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THE PEOPLE' UNIVERSITY- UNIT 5

CONCEPT AND SIGNIFICANCE OF
BUDGET AND BUDGET CYCLE IN INDIA
Objectives
After reading this unit, you should be able to:

Understand the meaning and significance of a public budget

Explain the steps involved in the budget cycle

Introduction
Government functions, policies, and programs are dependent on adequate budgetary
provision. The basis for the government budget is public finance, or revenues raised
by the government which are then allocated to fund public policies and programs.

A general or special fund comes from the public budget, which is composed of
revenues raised by the government through taxation and borrowing decisions. The
justification for this arrangement is that funds allocated through the budget for
specified government functions and policies are vital and must be protected by law
from political uncertainties.

Concept of Budget
The term budget is derived from the French word, Bougette, which means a leather
bag or wallet. The Chancellor of the Exchequer used to take out his papers about the
government's financial schemes for the ensuing year for laying before the House of
Commons. The term was used in its present sense for the first time in 1733 in the
British Parliament. Since then, the term has been used for a financial scheme or
statement of annual income and expenditure of the government.

A budget is a work plan that gives direction to the implementation of

policies and programs.

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The Institute of Cost and Works Accountants describes the term budget as, "a
financial and/or quantitative statement prepared prior to a definite period of time, of
the policy to be pursued during that period for the purpose of attaining a given
objective."

In brief, the budget is an authentic statement of expected income and expenditure for
a specific period. It is mainly instituted as:

A plan of income and expenditure

A reflection of public policy
A mechanism for planning, controlling, managing, and evaluating activities

According to Wildavsky, a budget is "a series of goals with price tags attached."
Dimock and Dimock define the budget as "a financial plan summarizing the financial
experience of the past, stating a current plan, and projecting it over a specified period
of time in the future".

A government may issue a policy statement stressing the need for realizing certain
objectives. But these objectives cannot be achieved without the provision of adequate
funds in the budget. It is not necessary that all policies are reflected in the budget. As
one United Nations publication points out, "while the national budget is an important
policy document, it does not necessarily present a full picture of the national policies
of a Government and may not be consistent with the national development plan."

Significance of Budget
In all democratic countries, the budget has been a dominant policy document. It is not
only the main instrument for implementing government activities but also used
extensively to regulate and influence economic and social activities in the private
sector of mixed economies. A budget is a work plan and an evaluation tool that gives
direction to the implementation of public policies and programs. Budget is vital to
financial administration. Since it operates within the limits of legislative authorization,
the executive is responsible for legal and financial accountability to the legislature.

The budget system today not only provides the legislature with overall control over
the revenue collected and expenditure incurred by the executive, but it also becomes
an important means for evaluating the progress of various government projects and
schemes.

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A budget gives the direction in which government intends to go in the near future,
usually in the next fiscal year. Bridges (1964) says, "Whatever else a Government
may or may not do, one thing it cannot avoid doing each year if it is to continue to
exist, and that is to obtain the authority of Parliament to raise revenue to meet
expenditure which is done by the Budget and the accompanying Finance Bill".

A Study Group of the Royal Institute of Public Administration (1959) observes: "In all
organizations, however, budgeting can assist management at every level in several
ways. In the first place, it helps in making reviewing policy, by encouraging
comprehensive forward-looking planning and decision making and providing both
the information and the occasions for regular reviews of plans and prospects for the
future. Secondly, it supplies yardsticks against which the actual results can be
judged, thus helping to assess their significance and decide what action may be
called for in consequence. A budget can be used in both these ways, whether it
relates to income and expenditure on revenue account, capital expenditure, or finance
and cash transactions".

In brief, the budget has acquired great dimension not only from the constitutional
point of view to assert legislative control over the executive, but also administratively
it has become an important aid to management, both for policy-making and for
keeping check on its execution. Indeed, it is the heart of administrative management.
It also serves as a powerful tool of coordination, and negatively, an effective device of
eliminating wasteful financial expenditure.

