Six basic types of budgets can be used to help city officials control waste and plan for the efficient use of resources:

• Line-item (traditional)
• Planning, programming, budgeting system (PPBS)
• Performance
• Zero-based
• Priority-based
• Participatory.

It is advantageous for a city to use a combination of different budget types and not fully rely on one method. The following information explains each budget type, including its advantages and disadvantages.

Line-Item Budget

The budget type most often used by Georgia’s cities is the line-item budget. The line-item budget lists each expenditure by account classification as identified in the Uniform Chart of Accounts. This budget type is useful for exercising control over spending in the current fiscal year. See the table below for an example of Line-Item Budgeting:
 

DEPARTMENT: Public Works

Expenditure Classification	Previous Fiscal Year 2018-2019: Actual	Current Fiscal Year 2019-2020: Budgeted	Current Fiscal Year 2019-2020: Est. YE Actual	Next Fiscal Year 2020-2021: Request
Salaries	$	$	$	$
Fringe Benefits	$	$	$	$
Supplies	$	$	$	$
Contractual Services	$	$	$	$
Capital Outlays	$	$	$	$
TOTALS	$	$	$	$

Advantages

• Easy to produce
• Provides tight control over operational expenses
• Easily adjustable from year to year through incremental changes

Disadvantages

• No requirement for departments to consider alternative methods of service delivery
• Budgeting is not connected to performance measures or the value of the outcomes of specific programs
• The incremental approach does not require justification for long-standing programs.

Planning, Programming, Budgeting System

The planning, programming, budgeting system (PPBS) organizes proposed expenditures according to broader overall functions. This format redirects the focus from what the city is buying to what services the city is providing. This budgeting system defines the goals of an agency and classifies the organizational activities that contribute to each goal. The PPBS budget is an excellent tool for planning. An example of an excerpt from a program budget might look like the following:

“Objective: Maintenance and construction of public facilities – to provide safe and efficient public access for vehicular and pedestrian traffic; prompt disposal of stormwater, wastewater, and solid waste; a clean and sufficient water supply; and clean, well-maintained public buildings.

• Service area 1 – administration and support (to provide general planning, coordination, supervision, and control of the activities necessary to accomplish this key objective)
• Service area 2 – public access (to provide and maintain vehicular and pedestrian access to private property while maintaining a safe, efficient flow of traffic on city streets; and to provide and maintain parking facilities considering short term and long-term needs)
• Service area 3 – stormwater and wastewater (to provide a system for disposing all stormwater and wastewater to minimize the frequency and severity of flooding and pollution)
• Service area 4 – solid waste collection and disposal (to provide a system for the regular and efficient collection and disposition of all solid waste)
• Service area 5 – water supply and distribution (to provide and maintain facilities for storing, treating, transporting, and measuring water)
• Service area 6 – public buildings maintenance and construction (to provide for maintenance and construction of city-owned buildings not used and budgeted specifically for one service area).”

The table below shows a PPBS Budget Template for the street sweeping program of a public works department. The other programs conducted by the department — street repair, solid waste collection, and inspection services — would each have a similar, separate budget:
 

DEPARTMENT: Public Works
PROGRAM: Street Sweeping

Expenditure Classification	Previous Fiscal Year 2018-2019: Actual	Current Fiscal Year 2019-2020: Budgeted	Current Fiscal Year 2019-2020: Est. YE Actual	Next Fiscal Year 2020-2021: Request
Salaries	$	$	$	$
Supplies	$	$	$	$
Contractual Services	$	$	$	$
Capital Outlays	$	$	$	$
TOTALS	$	$	$	$

Advantages

• Facilitates better understanding of the cost of each activity or service that a department provides
• Can be used to determine the most cost-effective method for service delivery
• Connects service delivery to the outcomes a city expects from each service area

Disadvantages

• Can be difficult to budget for activities that span multiple departments
• Process of developing service areas can be time-consuming and is not valuable if policymakers are not dedicated to learning the new system
• Utilizes a simple line-item budgeting style for each service area.

Performance Budget

Performance budgets emphasize departmental performance objectives and accomplishments rather than the purchase of resources. These budgets present the cost of performing activities during the budget year. A performance budget will look at issues such as productivity and will include performance indicators such as effectiveness and demand for services. The budget process has the dual role of providing funds for services and establishing performance goals. The goal of the performance budget is to emphasize the efficiency and effectiveness of services and increase accountability among departments. Click here for a section of a Sample Performance Budget and see the list below for Performance Budgeting Components:

• Expenditures are broken down into organizational sub-units (distinct programs and activities)
• A written summary of what each organizational unit does
• A summary of personnel resources:
  • Number of full-time employee positions
  • Actual expenditures for at least the previous two years
  • Estimates for the current and coming year
• Listing of major goals and objectives for the current and coming year
• Performance indicators – actual information for at least the previous two years and estimates for the current and coming year:
  • Workload – number customers served, miles of streets maintained, businesses inspected, etc.
  • Efficiency – cost per unit
  • Effectiveness – levels of satisfaction, % of targets met, etc.
• Explanation of factors significantly affecting the budget
• An organization chart showing major activities around which resources are allocated.

