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Budgeting Methods

Arlita W. Hallams and Teresa R. Dalstons book, Managing Budgets and Finances (see
Bibliography) has a very useful summary (p. 5-23) of all the different types of budgets
librarians could run into. It describes the method, gives examples, and lists the
advantages and disadvantages of each. Heres a summary of the types most common in
the public sector. The opinions implied are not necessarily those of Hallam and Dalston.
Line-item budgets are probably the most common of all, and this type is the example
used in this Workshop. Basically, there is a line for every type of expenditure (library
materials, electricity, travel), and a numbering system to keep track of them. The great
problem with line-item budgets is that they dont show the true costs of services or
programs, which are comprised of several line items. And the individual line items each
support several programs. Line item budgets are easy to cut (e.g. 6% across the board)
with no real accountability for the consequences.
Program Budgets are sometimes used by municipalities, but will almost certainly be
required for grant applications. A program budget delineates all the costs associated with
doing something. For example, a grant application for funds to establish a homework
center at the Eastside Branch would include the cost of the staff, the equipment, furniture,
electricity, training materials, grant administrative costs, and so forth. The disadvantage
of a Program Budget is that when all library services (programs) are delivered from a
single building, delineating projected costs among them is certainly possible. But at the
end of the day they have to be re-aggregated to find out what the library is really
spending on, e.g. power and gas.
Performance Budgets are like program budgets, but more closely tied to data collected
to demonstrate performance: number of reference queries handled at what cost, and so
forth. See also Managing Budgets and Finances for a description of PPBS
(Planning, Programming, Budgeting Systems) which is a combination of the two.

- OVER -

Making Library Budgets Winter 2009 - This material has been created by Anne Turner for the Infopeople Project
[infopeople.org], supported by the U.S. Institute of Museum and Library Services under the provisions of the Library
Services and Technology Act, administered in California by the State Librarian. Any use of this material should credit the
author and funding source.

Multi-year or two year budgeting is just what it sounds like. A municipality and its
constituent departments develop two-year budget projections of revenues and expenses.
There are opportunities in the course of the two years to make needed adjustments, but
basically this type of budgeting is seen as a useful planning tool. Indeed, proposing a
new library program and estimating what it is going to cost (and perhaps save) in Year 1
and Year 2 can be a very helpful in persuading funding authorities to adopt it. The
problem with multi-year budgeting is of course the unexpected: the surprise decline in
revenues or the inability to respond flexibly when a new problem emerges that a library
program might mitigate.
Zero-based budgeting is one of those techniques that (in the public sector at least) looks
good to the budget-cutters, but may be more trouble than it is worth. Basically, every
program gets re-justified from scratch every year. The program is ranked in terms of the
Librarys priorities, and then put into a pot with the programs of the other government
departments, and ranked again. This enables elected officials to look at the
municipalitys entire package of services, and make strategic decisions about funding.
Theoretically, zero-based budgeting promotes cooperation among departments (if a city
places a priority on services to pre-schoolers, the Library and the Parks and Recreation
Department might develop a joint program), but it also takes a lot of time. And it makes
programs that are not necessarily exciting, but are nevertheless very important (e.g.,
Library outreach visits to nursing homes) very vulnerable to cuts.

Making Library Budgets Winter 2009 - This material has been created by Anne Turner for the Infopeople Project
[infopeople.org], supported by the U.S. Institute of Museum and Library Services under the provisions of the Library
Services and Technology Act, administered in California by the State Librarian. Any use of this material should credit the
author and funding source.