Functions of Major Institutions in Budgetary

Process
The budgetary process involves a variety of institutions at various levels. The
following is a brief description of the major actors or agencies involved in the
budgetary process at the union level:

Parliament

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Parliament is the supreme legislative body involved in the budgetary process.

Parliamentary approval for the passage of the budget is a must. The Parliament is
entrusted with the primary responsibility of acting as the custodian of public money
in the country. Under Article 112 of the Constitution, the President shall cause to be
laid before both the Houses of Parliament the 'annual financial statement'. This
Annual Financial Statement is the main budget document. The word "budget" does
not figure in the Indian Constitution. Further, of the two Houses of Parliament, it is
the Lok Sabha that holds absolute control over the financial matters, including the
union budget.

Political Executive
The Executive has an equally important role to play in the budgetary process. The
union Finance Minister pilots the budget in the parliament. The Ministry of Finance is
the core unit of the Executive, entrusted with the task of managing the operational
dynamics of the budget. The Ministry of Finance is the nodal agency of the budgetary
process. Right from estimating the final figures of the revenues and expenditure of
the government for presentation before the Parliament, the Ministry is vested with
the task of ultimately ensuring that the finances of the country are managed with
proper care.

Audit Department
Another important institution involved in the budgetary process is the office of the
Comptroller and Auditor General (CAG). Visualized under the provisions of Article
148 of the Constitution, the office of CAG conducts an audit on behalf of the
Parliament to investigate and report on the fidelity, legality, and efficiency of all the
financial transactions carried out by government departments. Over the past few
years, the CAG has emerged as one of the most stringent checks on the financial
impropriety of the government.

Parliamentary Committees

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The Parliamentary Committees on Estimates, Public Accounts, and Public

Undertakings, as well as departmental Standing Committees, play an important role
in the budgetary processes of the country. These committees are empowered to
perform these tasks by parliament due to paucity of time or lack of expertise with the
latter. The Estimates Committee suggests economies in estimates of expenditures of
various government departments in order to make them more realistic and
economical. The Public Accounts Committee carries out a post-mortem of the
accounts in the light of the audit report of the CAG. In the process, these committees
bring out financial irregularities, if any, and suggest remedial measures for the same.

These institutions play a significant role in the budgetary process in India. Each year,
the budget follows a cycle that includes:

1. Preparation of the budget

2. Budget approval
3. Budget implementation
4. Auditing

Preparation of Annual Budget

Budgetary formulation is the initial step in the preparation of the budget estimates. It
is generally considered a useful tool for providing a meaningful grouping of the
activities of the government. Besides, it serves the purpose of presenting a maze of
data in a simple and systematic way which enables the parliamentarians to
understand the details of the budget. Budgetary classification is particularly helpful
in the appreciation of the performance budgeting method. Under the budgetary
classification government activities are categorized into three broad groups:

1. General or Regulatory Services (revenue, defense, police, general

administration, etc.)
2. Social and Community Services (education, health, housing, etc.)
3. Economic Services (foreign trade, industry, transport, agriculture, etc.)

After budget classification in terms of the broad categories, they are further classified
into units and sub-units to enable the measurement or performance of related
activities. The formation of the budget estimates follows the cycle of the financial
year, from April 1 to March 31. The Union Budget of India is presented each year on
the first working day of February by the union Finance Minister of India in Parliament.
However, owing to cumbersome procedures involved in the final formation of the
budget estimates, the process for the same begins around the month of September-
October of the preceding year.

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Initiating the process, the Ministry of Finance issues a circular to various ministries
and departments inviting their estimates for the coming year. On the basis of
instructions from the top nodal agency, various administrative agencies prepare their
estimates. These sectional estimates are then examined and scrutinized by
Departmental Heads and then passed on to officers of the Finance
Department/Ministry of Finance in November-December.

