Baseline Budgeting

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Baseline budgeting is the method of preparing a budget based on current borrowing, and spending levels multiplied by the inflation rate and then using that as a baseline.  After the baseline has been determined then additional borrowing and spending amounts are added as desired.

 

Baseline Budgeting Formulas

 

Current Budget x Inflation Rate = Baseline Budget

 

Then

 

Baseline Budget + Additional Borrowing + Additional Spending = New Budget

 

Or

 

            (Baseline Budget)

(Current Budget x Inflation Rate) + Additional Borrowing + Additional Spending = New Budget

 

Example:

 

Many people oppose the use of baseline budgeting as it assumes that current spending levels are either correct or need to be increased rather than assessing the effectiveness and efficiency of agencies and programs to determine whether current spending levels are justified prior to any increased spending.

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Compare with: Zero Based Budgeting