Business Practices

Cycle-Based Budgeting

• By Bo Yan
• 04/01/18

Although blaming district leaders for poor budget decisions is easy and convenient—and rightly justified in some situations—the root cause often lies in two system deficiencies that fail to provide the conditions for district leaders to make informed decisions:

• Lack of linked program alignment, budget, and outcome data that provide a complete picture of resource allocation and return on investment.
• An organizational structure and processes that fall short of institutionalizing routine scrutiny of spending using such data.

Today’s technology allows most districts to make informed decisions about which new programs to fund and which existing programs to cut. They can determine how much money has been invested in which areas, through which programs, and for how many years to improve which student outcomes; whether redundancy exists among those programs; and whether programs that target the same area support one another or compete for time and resources.

Unfortunately, many districts’ budget infrastructure is inadequate for providing such data, making it difficult for district leaders to objectively assess how resources have been used, which adjustments are needed, and which new programs should be funded.

It is not difficult to compile data on the costs and outcomes of a few intervention programs. In practice, however, districts scarcely use such data to examine cost-effectiveness of existing programs and to decide whether those programs should be continuously funded or adjusted to improve program outcome.

This process deficiency is due primarily to the fact that budget decisions about new initiatives are largely driven by needs assessment. Rarely does the deliberation involve setting program success metrics and time frames for delivering the results, which should be part of the budget decisions.

Without those two critical elements, no system check is in place to ensure that new programs will be reviewed at a certain time for return on investment. And district leaders have no incentive to raise issues over existing spending or to propose cuts, especially when money is available.

Our Solution

Two years ago, Jefferson County Schools in Louisville, Ky., addressed those system deficiencies by developing and implementing a budget process called cycle-based budgeting (CBB) supported by an online tracking system.

For any new initiative or program, district personnel must submit a budget request online specifying (a) alignment with district priorities, (b) budget needs and intended use, (c) measurable outcomes (academic or nonacademic), and (d) time needed to achieve the target outcomes, which becomes the cycle for the program to be implemented and reviewed. This online system allows us to easily track how the $48.7-million new investment has been made in which strategies through which programs in the past two years.

In 2017, we rolled $20.4 million in existing programs into the CBB model. As a result, we can show which strategies $69.1 million of the budget is invested in to target areas for improvement.

With the cycle associated with each budget request, we can institutionalize routine return-on-investment reviews with the CBB-accounted existing programs based on their cycles and the target measurable outcomes program owners set for themselves.

If a program has no or low return on investment at the end of its cycle, it is not automatically discontinued; CBB ensures that the discussions and debates about what should be done to such programs and how to best spend that budget take place in an open and safe environment and are anchored on tracking evidence rather than perceptions, anecdotal stories, or political influence.

Impact on the District

By addressing the two system deficiencies, we could provide data on how our district has made $48.7 million in new investments to implement district priorities during the past two years and set funding priorities for the 2018–2019 school year. District leaders made informed new-year funding priority decisions and could explain those decisions to stakeholders to gain support.

We have set expectations for the CBB-accounted spending over success metrics and the time frame for delivering results. District leaders expect to review a certain number of end-of-cycle programs each year (and know what those programs are) and to make funding or adjustment decisions. Program owners realize that money is not unlimited and that district support is not unconditional. As a result, we have created the conditions to transform spending on programs from entitlement into timebound conditional commitment.

Through cycle-based budgeting, we have empowered our leaders to make informed and tough decisions, which will lead us to more optimal use of the taxpayer money to improve student learning.

—This article is excerpted with permission from the January 2018 issue of School Business Affairs, published by the Association of School Business Officials International (www.asboint.org).