Advantages

• Used as an accountability tool for the efficiency and effectiveness of programs and departments
• Directly connects the cost incurred by cities to quantitative outputs of service delivery
• Provides additional transparency on the use of public funds and the purpose of spending

Disadvantages

• Does not account for the qualitative nature of services provided
• Requires a complex and systematic accounting system that is costly and time-consuming to implement and difficult to analyze
• Activities in departments dealing with broader social conditions are not easily quantifiable.

Zero-Based Budget

A zero-based budget system (ZBB) annually challenges and requires departments to justify and defend their programs. For each program, the department must show the various levels of service that could be provided with different levels of funding — including zero funding, alternative courses of action, the consequences of funding the service at different levels, or not funding it at all. The purpose of using a ZBB system is to make government more flexible, to eliminate programs that are not productive, and to improve effectiveness by forcing department heads to consider their total programs each year. Click here for a Sample Departmental Decision Package for a ZBB system.

Advantages

• Requires yearly consideration of service delivery methods and prioritizing
• Places focus on improving past practices and creating more efficient methods of service delivery
• Gives decision-makers an idea of what services are necessary and what could be trimmed back in case of budget cuts

Disadvantages

• It is not realistic to fully zero out programs every year
• Requires department heads to fill out paperwork and justify the spending in each program or service area
• Determining the most efficient plan of service delivery does not consider the actual value of the service.

Priority-Based Budgeting

Zero-based budgeting paved the way for a priority-based budgeting system. This budget type asks executives, department heads, and program managers to decide which activities and services matter most and to identify the revenue source to support these priorities. This requires a difficult examination of which activities and services are most critical for members of the community, and which of these can have a large impact for a relatively small investment. Priority-based budgeting is especially helpful in the context of reduced funding. Deliberately setting priorities guides how to disassemble and reconfigure services and capacity, as illustrated in the table below. The advantages and disadvantages are similar to those for zero-based budgeting.
 

OLD WAY	NEW WAY
Starting Point: Last Year's Spending	Starting Point: Next Year's Goals
Funding Targets: By Agency	Funding Targets: By Priority Outcome
Agency Submission: How Allocation Will Be Spent	Agency Submission: Proposal to Achieve Results
Debate: What to Cut	Debate: What to Keep

Participatory Budgeting

Participatory budgeting (PB) is an innovative tool that can be used with any of the above budget formats and gives constituents real decision-making power in deciding the public budget. It does not require a new revenue stream, but rather uses existing funds which are not committed to fixed expenses; these are typically discretionary public funds. Funding streams that matter to communities that are least represented in government should be emphasized, such as schools, housing, and community programs. Typically, participatory budgeting allocates 1-15% of the total budget; it does not have to stretch into the millions of dollars to be effective or worthwhile, but enough funds must be allocated for invitations to be compelling and for the process to have a visible impact on the community.  
Participatory budgeting can take many different forms, but all programs have the same basic traits:

• Information sessions: residents are given access to information about the cost and effect of government programs
• Neighborhood assemblies: residents articulate local budgetary needs
• Budget delegates: some residents sign up to directly interact with government officials and draft viable budget proposals
• The vote: a larger group of residents vote on which projects to fund.

Advantages

• Increases transparency and accountability in the budget process and can raise the level of trust in government
• Establishes a greater sense of democracy in the decision making on the use of public funds
• Budget decisions are more tailored to the community and better account for the needs of historically disenfranchised groups.

Disadvantages

• Participation in budgeting may not be possible for residents who do not have the time to give to the process
• Participants may only be involved in the process for a single issue that most directly affects them or their community
• Assemblies or councils are easily dominated by the loudest voice in the room if formal procedures are not adhered to.

For more information on the process, or if you are interested in applying participatory budgeting, the Participatory Budgeting Project (PBP) offers assistance and has supported most participatory budgeting processes in the United States. Atlanta is one city in Georgia that has successfully implemented elements of participatory budgeting.
 

Budget Types: Summary

All of the budget types described in this publication are acceptable for use in municipal governments. Each type provides a different orientation to help city officials make rational budget choices. While none of the budget types listed offers a perfect solution to ensure that resources are used most effectively, each system tries to organize information so that decision-makers can make reasonable choices. Whichever system your city uses, all players in the budget process must “buy into” the system, or it will likely fail.