Issue: Government Budgeting Policy (Use or Lose)

The Problem

This has to be one of my biggest pet peeves of all time. And this is one government budget policy that is in effect not only at the Federal Government Level but exists at the State Government Level as well. I have worked at both the Federal and State Government Levels and have personally experienced this first hand at both levels. I am not aware if this is in the County and City Levels, but I would bet it is.

Before I tell you what the problem is, I want to make one two more very significant points on this. First, and most important, if this policy is changed, this could save governments at all levels with the same policy so much money that we would not only have a surplus in a very short time, but the government could easily lower our taxes without affecting any other aspect of the government. The second point that I want to make on this is that this policy is not known by many people that don't work for the government. If a majority of the people outside the government would know this, there would be a public outcry to change it.

Now to get to the problem. Most governments from the City level to the Federal level work on a 12 month budget cycle. For example, the budget year for the Feds is from October to September. Most run from January to December. Each government agency submits their budget every year and an amount is approved for each agency. At the beginning of the budget year the money they were approved for is given to them and then the agency spends it throughout the year based on what their plans and operations.

Now here is the kicker: If an agency does not spend all of the money it was allocated, the money is taken away from the agency and spent elsewhere, AND, the agency risks a budget reduction of that amount the next budget year. So what does the agency do? They spend every penny they have. And sometime they spend more because they were given money that was taken away from another agency. When I worked for the government, I have personally been given hundreds of thousands of dollars from another agency to spend. This budgeting policy is known as "Use or Lose". Hundreds of millions of dollars are spent haphazardly each year by the government at all levels because of the fear of losing the money and risking a budget reduction the following year. It is unbelievable how much money is spent this way.

Suggestions to Fix the Problem

The sad thing is this could be a very easy fix. All it would take is a change in government budgeting to allow government agencies to bank their leftover funds at the end of each budget year and to eliminate the risk of a budget reduction an agency might face if they don't spend all their money. I personally believe after a couple of years of this policy and agencies banking their money, they would probably reduce their own budget. As I said earlier, this simple change of policy would save hundreds of millions of dollars, if not billions of dollars, each and every year. I believe this not only would solve the deficit, but would allow the government to even lower taxes.

Your Thoughts and Suggestions

Coming Soon.