A Century of Public Budgeting Reform

• DOI: 10.1177/0095399704268626
• Date: 01 March 2005
• Author: Janet M. Kelly
• Published date: 01 March 2005
• Subject Matter: Articles

10.1177/0095399704268626ADMINISTRATION & SOCIETY / March 2005Kelly / THE KEY QUESTION

A CENTURY OF PUBLIC

BUDGETING REFORM

The “Key” Question

JANET M. KELLY

Cleveland State University

A century of budget reformreflects a century of changing public support for the role of gov-

ernment in American society.When Americans trusted the private sector more than the pub-

lic sector,budget reform was centeredon cost control and improved efficiency.When Ameri-

cans turned to governmentto solve problemsthe private sector could not, budget reform was

centered on programmaticeffectiveness. We have an answer to V.O. Key’s question about a

theory of budgeting.History provides it. A theory of budgeting is a theory of political cycles

drivenby changing public opinion about the proper roleof government. There are two endur-

ing features of budgeting practicethat emerged in the past century. Incremental budgeting

reflects Americans’ preference for incremental policy change. The traditional or line-item

format promotes financial accountability.

Keywords: budget reform; budget history; political cycles

V. O. Key asked the budgeting question more than 60 years ago, “On

what basis shall it be decided to allocate X dollars to activity A instead of

activity B?” (Key, 1940, p. 1137). Economic theory was not determinate,

Keyasserted, nor was a pure political theory based on the relative powerof

competing interest groups. Yet governmentsassembled and enacted bud-

gets every year on some basis. Our discipline had not yet articulated that

basis. “The most advantageous utilization of public funds resolves itself

into matter of value preferences between ends lacking acommon denomi-

nator” (Key, 1940, p. 1144). We still have no denominator; however, we

have the benefit of 100 years of budget reform to help explain how value

preferences drive budget choices in the absence of a denominator.

Wildavsky(1961) said, in his response to Key’slament on our lack of a

budgetary theory, that to have such a thing would amount to a political

89

ADMINISTRATION & SOCIETY, Vol. 37 No. 1, March 2005 89-109

DOI: 10.1177/0095399704268626

© 2005 Sage Publications

theory, some way to reconcile the inherent tension between the public’s

desire for government action and their resistance to the revenue extrac-

tions that make it possible. In other words, a budgetary theory would tell

us the proper role of government in society. Key’s question and

Wildavsky’s answers are important for our constant consideration as a

profession. Using them both, I suggest that we can understand changes in

budgetary theory and practice over time by identifying values changes in

the political environment. As a consequence, we may gain a new under-

standing of why some reform ideas that dominated budgeting theory dur-

ing the past century emerged and why new reform ideas replaced them.

The two foundation assumptions of this exercise are (a) that budgeting

is an open system capable of changing to reflect public opinion and (b)

that the budget is primarily an instrument of control, either facilitatingor

limiting government intervention into public and privateaffairs. The arti-

cle begins with a pendulum theory of political history and then moves to

defend the permeability of the budget function to the political cycle. Next,

the progression of thinking and writing about the public budgeting func-

tion during the past 100 years is considered in the context of changing

public opinion on the proper role of government in society. Finally, the

article returns to the so-called conversation between Key and Wildavsky

and asks whether we were any better positioned to answer Key’squestion

at century’s end than we were at the beginning.

A POLITICAL CONTINUUM

AND AN OPEN SYSTEM

Historians and political scientists have noted shifts in American politi-

cal culture, though there is no consensus as to the length, the inevitability,

or even the meaning of those shifts. In general, they havebeen described

as a continuum, with one the concern for the public interest and social jus-

tice at one end and concern for privateinterest and economic prosperity at

the other. Hirschman (1982) described the ends as private happiness ver-

sus public happiness. McCloskey and Zaller (1984) characterized the end-

points as capitalistic values and democratic values. Schlesinger (1986)

summarized them as shifts in national involvement between public pur-

poses and privateinterests. What explains the change? From Schlesinger,

People can never be fulfilled for very long in either the public or private

sphere. We try one, then the other, and frustration compels a change in

90 ADMINISTRATION & SOCIETY / March 2005