Testing Rival Theories of Budgetary Decision–making in the US States

Abstract

INTRODUCTIONThis article examines the impact of three rival decision-making theories on disaggregated US state budgetary output data. This study tests the impact of the different theoretical explanations on expenditure levels. The three budget models tested are the garbage can theory, incrementalism, and rational approaches. The garbage can theory of budgeting argues that decisions are determined by the random mix of problems, solutions, participants, and choice opportunities in the decision-making process. Incrementalism focuses on expenditure decisions based on marginality and regularity from previous spending outputs. Finally, rational approaches to budgeting advocate that decision-makers think prospectively by systematically weighing policy options. The rational approaches we focus on here are program budgeting, Zero Based Budgeting (ZBB), and biennial budgeting (representing more strategic long-term decision-making in comparison to annual budgeting). These theories are tested on resource allocations, the winners and losers in the budget game. The history of their existence is traced by an examination of budget process outputs over time and across the fifty states.The literature on budgetary theories has the tendency to concentrate on one theory to the exclusion of others. For example, the recent trend is to examine performance based budgeting at various levels of government. 1 This is insufficient since state budgetary decision-makers obviously use more than one method (Botner, 1985). This is demonstrated in Table 1, with survey evidence compiled by these authors from the National Association of State Budget Officers (NASBO) from 1989 to 1996. This survey evidence indicates that most states use some combination of incrementalism and rational methods such as program and zero based budgeting. 2 Therefore, to downplay incrementalism when we speak about budget approaches seems entirely inadequate.A recent study has examined quantitatively the impact of incrementalism on sub national budget outputs (Boyne et al., 2000). There is also an extensive body of

Combining Incrementalism and Exogenous Factors in Analyzing National Budgeting

“…A further attempt (Reddick 2003a) on monthly US national government budget outcomes indicated that a rational or balancing component at the macro level does not prevent the domination of incrementalism at more micro-level spending sectors. In contrast with these studies, Reddick (2003b) found support for the garbage can model at the disaggregated level once several developments were introduced to mitigate a previous bias against that model, including a test of incrementalism along with exogenous variables. He concludes by suggesting a research path that combines several models, to capture what is most likely ''a hybrid form of budgeting'' (Reddick 2003b).…”

“…In contrast with these studies, Reddick (2003b) found support for the garbage can model at the disaggregated level once several developments were introduced to mitigate a previous bias against that model, including a test of incrementalism along with exogenous variables. He concludes by suggesting a research path that combines several models, to capture what is most likely ''a hybrid form of budgeting'' (Reddick 2003b). More recently, Le Maux (2009) compared the usual empirical specification of the median voter model against a dynamic model supposing politicians use an incremental, hill-climbing heuristic.…”

“…Further, the ''institutional friction'' theory induces researchers to identify those exogenous factors that may determine the sources of friction, that is, the informational, cognitive, decision, and transaction costs of change decisions. Finally, the recent comparisons among incrementalist model results and those of other competing models are either also going for testing incrementalism along with exogenous variables (Reddick 2003b) or confirm the inappropriateness of an incrementalist model devoid of such variables (Le Maux 2009).…”

“…The core of Wildavskian budgetary incrementalism builds upon contributions made by Simon (1955) and Lindblom (1959), who underlined the First AR(1) models: Wildavsky (1966, 1971). True (2000), Robinson (2006) Comparing incrementalist model results with those of other competing models: Reddick (2002Reddick ( , 2003aReddick ( , 2003b, Le Maux (2009) Caamaño-Alegre and Lago-Peñas cognitive limits, information costs, and political constraints opposed to rational-comprehensive decision making in complex and uncertain environments. In the case of national budgeting, decision makers are generally confronted with burdensome calculations, strict deadlines, repetitive tasks, and strong expectations.…”

Getting resources to those who need them: the evidence we need to budget for underserved populations in sub‐Saharan Africa

“…Evidence‐based budgeting aims to replace incremental budgets which are based on last year’s budget with small increases, to a rationalist theory that adds an aspect of performance or outcome measurement [28]. In this paper, we focus on the critical evidence required for an intervention to be considered in an EBB budget allocation decision in the context of USDB populations.…”