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Baseline Budgeting In the world of government budgeting and spending there is more than one type of budgeting. A simplistic view would simply say a government budget counts up how much money the government has and then determines how those funds are spent. Unfortunately, our modern government system at the state and federal level are not so simple. There are entitlements, technical adjustments, one-time spending, policy decisions, and discretionary spending. If that's already starting to make your head spin a little, welcome to the club. Government spending and budgeting is not simplistic; it is fraught with politics and policies, some decades old and institutionalized. Baseline budgeting is one of the many types of accounting that government uses. In a basic sense, a baseline budget represents the spending that stays fairly the same from year to year to "keep the lights on" in a government program. Assuming the program won't be cut, significantly reduced, or replaced, this spending amounts to what is "under the line" or assumed recurring in terms of expenses. However, while many would agree a certain level of maintenance is required to keep an agency operating, baseline budgeting can be anything but just that. Baseline Budgeting Definition In a one-sentence description, a baseline government budget involves carrying over the current spending level from year to year and treating it as the floor on which to build additional spending changes. The major assumption in this approach is that the existing spending level of the agency is correct and needs no adjustment. Any new change should be on top of the existing level, not into it. Additionally, the baseline budget needs to be adjusted to address common issues that devalue spending worth. These factors include inflation, cost of living increases, and adjustment in supply and resource costs to maintain the same level of service. The inherent issue with baseline budgeting is that it doesn't shrink if followed correctly. There are some exceptions to this rule: caseload programs, for example, flow and ebb with the number of cases that apply, if all else in the program is allowed to remain unchanged. Programs driven by statutory formulas will also cause increases on the natural as the formula math results in new costs. Social services and health services programs tend to be common examples of this sort of situation. The treatment of these baseline factors along with the existing spending then get accepted as the "floor" for any new spending discussions in each new budget cycle. Many critics argue that any real cuts in government spending needs to cut into such floors to score real savings. However, government insiders also know how difficult such an approach can be. Just trying to get a statutory change of an entitlement formula is like climbing Mt. Everest in a partisan environment. Thus it's easier for politicians, who actually pass the legislative language of budgets, to focus on policy issues above the baseline than the baseline costs themselves.
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Baseline Budgeting - What it is, who uses it and why.
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