What a novel concept!
Sadly, not enough people even know what this really means.
Let’s put it into terms of your own home budget, if you have one. Assume you make $75,000 a year. You are married (wife or husband doesn’t draw a paycheck), two kids, two cars, a home (with mortgage) and a myriad of other expenses.
That being the case, you have FIXED expenses throughout the year, mortgage payments, car payments, utility bills and other fixed expenditures ad infinitum, and don’t forget TAXES!
When you try and figure out what amount of disposable income you might have for the year, time to add up everything absolutely NEEDED. Forget the “wants” right now.
When you have finally decided your fixed expenditures, subtracted that from your income, you have what we euphemistically call “disposable income”. RIGHT?? WRONG!!!
Murphy’s Law will always come into play at this moment. Something will always happen to eat up some or all of the balance. We have to zero-base our budgets all the time or risk putting ourselves in a hole we cannot climb out of.
Here now comes the rub. If our families have to budget this way, why isn’t the government required to budget this way? “But the government uses a budget, don’t they?” The government uses what I call a “cost plus” budget. They don’t start out with a blank sheet each year and put the basic absolute needs in place, they start out with last year’s budget and add on. They add on, even if some programs are over they continue to be funded. It was brought to my attention that there was funding for pond maintenance, but the pond was cemented over, no longer needing maintenance, yet the fund was continued and therefore, so was the budget entry.
Here in O’Fallon, Missouri we use “zero based” budgeting, every year. The Departments start from scratch, establish the ongoing NEEDS, operational cost(s) and then, if anything is left over, they put in their wants and also put away some in reserves to build a kitty for any future improvements or costly equipment.
We currently enjoy an unrestricted reserve that would make a lot of cities jealous. As a result, taxes and fees are kept low, we have an aggressive capital improvements program for the future AND all without taxing and spending what we don’t have.
Common Sense? What else but a resounding YES!
Jim Pepper is currently a Councilman in O’Fallon, MO, a city of approx. 80,000, he was just re-elected this month to a second term. Jim is a former Mayor and City Councilman in St. Louis County, MO. Jim also spent 35 years in the corporate world of Xerox.