Budgeting in the United States: From Theory to Practice Using Higher Education

Abstract

The purpose of this chapter is to review the literature pertaining to the evolution of budgeting in the United States and to deliver a case study of Higher Education to test empirically the implementation of the Performance-Based Budgeting (PBB). This review comprises the theory of budgeting with its historical background including PBB. The case appraises the specificity of budgeting for higher education along with the issue of the efficiency and productivity definitions including the issue of measurement (Salerno 2003). It addresses the question: Does the use of performance measurement (PM) as a rational approach to resource allocation in performance-based budgeting (PBB) alter the efficiency of higher education institutions in the United States? This study found that the level of implementation of PBB was associated with a statistically significant increase (p < 0.05) in the efficiency of higher education institutions. Over the years, states that use PM in their budget decisions, as opposed to those that do not, had greater efficiency in higher education.