By the 3rd week of January, the Ministry of Finance is able to prepare a consolidated
statement of revenues and expenditures, known as the 'Annual Financial Statement'.
This statement is called the 'budget document'. It is generally presented in the
following format:

1. Actual figures of the previous three financial years

2. The sanctioned budget estimates for the current financial year
3. Revised estimates of the current financial year
4. Proposed estimates for the next financial year, with explanatory notes for any
increase or decrease in estimates
5. Actuals of the current financial year available at the time of preparation of the
estimates and actuals for the corresponding period of the previous financial
year

The estimates of the 'Annual Budget' for the ensuing financial year are proposed on
the basis of:

1. The revised estimates of the current year

2. The 12 months actuals of the last and previous years
3. Any recognizable regularity in past year's figures
4. Any special circumstances causing variations

The 'Annual Financial Statement' or the main budget document prepared by the
Ministry of Finance shows the receipts and payments of the government under three
parts in which government accounts are kept:

1. Consolidated Fund
2. Contingency Fund
3. Public Accounts

All revenues received by the government, loans raised by it, and also its receipts from
recoveries of loans granted by it, form the Consolidated Fund. All expenditure of
government is incurred from the Consolidated Fund, and no amount can be
withdrawn from the Fund without authorization from Parliament.

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The Contingency Fund is an imprest placed at the disposal of the President to incur
urgent unforeseen expenditure pending authorization from Parliament. Parliamentary
approval for such expenditure and for withdrawal of an equivalent amount from the
Consolidated Fund is subsequently obtained and the amount spent from the
Contingency Fund is subsequently recouped to the Fund. The corpus of the Fund
authorized by the Parliament, at present, is $500 crore.

In Public Account, the government acts more as a banker, for transactions such as
those relating to provident funds, small savings collections, and other deposits.
Parliamentary authorization for such payments from the Public Account is, therefore,
not required.

In a few cases, a part of the revenue of government is set apart in separate funds for
expenditure on specific activities like road development, primary education, public
health, etc. These amounts are withdrawn from the Consolidated Fund with the
approval of Parliament and kept in the Public Account for expenditure on the specific
items.

The Budget has to distinguish expenditure on revenue account from other

expenditure. Government Budget, therefore, comprises:

1. Revenue budget
2. Capital budget

Scrutiny of Budget
Scrutiny of budget is of utmost importance for it affects the economy of the country.
This examination and scrutiny of the budgetary proposals takes place at two levels:

1. Administrative
2. Legislative

Administrative scrutiny refers to the scrutiny carried out by the higher level of a
particular department as well as the Ministry of Finance. The proposal is made part
of the departmental budget when it is approved by the head of the department. If the
proposal involves construction works, it needs to be submitted for scrutiny to the
Public Works Department, which may then give technical approval to the proposal.
As the final step in administrative scrutiny, all the departmental budgets, particularly
the "new items" thereof, are minutely scrutinized by the Ministry of Finance, and the
latter's decision carries considerable weight.

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Legislative scrutiny begins after the budget is presented to Parliament. With the
setting up of departmental-related Standing Committees in 1993, legislative scrutiny
of the budget has become more focused and sharp. In the end, the debates on
budgetary proposals culminate in getting parliamentary approval.

Principles of Budget-making
The formation of the budget is guided by certain basic principles that must be
followed:

1. The budget must be a balanced one: The estimated expenditures should not
exceed estimated income. When expenditure exceeds estimated income, it is
called a deficit budget.
2. Estimates should be on a cash basis: This kind of cash budgeting has the
advantage that the final preparation of accounts of a year can be done soon
after its close, though it may not reveal the true financial picture for the year.
3. The budget must distinguish between recurring expenditure and income on the
one hand and capital payments and receipts on the other. In other words, there
must be a distinction between current or revenue budget and capital budget.
4. The budget should be gross and not net. All the transactions of income and
expenditure must be clearly and fully shown and not merely as the resultant
net position.
5. Budget estimates should be as exact as possible: Gross over-estimating leads
to heavy taxation. Gross under-estimating can throw the whole budget out of
gear when it comes to implementation.
6. The formal classification used in the budget should correspond to the format of
accounts, that is, budget heads should be the same as that of accounts. This
facilitates budget preparation, budgetary control, and maintenance of accounts.
7. The rule of lapse: No part of the grant that is unspent in the financial year can
be carried forward to the next financial year.

