit it, as auni1, to make effective and logical programnade-offs. No one comminee can execule Ihalresponsibility for the entire Congress. Priorilyranking decisions must be made by the Congres~ asa whole. A system would need to be established toeffectively permit this through traditional votingmethods. The need for a new process by whichCongress determines national spending prioritieswas recognized in the Budget Reform Act of 1974.That Act provided for a 50-hour debate on thecongressional budget resolution which focuses onthe allocation of total spending among majorbudget functional areas. Passage of a resolulion bythe Congress establishes a spending ceiling;however, the Congress slill has no formalmelhodology of ranking the priority of one Federalprogram as compared to another. Priorities may bediscussed during debale bUI they are nOI specificallyvoted upon.

In addition to creating a syslem which couldeffectively deal with the political connicls naturallyassociated with any forced priority ranking, sevenbasic changes would need to bc made 10 the presentbudgeling praclice:

(I) Criteria for determining what constitutes aFederal program must be more clearlyspelled oul.

(2) A systematic method of funding discretion­ary and non-discretionary programs must bedeveloped.

(3) Program decision unils must be identifiedand defined.

(4) Decision packages must be developed.(5) Generally accepled principles and standards

governing program evaluation and COSI­benefil analysis must be developed.

(6) A priority ranking syster.l must be de­veloped.

(7) The decisionmaking process during execu­lion must clearly SUppOTt the outcome ofpriority ranking.

Before we can review all Federal programsfrom Zero-Base, we need 10 define what a programis and identify how many programs there are. Thisin itself can be complex since many functionsoUflined in the Federal budget cross agency lines,Iheret-y making il difficult to identify whether anagency t~ administering a program or is administer­ing one or more levels of a program.

The Budg" Reform ACI anempts to getCongress to priorit ize Government spending as it ispresented in terms of functional categories outlinedin the President's budget. These categories are verybroad and involve the activities of so many differentagencies that using them to conduct a specific review

MAY/JUNE 1979

of program pnonues becomes impossible. Forexample, functional category No. 750, iawEnforcement and Jus/ice, involves a variety orefforls in over 13 dinerent Government departmentsand agencies. To define La,,:, Enforcement and .Justice as a -"program" would require theestablishmeDl of a single program administratorwith the authority to cross agency-lines in makingprogram decisions. To define each agency's effortsin this function as a program would presentsl\ch alarge volume of paperwork that it would beimpossible for the congressional staff to consider it.The problem of defining II Federal program hasbeen reviewed in the work associated with 52925.Federal "Sunset" legislalion. The report put out bythe Government Operations Commillee on thisproposed legislation indicates that IwO -methodswere used 10 estimate the number of FederalPrograms: (I) The budgel accounts method, and (2)the public laws method. Each method estimated th;ttIhere are approximately 1,000 pr~grams. However,the report of the Commillee on Rules andAdministration aptly points out thaI inconsistenciesin using these two methods could. vary the numberof programs under the jurisdiclion of a Commilleesuch as Ihe Commi.llee on Agriculture and Forestryby more than three times. That same reporl alsopoints out that "The facl is thaI lhere are manymore than 1.000 programs. How many more is anopen Question. There could easily be as many as40,000, 50.000. or 100,000." Before we can apply

about theauthor...

Richard L. Brown Is Iha Direc­tor. General Services and theController of the U.S. GeneralAccounting Office. The of­flees over Which he has

responsibility are the Office of Administrative services,the Office of B.IJdgel and Financial Management, theOffice of Information Managemenl, the Office of theLibrarian, and the Office of Publishing services.

Mr. Brown Joined the General Accounting Office In1914 as tho A.alatant Budget Ollicer. Ho lator becamotho Budgot Offlcor, and In 1977 was appointedControtler. Prior to coming to GAO he worked for theNavy llepar1mOnl and IRS. Ho tought English at theUniversity 0' Maryland prior to beginning his career withthe Government.

He has received his B.A. trom W«'ber State College, hisM.P.A. from the Amorlcen Unlvorslty, end his JurisDoctorate from the National Law Genter. Ge9',geWashington University.

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Ihe Zeri -Base Budgeling mechanism, we musl spellOUI wll " crileria are going to 'be used 10 deline aFeder" program' and apply thai criteria on acontil... ing basis 10 program review and evalualionlechr' 'jues. By doing so, Federal programs will becon" .Ienlly defined j)Crmilling equal considerationII, Jgh a priority ranking pr"ce".

