Public Sector Governance and Accountability Series: Budgeting and ...

Budget Methods and Practices 113
to run a program and the program’s beneficiaries—discontinuing a program
involves a difficult internal and external political process in which there are
losers. The focus of the budget process thus becomes a narrow range of
increases and decreases.
When a project or a program is included in the base, it is not only for the
budget year, but for all future years until it is challenged. In other words, in
classical budget practice, spending agencies have a fair expectation that the
base they have established incrementally over years will be funded in the next
budget year. In addition, there is also an expectation that they will receive
what Wildavsky and Caiden (1997: 46) term a fair share of some proportion
of funds that are available for distribution, whether because of an increase in
total expenditure or because of decreases to some agency’s funding.
How budgeting systems define the base in practice depends on whether
inflation is a significant factor and whether there are significant fluctuations
in the demand for spending, particularly in programs that result from
separate legislation, such as the social security program or free primary
education. When inflation and significant fluctuations in the demand for
spending are absent, an agency’s current spending is taken to be its base.
However, when the cost of providing goods or services at existing levels in
future years is likely to increase on account of price increases or because the
number of beneficiaries will increase, the base is usually defined as the future
cost of providing a program at current levels of service.
Traditionally, budgets were arranged by line item. Many countries still
have budgets that are classified in accordance with specific line items. When
budgets were first brought to legislatures, every separate piece of spending
got approved in all its particular details. In other words, a legislature would
consider an agency request to build a bridge, relevant input by input: the
number of labor hours required, the number of logs for the supports, and
so forth. However, as the number of agencies and their activities grew, a
limited number of standardized items were selected under which activities
needed to be described. Over time, previously approved programs were
reflected in bulk by agency against the standardized line items, effectively
for reapproval. Only new spending proposals were considered separately as
a project or program, to be absorbed in subsequent years in the funding
base. In recent years, many countries—including developing countries—have
moved away from the line-item system to compliance with the International
Monetary Fund’s Government Finance Statistics system of economic
classification (IMF 2001). However, this move has not necessarily brought
a fundamental change to how budgeting is done: budget decision makers
use the new economic classifications, instead of line items, to control