Enactment of Budgetary Proposals

A crucial stage in the budgetary process is the approval of the budget by Parliament.
In this context, it is important to bear in mind the powers of the Indian Parliament in
budgetary matters, covered in Articles from 112 to 117 of the Constitution. Briefly
stated, they are the following:

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1. No demand for a grant shall be made except on the recommendation of the

President.
2. Any proposal dealing with expenditure must be on the recommendation of the
President.
3. Parliament can reduce or abolish a tax, but not increase it.
4. Certain items of expenditure are charged on the Consolidated Fund of India.
The charged expenditure is subject to discussion though not submitted to the
vote of Parliament.
5. Parliament cannot amend the Appropriation Bill in such a way as to vary the
amount, be it charged expenditure or otherwise, or alter the destination of any
grant.
6. In financial matters, the powers of the Rajya Sabha are restricted. It must accept
the Finance Bill with or without any recommendations within 14 days. The Lok
Sabha may accept or reject any or all of these recommendations. In any case,
the Finance Bill does not go again to the Upper House but directly to the
President for his assent.

The various stages in the budgetary process in the parliament:

1. Presentation to the Legislature: The Finance Minister presents the budget to

the Lok Sabha usually on the first working day of February. He does so with the
budget speech which is eagerly awaited by business circles as it gives first
indications of tax proposals and the economic and financial policy of the
Government. The budget is also placed before the Upper House, though its
financial powers are extremely limited.
2. General discussion: It takes place a few days after the presentation of the
budget and is spread over two or three days. The discussion in each House is
confined to general principles or policy underlying the budget. No details are
discussed; there is no voting, nor are cut motions allowed. At the end of the
debate, the Finance Minister replies, reacting to the points raised by the
members.
3. Voting of demands for grants: After the general discussion, the Lower House
takes up the voting of demands. This voting of the expenditure is part of the
budget and is the exclusive privilege of the Lower House. The demands are
presented ministry-wise and each demand is subject to a vote. At this stage,
there is a lot of discussion of the details. The opposition can subject the
proposals to severe criticism. Members can move cut motions, which are of
three kinds, namely-disapproval policy cut, economy cut, and token cut.

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In about 30 to 40 days the Lok Sabha must complete the voting of demands. The
time limit for each demand as well as for the entire expenditure part of the budget is
fixed by the Speaker in consultation with the leader of the House. On the last day, all
the remaining demands are subject to vote though the discussion may not be
adequate. A demand becomes a grant after it has been duly voted.

Demands for Grants

The estimates of expenditure from the Consolidated Fund included in the Annual
Financial Statement and required to be voted by the Lok Sabha are submitted in the
form of Demands for Grants. Generally, one Demand for Grant is presented in respect
of each Ministry or Department. However, in respect of large Ministries or
Departments, more than one Demand is presented. Each Demand normally includes
the total provisions required for a service, that is, provisions on account of revenue
expenditure, capital expenditure, grants to state and union territory Governments,
and also loans and advances relating to the service. In regard to Union Territories
without legislature, a separate Demand is presented for each one of them. Demands
for Grants are presented to the Lok Sabha along with the Annual Financial
Statement.

Finance Bill
At the time of presentation of the Annual Financial Statement before Parliament, a
Finance Bill is also presented detailing the imposition, abolition, remission, alteration,
or regulation of taxes proposed in the Budget. A Finance Bill is a Money Bill. It is
accompanied by a Memorandum explaining the provisions included in it.

