Zero Based Budgeting, What Is

The Star Tribune (Minneapolis/St. Paul, Minn.) ran an almost comical teaser story the other day about the state budget deficit that was officially announced yesterday (or if you still prefer to get your news a day late in physical form, like me, today). In it, the reporter spent lots of time with the budget gurus, late into the evening, crunching terrible numbers. But he couldn’t say much about the process, or the number, so it was like walking into a room just in time for the punchline.

“Ha ha, yeah …. hoooo boy, it’s bad.”

Turns out it is a projected $5.9 billion deficit for our state. Today’s story said the legislature was going to zero-based budgeting, but gave no definition, so here it is. I imagine most of us will be hearing a lot more about this in weeks to come. Happy Friday?

clipped from www.businessdictionary.com

Method for preparing cash flow budgets and operating plans which every year must start from scratch with no pre-authorized funds. Unlike the traditional (incremental) budgeting in which past sales and expenditure trends are assumed to continue, ZBB requires each activity to be justified on the basis of cost-benefit analysis, assumes that no present commitment exists, and that there is no balance to be carried forward. By forcing the activities to be ranked according to priority, ZBB provides a systematic basis for resource allocation.