Another major problem Ihal must be resolvedi' hal of dealing consislently with discrelionary and, ',ndiscrelionary programs between agencies.

Both Ihe Budgel Reform Act and the proposed"SlInsel" legislalion recognize Ihe need forse~,1raling budgetary ilems which are readily.<>lllroliable from Ihose which are not. According to,'Slimales made by' Ihe Commillee on Governmentr..:,eralions. up 10 75 percenl of the budget is,Ialivel)' unconlrollable. 52925 limils nondiscretion

I areas such as Ihe Nalional Debl and Social5, 'rily payments. To make a Zero·lb,,< tool workefl. ivel)', crileria will need to be est~bli.hed whichc1ea.... define which "programs" are discretionaryand " ich are nondiscretionary and therdoresubject 0 the priority ranking process. Such criteriadoes . ,I currently exist, nor does Ihe presentproce,· consider ils applicalion in the cootextrequi, d for Zero-Base Review.

( ·.ce discrel ionary and nondiscretionary pro­grams have been identified, program decisionunits n.· 'd to be defined. For example, a decisionunit co'..1d represent a ··program," a functionalcalegory 'S oUllined in the Presidenl's Budget, agroup of 'rograms adminiSlered by a single Federalagency, 0 all programs administered by a Federalagency. n.,. unil requiring Ihe decisions of go or nogo, or if go, ... what level, need 10 be identified in amannp.f whic., oermits consistent evaluation andjUSlificalion opl".·,,·l"'lY for each unil. These unitsneed to be structured in ~:.: ... :, :' ~;:tInnt"r ~... ".• '. !litthe Congress to focus on what It vcucves are thesubSlantive national issues wilhout imposing asignificant addilional workload requirement onauthorizing commiit-;c staffs in reviewing dt:UliledjUSlification documents for units where no issuesexist. The unit muSl be specific eno:lgh to permit theapplication of a priorilY ranking technique toprograms within the unit, and broad enough toavoid volumes of jUSlification materials 100 larae 10

be meaningfully considered.Once decision uni!s are identified, Decision

P:.ckages musl be developed to serve as the vdliclefor defining Ihe unit'S goals and objectives;presenting costs of operating the unil at alternativefunctional levels; presenting justification for theunit 's continued existence. expansion. or alteration;and presenting alternative methods with their costs'for achieving its goals and objectives. Decirion

Packages become the backbone of any effectiveZero-Base Budgeting process.. They can be tailoredto individual program needs and can be modified.with relative ease to ac~ommodaledecision unit andprogram changes. Decision Paekages can beprepared al virtually any level of detail providingsucceeding levels of management the oPporlunity to·review at whatever level they feel appropriat~.. Thiscould present problems if commillees beganreviewing large numbers of Decision Packagesprepared 10 assist in ranking program prioritiesbelow the decision unit level. Congress would need10 concentrate on reviewing Decision Packagesprepared for defined unils if it hopes to deal witbthose units from a Zero Base. In many cases thiswould mean that commillccs would not review all"programs" from a Zero Base. But it would still benecessary for them to review all programs subjCCI topriority ranking. Decision Packages also provide amechanism for considering the input of managers ;otall level. within the overat! unit. The greatest pitfalla"ociated wilh usc of Decision Packages is thetendency they have to proliferate large quantities ofpaperwork. Great care must be taken 10 insure thatthe temptation 10 collect and document data at thelowest level of detail is avoided. Decisions made byIhe Congress on each package as j:.repared for eachdecision unit should consider no more thanproposed alternatives and levels of effort. TheCongress must avoid the temptation of reviewing indetaillhe rationale behind each level of effort withinthe package.