Appropriation Bills
After the Demands for Grants are voted by the Lok Sabha, Parliament's approval to
the withdrawal from the Consolidated Fund of the amounts so voted and of the
amount required to meet the expenditure charged on the Consolidated Fund is
sought through the Appropriation Bill.

Legislative Approval of Budget

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After the Appropriation Bill is passed in the Lok Sabha, the Speaker certifies it as a
money Bill and sends it to the Rajya Sabha. Here the bill is discussed and returned to
the Lower House, with or without recommendations. The Lok Sabha gives the
Appropriation Bill its final shape and then sends it to the President for his assent,
which is given as a matter of course. Thus, the Appropriation Bill becomes the
Appropriation Act.

Before it becomes a law, it is discussed in the Legislature in two parts. First, the
expenditure side is discussed and then the revenues are discussed.

All legislatures make extensive use of Committees for the examination of estimates.
In the legislature, two separate Bills are passed, one is the Appropriation Bill which is
a legal authorization to spend money, and the second, Revenue Bill, which gives
authority to impose and collect taxes. After these two bills are passed by the
Legislature, the Political Executive seeks to implement it.

Implementation of Budget
Implementation of budget takes place from April 1 of each year. The nodal agency,
the Ministry of Finance, issues advisories to the spending ministries intimating the
quantum of allocated funds to them. Thereafter, the heads of the departments
allocate money to the numerous disbursing officers of the departments. However, the
disbursing officers are not authorized to spend moneys beyond certain limits. To go
beyond limits, they require sanction from the requisite authorities. At the same time,
it is also mandatory for each spending department to keep records of payments and
receipts in the prescribed method of accounting.

Budget Accounting and Audit

The Comptroller and Auditor General of India (CAG) is a constitutional authority.
Accordingly, he "shall perform such duties and exercise such powers in relation to the
accounts of the Union and of the states" as may be prescribed by Parliament. In this
way, he is the custodian of the accounting and audit systems in the country.

The auditing part of the budget cycle is designed to make sure that public money is
spent appropriately.

Audit is an independent review authority with the objective that public

organizations or programs spend money in accordance with law and
efficiently.

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In other words, the office of the CAG is responsible for budget audits. An audit is
primarily seen as an extension of legislative control and accountability over the
financial administration of the country. The audit in our country is more focused on
expenditures.

Budgeting: Types and Approaches

Budget and Railways

A historic step was taken to merge the Railway Budget with the General Budget
from 2017-18 onwards, discontinuing a colonial practice that had been in place since
1924. This move was intended to bring Railways into the center of the government's
fiscal policy, facilitating multi-modal transport planning across railways, highways,
and inland waterways. Despite this integration, the functional autonomy of Railways
is intended to continue.

Furthermore, the classification of expenditure into plan and non-plan categories was
also removed starting in 2017-18. This change aims to provide a more holistic view
of allocations for sectors and ministries, thereby enabling optimal allocation of
resources.

Glossary
Budget: An authentic legal statement of income and expenditure for a
specific period.

Cycle: A series of events that are regularly repeated in the same order.

Dissolution: In the context of the House, it refers to the dissolution of the

House of People, upon which all matters pending before the House lapse.

Finance Bill: Any bill that relates to revenue or expenditure, over which
the Upper House has minimal jurisdiction.

Transfer payments: Transfers of money from the government to individual

recipients, such as farm subsidies, disaster relief, etc.

Introduction to Budgeting

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Public budgeting has gained significant importance, leading governments to

experiment with various techniques and approaches. Despite these efforts, the
budget process is often criticized for being confusing, time-consuming, burdensome,
and repetitive, with results that often disappoint both budgeters and observers.
According to McCaffery (1987), the purpose for which money is spent is more
important than the techniques of budgeting themselves.

