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Budget FY17: Zero-Based Budgeting

The Budget Office began the implementation of zero-based budgeting (ZBB) with the FY2015 budget cycle in support of the strategic plan, Vision 2018: Fulfilling the Promise of Preparation.

This process aligns with Strategy 4.3.1, Implement a zero-based budgeting process to invest in strategic priorities. Zero-based budgeting is a technique used for developing annual budgets that complements the budget planning and review process. Due to its flexibility, this method of budgeting allows department heads to identify alternative ways to utilize limited resources through a systematic review. All expenses must be justified and every function within an organization is analyzed for its needs and costs. The purpose of the ZBB analysis is to assess a particular program’s activities against its statutory responsibilities, purpose, cost to provide services, and desired performance outcomes.

The above video was created when HCPSS introduced the zero-based budgeting process in FY 2015.

The following questions are answered by performance managers in the HCPSS ZBB process:

  1. What does this program do and how does it support achieving the goals and outcomes in Vision 2018?
  2. What staffing, supplies, equipment, and other resources does the program need in 2017 to be successful in supporting Vision 2018?
  3. What is the program’s purpose and what are the desired outcomes? What goals and strategies are utilized to align this purpose with Vision 2018?
  4. What performance measures are in place to report on the program’s effectiveness?

$32.5 Million Identified in Savings through Zero-Based Budgeting in First Three Years

The ZBB process helps the school system prioritize requests, yielding a much leaner and more focused request. The FY 2015 request was reduced by $10.4 million, the FY 2016 request was reduced by $10.2 million, FY 2016 savings through cost-containment yielded $4.3 million, and the FY 2017 request was reduced by $7.6 million.

The school system offered an Early Retirement Plan (ERP), which allowed nearly 400 individuals to retire at the end of FY 2015. The school system will yield $11.4 million savings in salary, social security, and retirement through FY 2023. In FY 2016 alone, the savings from the ERP totaled $4.3 million, providing most of the internal funding for the mid-year salary increase negotiated after the FY 2016 budget was finalized.

In the third year of ZBB, efforts continued to allocate resources most efficiently and effectively. Savings through redirected resources yielded $3.0 million in ZBB savings which was applied to non-salary increases aligned with Vision 2018. Projected FY 2017 ERP savings, totaling $1.2 million, are directed to offset salary increases.

In reviewing key activities and program alignment with Vision 2018, 35.2 requested positions totaling $2.1 million and $1.3 million of new initiative requests were excluded from this budget, saving an additional $3.4 million. In total, the ZBB process yielded a reduction of approximately $7.6 million.