Zero-based budgeting is the method of preparing a budget beginning with a new assessment of anticipated revenue projections, and an assessment as to whether or not current borrowing and spending levels are justified, based on the effectiveness and efficiency of current agencies and programs. Then a new budget is developed based on the new assessment of anticipated revenue, borrowing, and spending requirements and desires.
Zero-Based Budgeting Formula
$0 + Anticipated Revenue - Expenditures + Borrowed Funds = New Budget
Many people oppose zero-based budgeting because they are concerned that it could potentially diminish spending levels for programs that they support and would like to continue to fund at current or increased levels.
Compare with: Baseline Budgeting