Different Types of Budgeting

Public budgeting is considered a 19th-century phenomenon. Budget classification in
India, even after independence, largely followed the line-item method, which has
become outdated due to difficulties in evaluation (Chakrabarty & Chand, 2016).
There are two main types of public budgets:

Operating budget: Planned for a short term or year-to-year basis. In India, it is

called the 'Annual Financial Statement,' which includes estimated receipts and
expenditures.
Capital budget: Planned for a longer period and involves projects like building
bridges or other large-scale projects.

Wildavsky notes that budgets are political documents that concern administrators,
politicians, interest groups, and citizens, all interested in the distribution of
governmental allocations.

Line-Item Budgeting
Line-item budgeting is a traditional form of budgeting that developed in the early
20th century. It focuses on inputs, where each line lists an item or object on the left
and its cost on the right. This method became associated with governmental honesty,
efficiency, and less inflexibility. However, a major disadvantage is that it is not tied to
performance. Despite its simplicity, it remains popular among local governments.

Performance Budgeting

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Also known as programme budgeting, performance budgeting is a tool of

development administration. It presents government operations in terms of functions,
programs, activities, and projects (ARC, 1967). This approach gives administrators
greater responsibility in using budgeted resources, viewing them as managers rather
than clerks.

According to Viswanathan (1972), performance budgeting is:

a comprehensive operational document, conceived, presented, and

implemented in terms of programmes, projects, and activities, with their
financial and physical aspects closely interwoven.

Key objectives include:

Linking programming and budgeting.

Enabling the legislature to better control the executive.
Aiding in the formulation and review of policy and plans.
Supplying yardsticks of efficiency.
Facilitating effective accounting and audit.

The central points of performance budgeting are measuring the amount of work done
and the quality of that work, both of which impact future funding (Holzer and
Schwester, 2011). It is primarily concerned with efficiency and economy, focusing on
work-cost measurement, also known as unit costs. While it is an excellent analytical
technique, it does not select the best program from all alternatives and only assesses
existing programs.

Planning-Programming-Budgeting (PPBS)
PPBS is a system of resource allocation aimed at improving government efficiency
and effectiveness through long-range planning goals, cost-benefit analyses of
alternative programs, and articulating programs as budgetary and legislative
proposals.

First adopted in the US in the 1960s, PPBS involves:

1. Identifying and examining goals and objectives.

2. Analyzing alternatives to achieve objectives at the least cost.
3. Forcing agencies to consider programs as means to defined objectives.
4. Subjecting programs to competition from alternative programs.

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The approach aimed at setting goals, analyzing costs and benefits, focusing on
objectives, and monitoring results. However, it had weaknesses, including limitations
of the rational decision-making model, difficulties in identifying all possible goals and
projects, and challenges in cost-benefit analysis due to the intangible benefits of
some programs. PPBS was abandoned by the US federal government in 1971.

Zero-Based Budgeting (ZBB)

ZBB is a budgeting technique developed in the 1970s that requires all spending to
be justified and approved each year. It was first adopted in the United States in
preparation of the fiscal 1973 budget of the state of Georgia when Jimmy Carter was
the Governor of the State, and later adopted throughout the federal government
when he became President.

According to Henry, ZBB involves:

the allocation of resources to agencies on the basis of those agencies

periodically reevaluating through intense consultation the need for: all
ofthe programs for which the: agency is responsible and justitying the
continuance or termination of each program in the: agency's budget
proposal

Unlike PPB, ZBB made rapid headway, challenging the need for a program at any
funding level and rejecting incrementalism. Its operational elements include:

1. Identification of decision units.

2. Analysis of decision packages.
3. Ranking of decision packages.

In a ZBB system, department heads must defend their programs and funding levels
each year, showing how different funding levels would impact service delivery.

Advantages of Zero-Based Budgeting:

Efficient allocation of resources.

Drives managers to find cost-effective ways to improve operations.
Detects inflated budgets.
Useful for service departments where output is difficult to identify.
Increases staff motivation, communication, and coordination.
Identifies and eliminates wastage and obsolete operations.

