SB508

Report Title:

Zero-Based Budgeting

Description:

Requires principal departments of the state executive branch to develop and prepare proposed biennium budgets in accordance with zero-based budgeting principles beginning in FY2007-2008, FY2009-2010, and FY2011-2012, respectively, and every 6 years thereafter.

THE SENATE	S.B. NO.	508
TWENTY-THIRD LEGISLATURE, 2005
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO STATE FINANCIAL ADMINISTRATION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Zero-based budgeting, described. (a) For the purposes of this Act, the term "zero-based budgeting" refers to a budgeting system that starts from "zero" each biennium. In zero-based budgeting, previous years' biennium budgets are used only to provide costing information. The following management tasks are an integral part of the zero-based budgeting process:

(1) Identifying and analyzing the organization in total;

(2) Setting output and financial performance targets;

(3) Making operating decisions; and

(4) Evaluating changing responsibilities and workloads.

(b) The three steps in zero-based budgeting are:

(1) Developing decision packages by analyzing and

describing every discrete activity, current as well as new. The term "decision package" refers to an analysis of cost, purpose, alternative courses of action, measures of performance, consequences of not performing the activity, and benefits of the activity;

(2) Ranking decision packages in their order of

importance. Both cost/benefit analysis and subjective evaluation may be used to evaluate and rank decision packages. The purpose of ranking decision packages is to require project managers to explicitly identify their priorities and to allow department heads to evaluate and compare the relative needs and priorities of different projects; and

(3) Allocating resources in order to fund the most

important activities, whether preexisting or new. The final biennium budget is produced by taking decision packages that are approved for funding, sorting them into their appropriate budget programs, and adding up the costs identified on each decision package to produce the biennium budget for each program.

(1) Provide elected policymakers and appointed

decisionmakers with detailed information concerning the money needed to accomplish desired ends;

(2) Highlight redundancies and duplications of effort

within state government, within a department, within a program, and within a project;

(3) Focus on actual dollars needed to produce outputs

rather than on the percentage increase or decrease from previous bienniums;

(4) Specify priorities within and among offices and

divisions of a department;

(5) Allow a performance audit to determine whether each

activity or operation was performed as promised;

(6) Identify activities that can be reduced or expanded

if allowable expenditure levels change or actual

costs vary from the budget.

SECTION 2. Transition to zero-based budgeting. (a) Notwithstanding any other law to the contrary, each principal department of the state executive branch shall develop and prepare a proposed biennium budget in accordance with zero-based budgeting principles as follows:

(1) Beginning fiscal year 2007-2008 and every six years

thereafter, the department of human resources development, department of accounting and general services, department of the attorney general, department of budget and finance, department of commerce and consumer affairs, and department of taxation;

(2) Beginning fiscal year 2009-2010 and every six years

thereafter, the University of Hawaii, department of education, department of health, department of human services, department of land and natural resources, and department of agriculture; and

(3) Beginning fiscal year 2011-2012 and every six years

thereafter, the department of Hawaiian home lands, department of business, economic development, and tourism, department of transportation, department of labor and industrial relations, department of defense, and department of public safety.

(b) All information developed for zero-based budgeting pursuant to this section shall be made available to the auditor, the director of finance, and the chairpersons of each fiscal committee of the legislature.

SECTION 3. Applicability to the University of Hawaii. This Act shall apply to the University of Hawaii. In accordance with article X, section 6 of the state constitution, the legislature finds and declares this Act to be a law of statewide concern.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________
	_____________________________
	_____________________________
	_____________________________
	_____________________________