INTRODUCTION Chapter 1

1

In what many characterize as the information age,1 it is to be expected that any book dealing with large organizations operating in the world economy would focus extensively on information. This book is about complex governmental insti- tutions that operate in a world economy and society, and its extensive focus on information is no surprise. This book is about budgets, budgeting systems, and budgeting processes; the nature of the decisions that are made; and the processes by which those decisions are made. As we discuss throughout the book, budget- ing has always been about information, and budget systems are about gathering the best information available, whether that information be primarily of a techni- cal nature or primarily of a political nature, and bringing that information to bear on decisions about allocating resources to purposes.

Public budgeting involves the selection of ends and the selection of means to reach those ends. It involves the division of society’s economic and financial resources between the public sector and the private sector as well as the allocation of such resources among competing public sector needs. Public budgeting sys- tems are systems for making choices of ends and means. These choices are guid- ed by theory, by hunch, by partisan politics, by narrow self-interest, by altruism, and by many other sources of value judgment including avarice and perceptions of the public interest.

Public budgeting systems work by channeling various types of information about societal conditions and about the private and public values that guide resource allocation decision-making. Complex channels for information exchange exist. Through these channels, people process information on what is desired, make assessments of what is or is not being achieved, and analyze what might or

31293_CH01_Lee.qxd 4/22/07 9:18 AM Page 1

© Jones and Bartlett Publishers. NOT FOR SALE OR DISTRIBUTION

2 Chapter 1: Introduction

might not be achieved. Integral to budgeting systems are intricate processes that link both political and economic values. In making decisions that ultimately deter- mine how resources are allocated, the political process uses sometimes bewilder- ing and often conflicting information about values, about actual conditions, and about possible condition changes. This book is an analysis of procedures and methods—past, present, and prospective—used in the resource allocation process.

This chapter examines some basic features of decision-making and budgeting systems. First, some major characteristics of public budgeting are explained through comparison and contrast with private forms of budgeting. Second, the development of budgeting as a means of holding government accountable for its use of society’s resources is reviewed. Next, budgets and budgeting systems are defined. Finally, the role of information in budgetary decision-making is considered.

Distinctions Regarding Public Budgeting

Budgeting is a common phenomenon. To some extent, everybody does it. People budget time, dollars, food—almost everything. The family hardware store budg- ets, Wal-Mart budgets, and governments budget. Moreover, important similarities exist in the budgeting done by large public and private bureaucracies.2

Budgeting is intended as a mechanism for setting goals and objectives, for allocating the resources necessary to achieve those objectives, for measuring progress toward objectives, for identifying weaknesses or inadequacies in organ- izations, and for controlling and integrating the diverse activities carried out by numerous subunits within large bureaucracies, both public and private. Budgeting is the manifestation of an organization’s strategies, whether those strategies are the result of thoughtful strategic planning processes, the inertia of long years of doing approximately the same thing, or the competing political forces within the organization bargaining for shares of resources. Once resources are allocated through the budgetary process, the organization’s strategies become apparent even if they have not been articulated as strategies. Budget