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Disadvantages of Zero-Based Budgeting:

Difficult to define decision units and packages.

Forces department heads to justify every detail.
May threaten R&D departments.
Requires training for managers.
Difficult to administer and communicate.

Gender Budgeting
Gender budgeting involves preparing or analyzing budgets from a gender
perspective to address gender inequality. It aims to ensure that development benefits
reach women as much as men. Gender budgeting is not merely an accounting
exercise but an ongoing process of keeping a gender perspective at various steps of
policy, budget planning, program formulation, allocation, implementation, impact
assessment, review, and audit. It intends to segregate budget items to establish their
gender-differential impacts and translate gender commitments into budgetary
commitments.

Target-Based Budgeting (TBB)

Also known as Target Budgeting, Fixed-Ceiling Budgeting, and Top-Down
Budgeting, TBB is a method of allocating resources where agency spending limits
are set by the elected chief executive.

Under TBB:

the elected chief executive sends budget targets to departments

the departments then try to achieve the set departmental goals using their own
approaches, methods, or devices

TBB focuses on the chief executive's mission by redirecting resources to extract

desired outputs and outcomes.

This system is designed to cut costs when revenue declines, often through reducing
temporary employees, deferring maintenance, and postponing equipment purchases.

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TBB can strengthen communication between public administrators and legislators

and enable the chief executive to exercise greater budgetary control. However, in
developing countries like India, TBB may face difficulties in resolving dilemmas
involved in cutting agency budgets and then allowing administrators to manage the
cuts.

Approaches to Budgeting
There appear to be two principal approaches to budgeting: incrementalist and
rationalist.

Incremental Approach
Charles Lindblom advocated for an incremental approach, arguing for decision-
making through successive, limited comparisons (Lindblom, 1979). Political scientists
argue that the budget is interest-oriented, influenced by who pays and who receives.
According to Wildavsky (1992), the budget represents individual preferences and
conflicts, making the process political rather than economic.

Succinctly, incrementalism is:

a theory of the budgetary process proposing that policy makers give only
limited consideration to small parts of the budget and: arrive at decisions
by making marginal adjustments in last year's budget

Participants make marginal changes to an existing base, emphasizing increases from

the current year (Lynch, 1979).

Rational Approach
The economic perspective, as captured by V. Lewis (1952), introduces a measure of
rationality, advocating for a normative theory of budgeting. Economic principles
remain paramount, with zero-based budgeting (ZBB) and PPBS as close applications.
Mikesell (1978) argues that the budget process should support public policies and
projects where the value exceeds the costs, minimizing wasteful misallocation of
scarce resources. For Brubaker (1997), the budgetary process should express public
preference, produce net benefits, decrease opportunities for rent-seeking, and allow
direct participation.

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Public Administration Perspective

Questions arise regarding the basis for allocating public money to some programs
and not others. V.B. Lewis points out that budgeting is essentially applied economics,
involving the allocation of scarce resources among competing alternatives. Public
administration’s emphasis on efficiency and effectiveness aligns with the economic
principles set forth by Lewis (1952), Mike-sell (1978), and others.

Frederickson (1990) views social equity as a standard for budgetary preferences and
government action, envisioning it as the third pillar of public administration (after
economy and efficiency). This encompasses equality in governmental services and
responsiveness to the needs of the citizenry, requiring public administrators to
balance the needs for economy, efficiency, and social equity.

Conclusion
Budgetary choices are a function of values and principles, with efficiency and cost-
benefit notions guiding the budget process. Incrementalism and bargaining play an
important role in budget formulation, while economy, efficiency, and social equity are
important criteria in resource allocation. Multiple, often overlapping, criteria influence
budgetary decisions, along with political influence and bureaucratic perceptions,
encapsulated in Harold Lasswell's statement, 'who gets what, when, and how.'

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