Summary of Key Points
The reform of the zero-based budgeting system aims to break away from the entrenched practice of relying on the previous year's budget figures when determining this year's budget allocation, ensuring that fiscal funds are used more efficiently and effectively. Many regions across the country have embraced this reform, with Zhejiang being a prime example. There, 54.6 billion yuan in unnecessary expenditures were cut, and 204.2 billion yuan was allocated for livelihood improvements. However, audits have also revealed several issues: some departments have prepared their budgets inadequately (lacking justification and accuracy), continue to rely on outdated figures (resulting in low execution rates), and do not have established spending guidelines (for instance, there are no standards for the maintenance of official vehicles). The root causes of these problems include both the subjective desire of departments to request more funds and objective limitations related to the timing of budget preparation and work schedules. The next steps in the reform involve refining the budgeting process, establishing clear spending standards, and gaining strong leadership support to ensure the successful implementation of the zero-based budgeting system.
I. What Makes Zero-Based Budgeting Different from the Traditional Approach?
In the past, budgeting was based on a "base figure" method: the amount allocated for the current year was determined by adding or subtracting a small percentage from the previous year's figure. For example, if the office expenses were 1 million yuan last year, they might be 1.05 million yuan this year. The problem with this approach is that it encourages complacency—since the funds were allocated last year, they can be requested again even if they are no longer needed, leading to waste.
Zero-based budgeting, on the other hand, requires a completely new approach: the budget is calculated from scratch for each year. Every expense and the need for funds must be re-evaluated, with priorities determined based on the urgency of the tasks. The goal is to allocate funds to the most critical areas (such as public welfare and key projects), ensuring that every penny is used wisely.
II. Reform Has Been Successful: Provinces Like Zhejiang Have Seen Benefits
Many regions have seen improved efficiency in fund allocation since adopting zero-based budgeting. For instance, Zhejiang has been using this method since 2020 and has achieved the following results:
- 54.6 billion yuan in "non-essential and non-key" expenditures (such as unnecessary meetings and duplicate projects) were cut.
- 204.2 billion yuan was added for livelihood improvements (such as education, healthcare, and pension programs).
These achievements demonstrate that zero-based budgeting can indeed direct fiscal resources towards their intended purposes, rather than leaving them idle in departmental accounts.
III. Issues Identified by Audits: Ineffective Use of Funds and Uncompleted Reform
Audits in over a dozen provinces have highlighted several challenges in the implementation of the reform:
1. Arbitrary Budgeting: Some departments prepare their budgets without a solid basis, requesting whatever amount they wish. For example, Inner Mongolia set aside 2.079 billion yuan for ongoing projects and subsidies for the free trade zone, but only 285 million yuan was actually spent; 7 projects in Jilin were budgeted without considering the actual costs, resulting in a waste of over 16 million yuan.
2. Reliance on Outdated Figures: Some projects had low execution rates last year (below 60%), and this year, their budgets were still calculated based on those figures, with some even increasing. For example, 14 projects in Yunnan had execution rates below 60% for two consecutive years, yet 246 million yuan were allocated this year, with the budgets for three projects even increasing. Similarly, in Shandong, meeting and training expenses for 75 and 37 departments, respectively, had execution rates below 70% last year, leading to a waste of over 40 million yuan.
3. Lack of Spending Guidelines: Zero-based budgeting requires clear spending standards (e.g., how much should be spent on maintaining official vehicles or hosting meetings), but many regions have not established these. For instance, Gansu has only established a few general standards for IT maintenance, while Inner Mongolia has not set any standards for six years, resulting in inflated budgets for 32 departments with execution rates below 70%.
IV. Why Is the Reform Difficult to Implement?
There are two main reasons for the difficulties:
- Subjective Motivation: Departments often request more funds, believing that any unused amount can be carried over to the next year, with no adverse consequences for them. If they request too little, they may face budget cuts in the following year. This leads to inflated budgets.
- Objective Constraints: The budgeting process is completed half a year in advance (e.g., the 2025 budget is prepared in October 2024), but the actual priorities for the next year are only determined at the end of the year. This makes it difficult to prepare detailed budgets for specific activities, leading to general and poorly executed plans.
- Insufficient Budgeting Capabilities: Some departments lack the ability to prepare detailed budgets, often categorizing expenses broadly (e.g., only specifying "office expenses") or overlapping projects, making it hard to track the use of funds.
V. How to Deepen the Reform
To successfully implement zero-based budgeting, the following measures are needed:
1. Refine Budgets for Specific Activities: Experts suggest breaking down project budgets into detailed activities, such as specifying "100 boxes of printing paper" or "5 training sessions for 20 people each." The accuracy and detail of the budget should be used as evaluation criteria, and financial staff should be trained to improve their skills.
2. Establish a Comprehensive Spending Standard System: Regions should develop detailed standards for common and recurring expenses, and for one-time projects, use estimates from similar cases to cover all areas gradually.
3. Strong Leadership Support: Local party committees and government leaders must take personal responsibility for implementing the reform, addressing misconceptions about its feasibility and ensuring that the financial departments are well-prepared.
4. Expand the Scope of the Reform: The State Council has called for expanding the pilot programs at the central level and guiding local regions to further explore and establish a budgeting mechanism that ensures both adequate funding for essential needs and strict control over unnecessary expenses.
In summary, the zero-based budgeting reform is not a temporary initiative but aims to fundamentally change the way fiscal resources are allocated. Although there are still challenges, by addressing these issues step by step, we can ensure that public funds are used more transparently and effectively.