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Zero-Based Budgeting for Adaptation and Sustainability

STRATEGY: Consider zero-based budgeting (ZBB) practices to reallocate and reassess school-level budget priorities annually.

Operating, leading, and improving schools cannot take place without proper financial resources. Budgets and school funding streams vary from state to state and district to district. Good financial practice means aligning the budget and financial processes with the school’s strategic plan. There are many types of budgeting models, and the zero-based budgeting (ZBB) approach is aligned with service-level entities, such as schools, where the provision of service is paramount. ZBB is a management tool used to control costs in an organization.


For American Association of School Administrators (AASA), Kelt Cooper, a district superintendent, wrote,

An alternative method [to budgeting] that truly addresses budget development and program effectiveness employs the basic principles of the return-on-investment model and zero-based budgeting (ZBB). The advantages of this approach are manifold:

  • It requires predicted outcomes to be established and empirical means of assessing effectiveness;
  • It provides a “returns” method for determining budget priorities;
  • It provides the information necessary for deciding whether to maintain programs, build programs, eliminate programs or introduce new ones;
  • It ultimately leads to a more strategic simplification of effort while increasing student and program success; and
  • It forces those involved in the budget development to evaluate whether such programs and activities are truly fortifying student achievement.
  • ZBB is a repeatable process that organizations can use to review every dollar in the annual budget, manage financial performance on a monthly basis, and build a culture of cost management among all employees. The ZBB approach involves pinpointing outcomes and developing a package of expenditures to support each desired outcome. However, it takes a great deal of time to develop a zero-based budget compared to other budgets. For example, the point of a zero-based budget is to make income minus what is spent equal zero; if all expenses are covered during the month and there is $500 left over, the budget is not complete.

The ZBB approach eliminates non-working money that doesn’t efficiently support the strategy and allows funds to be redirected and more closely aligned to growth initiatives and goals. Through combining the various outcomes and expenditure packages, a budget is derived that should result in a set of specific outcomes for the entire school or district. This type of budgeting helps the leader avoid traditional expenditures that are no longer required, and the ZBB process includes identifying the decision unit (a single activity or cluster of activities), making decision

packages (breaking decision units into smaller packages), ranking decision packages (order of importance), allocating available resources (funding decisions are made), and controlling and monitoring (evaluated for performance output).

First Steps to Consider

  • Inform personnel what ZBB is and how it differs from past budgeting practices.
  • Bring appropriate people into the process, to ensure transparency.
  • Establish accountability and controls.
  • Develop a multi-level learning campaign using technology for dissemination and transparency.

Complexities & Pitfalls

ZBB aims to reflect the true expenses to be incurred, and therefore can be a time-consuming process that requires intensive manpower and training to understand every line-item and every cost. While organizations find evidence of impact on cost categories, they realize it can be a challenge to create a culture that delivers more than just one-off savings and can sustain a zero-based mindset over time.

Common pitfalls

  • Understanding the ZBB model as simply building a budget from zero versus building cultures of cost management.
  • Its time-intensiveness.
  • Lack of training.
  • Lack of adherence to the steps to implement ZBB.
  • Inadequate resources allocated under current and future market conditions.

Guiding Questions

  • What factors influence the redesign of the organization’s budgeting structure?
  • What resources and activities are needed to compete under current and future market conditions?
  • How does this new approach reflect evolving market conditions?
  • What is the cost target? What is the baseline for costs and processes?
  • What activities can be removed to match the evolving needs of the organization?