As a practical application of the approach set forth in this chapter, we may consider the public budget-making process, and the form which this process will have to take if it is to conform to the requirements of rationality.
It has been asserted that the concept of efficiency involves an analysis of the administrative situation into a positive value element ( the results to be attained) and a negative value element (the cost).’ For the practical execution of this analysis, a technique is needed that will enable the administrator to compare various expenditure alternatives in terms of results and costs. The budget document will provide the basis for such a comparison.
The essence of the public budget process is that it requires a compre- hensive plan to be adopted for all the expenditures that are to be made in a limited period. But if the budget is to be used as an instrument for the control of efficiency, substantial improvements must be made in present techniques.
1. Inadequacy of Customary Budget Methods
What does the typical governmental budget include? It tells how much each department will be allowed to spend during the subsequent year, and how it may spend it. How are the particular figures to be found in budgets arrived at? How is it determined that 14 per cent of the budget shall be devoted to fire protection and 11.6 per cent to highways?
A different answer to this question would be given in every community in which it was asked. Some budgets are made by copying off the figures of the previous year’s expenditures. Some are constructed by increasing or decreasing appropriations by a fixed percentage. Some are determined by allotting to each department a certain percentage of its request—he who shouts loudest gets most. Some have even less systematic plans.
If this seems exaggerated, the following justifications for increased appropriations in the supporting schedules of one city budget should serve to convince even the most skeptical:
“Salaries should be commensurate with duties and responsibilities of office.”
“Naturally with increased work more supplies will be necessary and the cost will be greater. My postage bills alone amount to $2,500 a year.” “Time and skill required for this work before and after election.”
“A larger increase was asked last year and refused.”
There are, of course, a few exceptional cities and other agencies which attempt to substitute a more rational budget review for this hit-or- miss process. A number of federal departments, including the Department of Agriculture, may be cited in this connection.18
2. The Long-Term Budget
If budgeting is to serve as a basis for the rational allocation of expenditures, two comprehensive budgets must be substituted for the present inadequate documents: an annual budget and a long-term budget. However, since the annual budget is merely a segment of the long-term budget, only the latter need be discussed.
The long-term budget will be made up of several parts: (1) long-term estimates of trends in problem-magnitude for the various departments— distribution and concentration of burnable values which must be protected against fire, mileage of streets which must be kept clean, popula-tion which must be served by libraries, etc.; (2) long-term estimates of service adequacy—that is, the level of services which the city intends to provide its citizens—so many acres of park per 1,000 population, a specified fire loss, etc.; (3) a long-term work program, showing in work units the services which will have to be provided and facilities to be constructed to achieve the program outlined in items (1) and (2); and (4) a financial program which will relate the work program to the fiscal resources of the fiscal resources of the community.
Item (1) involves primarily factual considerations. The determination of item (2) is primarily a matter of value judgments. Items (3) and (4), after the first two items have been determined, become largely factual questions. Hence, it would seem to be a legislative task to weigh (2) against (4), and to determine the budget program. On the other hand, the legislature would need assistance in developing the factual information for (1), (2), and (3).
Under present budgetary procedure, items (1) and (2) are seldom even a part of the budget document, and the entire discussion is carried on in terms of items (3) and (4). Furthermore, usually a single budget plan is presented to the legislature, for its approval or amendment. It would seem much preferable, if the necessary information were available, to present directly to the legislature the policy issues involved in (2), and to present the legislature with alternative budget plans, indicating the implications for policy of increases and curtailments of expenditure. Modifications along these lines would seem to be absolutely essential if the legislature is to be returned to a place of influence in the determination of public policy.
Too often, under current practice, the basic decisions of policy are reached by technicians in the agency entrusted with budget review, without any opportunity for review of that policy by the legislature. That this condition is tolerated results partly from general failure to recognize the relative element in governmental objectives.79 Since most legislative declarations of policy state objectives of governmental activity without stating the level of adequacy which the service is to reach, it is impossible for an “expert” to reach on factual grounds a conclusion as to the adequacy of a departmental appropriation. Hence, present procedures would not seem to safeguard sufficiently democratic control over the determination of policy.20
3. Progress Toward a Long-Term Budget
Public agencies have made considerable progress within the past few years toward long-term plans that include a work program and a financial plan. Little progress has as yet been made toward a program that will tell the legislator and the citizen what this program means to him in terms of specific governmental services. Furthermore, little progress has as yet been made toward estimating the cost of maintaining governmental services at a particular level of adequacy, or determining when expenditures should, in the interests of efficiency, be turned from present channels into other, more useful directions.
4. Illustration of a Rational Budget
As an illustration of the line of development which needs to be pursued, the budget procedure of the California State Relief Administration will be described briefly. The agency for several years employed a well designed procedure of budget estimating. One reason for its successful performance of this difficult task was the nature of its objectives.
The major task of an unemployment relief agency is to provide a minimum level of economic security to needy families. The family budget which the agency employs to effect its policies provides an immediate translation of “cost” into “result.” That is, it is immediately possible to visualize what a specific expenditure means in terms of the level of eco- nomic assistance which the agency provides. The policy-forming body can decide how large a family budget it is willing to authorize, and this decision can be immediately translated into cost terms. In this way “ser- vice adequacy” is determined.
Similarly, the State Relief Administration had worked out a detailed procedure for estimating over a period of time how many cases would be eligible for assistance; that is, what the problem-magnitude would be. With these two steps completed—the level of service determined and the problem magnitude estimated-it was a simple matter to develop the work budget and estimate financial needs.
This illustration has been oversimplified to emphasize its salient fea- tures. An unemployment relief agency must provide certain types of ser- vice as well as cash relief. The operating expenses of the agency have been left out of consideration also. But, except for this oversimplification and these omissions, the budget procedure which has been described closely approximates the ideal of a rational budget process.
Source: Simon Herbert A. (1997), Administrative Behavior, Free Press; Subsequent edition.