A Better Way to Build the State Budget

There are three different approaches to writing a state budget, and like most states, Wisconsin uses the easiest one that all but guarantees more spending in each new budget. Fortunately, Wisconsin already has the tools it needs to transition to a better approach, as well as the public support to go for it.

The three approaches are: zero-based budgeting, performance-based budgeting and incremental budgeting. Wisconsin, along with 42 other states, uses incremental budgeting exclusively. The rest of the country uses a mixed approach.

• Incremental budgeting means taking whatever you spent in the last budget and adding to it. This approach promotes unnecessary spending, discourages innovation, fails to consider changing conditions and requirements, and discourages efficiency and effectiveness. In other words, it’s pretty much what you’d expect from government and exactly what you’d argue needs to change about government.
• Zero-based budgeting means writing each budget from scratch, starting with a review of each agency’s goals, structure, function and activities. This approach requires justification for each and every item in the budget. It forces agencies to make thoughtful, strategic decisions and consider how it accomplishes its mission of serving taxpayers. No state currently uses zero-based budgeting, and the federal government stopped using it 1981.
• Performance-based budgeting is similar to zero-based budgeting except you don’t start from scratch. You start with a review of each agency’s performance over the past budget cycle to justify increasing or decreasing spending.

Incremental budgeting is the easiest approach both mentally and politically, which is why it is so attractive for politicians. However, Wisconsin has taken steps that would enable it to transition to zero-based or performance-based budgeting, should its politicians ever build up the courage to do so.

A law was passed in 2017 that required every state agency to submit a “base budget review report” every two years that justifies all of its spending items and explain how they contribute to they contribute to the agency’s mission. That report is due by May 15^th of even-numbered years, about a month before the governor typically issues budget guidance to agencies for the next state budget. These reports enable Wisconsin to use zero-based budgeting.

Starting in 1977, agencies included their mission statements, vision statements, goals, and performance measures in their budget requests. This enables Wisconsin to use performance-based budgeting. Unfortunately, the legislature has never shown any interest in this information and has no involvement in its collection or reporting. There are 39 states that require agencies to submit performance reports. Wisconsin is one of 12 states that has no process to review those reports.

Ideally, Wisconsin would adopt zero-based budgeting, but performance-based budgeting would be a good step in the right direction. It would allow lawmakers to still use the current budget as a starting point but would then enable them to make bold decisions regarding program authorizations and the allocation of resources.

Whereas a lack of political courage has always held Wisconsin (and other states) from abandoning incremental budgeting, today there is growing public support for government to take bold steps to improve efficiency and effectiveness. President-elect Trump’s Department of Government Efficiency (DOGE) at the federal level is one example. Speaker Robin Vos’ Government Office of Accountability and Transparency (GOAT) in Wisconsin is another example. If Wisconsin really wants to get serious about these issues, using performance-budgeting would be the best way to show it in 2025.