Evaluating alternative approaches to school budgeting

Source: Ortynsky, S., Marshall, J., & Mou, H. (2021). Budget practices in Canada’s K‐12 education sector: Incremental, performance, or productivity budgeting? Canadian Public Administration, 64(1), 74–98. https://doi.org/10.1111/capa.12402

LEARN Brief and Infographic Credits: Dr. Lindsay Yearta

Overview: 

This study investigated how Canadian provinces and territories budget for K–12 education, using 28 interviews with budget officers from 12 jurisdictions. The researchers found that almost all provinces rely heavily on incremental budgeting, in which last year’s budget serves as the baseline with small increases or decreases. Although provinces routinely collect performance data (such as student achievement and attendance), this data is almost never used to inform budgetary decisions. Additionally, very few respondents had heard of or used the concept of productivity dividends, which are routine in Australian public budgeting and help governments capture savings from productivity gains.

The authors argue that this incremental approach results in governments systematically failing to capture billions of dollars’ worth of annual productivity gains, which instead remain within line departments and contribute to unintended program expansion rather than strategic reallocation. They recommend adopting productivity budgeting, which automatically adjusts budgets downward each year to reflect expected improvements in public sector efficiency. This model requires less data than performance‑based budgeting and ensures that savings can be directed to priority areas rather than remaining siloed.

Overall, the research is compelling, clearly presented, and highly relevant for districts and state education agencies. Its strength lies in its real-world insights from budget practitioners, highlighting the gap between performance data collection and actual use in budgeting. A limitation is that the study focuses on provincial governments rather than individual school districts; however, the principles and findings are readily transferable. The article ultimately provides a persuasive case for reconsidering budgeting approaches in education systems.

Key Insights: 

• Budgeting is overwhelmingly incremental. 23 of 25 interviewees said K–12 budgets are entirely or almost entirely based on incremental adjustments.
• Performance data is collected but not used. Most provinces gather student performance data, but 20 of 26 respondents said it plays no role in budgeting.
• Incremental budgets limit reallocation to priority needs. Savings remain within departments instead of being redeployed at the government level.
• Productivity budgeting is more feasible than performance‑based budgeting. It requires less data, avoids gaming, and focuses on outputs rather than inputs.

Action Steps: 

• Audit existing budgeting practices. Assess how much of the district budget is based on “last year plus inflation”.
• Identify where productivity gains (efficiencies, staffing improvements, technology) have already occurred but are not captured in budgets.
• Identify potential productivity dividends. Measure year‑over‑year improvements, such as reduced cost per student, streamlined processes, or technology efficiencies, and quantify the savings that could be centrally reallocated.
• Instead of allowing each school or department to keep internal savings automatically, redirect those savings to districtwide priority areas (e.g., tutoring, mental health, transportation safety, teacher development).
• Make outcomes such as student achievement, access, equity central to budget justification rather than simply increases in expenditures.
• Train leaders in productivity concepts. 

Full Study: https://research.ebsco.com/linkprocessor/plink?id=9d2c94ad-3f09-3ea8-8405-6655a50abcb5