One important key to viable Zero·BaseBudgeting is an effective program evaluationprocess. Too frequently, the importance of thi,process is overlooked or underemphasized. If nochange were made to the current Federal budgetprocess, the Congress would have to rely on internalagency program evaluations based principally uponinternal agency audil programs. The GeneralA<.~ounting Office could presently evaluate certainsignificant programs for the Congress; however. itwould be impossible for tile GAO to conduct anindependent evaluation of every Federal program onan annual basis. One of the most significantproblems to be overcome as it relates to programevaluation for purposes of Zero-Base Budgeting i.to develop a method of consistently evaluatingprograms throughout the entire Federal Govern­ment. Since each agency would need to continue tobear the principal responsibility for condu~ting

regular program evaluations, the Congress must beassured that each program is evaluated consistentlyin relationship to its competitors for scarc~

resources. To do this. generally accepted standardsgoverning program evaluations need to be developed

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and adopted by all Federal agencies. Thesestandards must be designed to give propercon~il\eration to costs versus benefits as well asprogram outputs as Qenerated by public need. Suchstandards are not now consistently !lPplied andprogram evaluation too frequently winds up, as asynthesis of the best judgments of programmanagers at all levels. Inconsistent evaluation of awide variety of very complex programs makespriority ranking judgments virtually impossiblewhen they must be agreed upon by a group as largeand diverse in interests as the Congress.

The Planning Programming and BudgetingSystem also recognized the importance of goodprogram evaluation. However, like the presentZero-Base Budgeting mechanism, program evalua­tion under PPBS lacked standards and consistentlyapplied evaluation techniques. This problem wasacknowledged by Congress when in the BudgetReform Act of 1,974 Title VII was included tostrengthen the program evaluation role of the GAO.The GAO has recognized a long-standing need forappropriate internal auditing standards for use byall Federal agencies and has done a significantamount of work in encouraging the adoption ofsuch standards. The next logical step is to developprogram evaluation standards which will uniformlyutilize information obtained from internal and GAOaudits to consistently evaluate all Federal programs.Once program evaluation in formation can beobtained for all Federal programs the Congress willhave a basis for implementing a priority rankingsystem.

The forced priority ranking is one of the mostsignificant contributions of Zero-Base Budgeting.The present Federal process permits programreview, evaluation, and funding analysis. However,there is no mechanism which forces top policymaking attention on the relative value of all Federalprograms. Zero-Base Budgeting has that mechanismin formal priority ranking.

Priority ranking systems vary considerablythroughout the various Zero-Base Budgeting appli­cations used by a wide variety of businesses andState and local governments. In virtually allinstances where this mechanism is now being used,ranking of de :isions boils down to informedprogram judgt,lents made by the chief executive ofthe company or State or local governmentconcerned. In some cases those judgments are basedon sound information received through goodprogram evaluation and internal auditing systems;however, in too many instances the judgmentsbecome subjective and are made primarily as aresult of the pressure put on the decisionmaker by

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the system. As effective a tool as priority rankingcan be, forced decisiolls where there is nosubstantive evaluative inforrnUion could seriouslyaffect important prolrams.' In the context ofZero-Base, Budgeting, prOllfatll$ are considered inthe light of budget year influences. Since budgetyear constraints will probably continue to llfOW outof an increasing public desire to reduce Federalexpenditures, a Zero-Base system will force anevaluation of programs as they impact the budgetyear more than as they impact pilblic needs over a S­to IO-year period. This process in the ZBBmechanism focuses top manalement attention onthe short-term implications of budget year decisionsrather than on the long-term impact of thesedecisions on Federal programs. To make priorityranking work effectively, a method of incorporatingthe longer range perspectives of PPBS needs to beadopted.

Finally, the decisionmakinl processes of budlletexecution must fUlly support the outcome of priorityranking. The constitutional fact of separation ofpowers will make that difficult, but not alwaysimpossible. If the President can be involved in thedecisionmaking process with tile Congress and canagree with the priority rankinl. proper executionwill be achievable. However. where there aredifferences (impoundments, Ihifts in approvedprogram emphasis) the process will need to beengineered to formally accept these changes throughrevised Decision Packages which will ultimately beapproved by the Congress. A process to accomplishthis would necessarily be long and involved and maybe 100 cumbersome to permit timely changes.

In conclusion, it seems that many Zero-BaseBudgeting concepts are worthy of lJ:Crious considera­tion in implementing them ir. \be Federal budgetprocess. A top down decision to implement aZero-Base process immediately could result inserious program conflicts and procedural confusion.This could create an impossible workload to Qperateproperly or an even more arbitrary decisionmakingsystem than is presently used, if done improperly.Without proper application of the full range ofZero-Base concepts, a large amount of adl\itionalpaper review could be created with the resultingdecisions being based on the same judgments as withthe present process.

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