Canada's Envelope Budget: A Strategic Management System

Abstract

Canada's envelope budget system organizes the budgeting and policy-making process into a strategic decision function which integrates concepts of what to decide with concepts of how to decide, provides policy guidance budget targets by program prior to the start of the budget process, and delegates decisions to different levels based on who needs to make what decisions. This is a conscious effort to integrate macro and micro decisions within a context of scarce resources and should be of great interest to American decision makers, irrespective of whether their jurisdictions are beginning to emerge from prolonged periods of fiscal stress as are many states or whether they are influenced by looming federal deficits and program diminutions. Strategic planning offers decision makers the opportunity either to cut back in an organized way or to spend new resources where they will do the most good. While much of the recent literature on cutback budgeting has dealt with resource scarcity by tactical maneuvers such as across the board cuts which penalize the efficient and necessary with the inefficient and less necessary, there is a body of literature in cutback management which deals with cutback management as strategic planning. Moreover, strategic planning is a familiar, if minor, theme in budget literature. Charles Mottley' traces it to documents first produced by the U.S. Naval War College in 1936 and later into the military's version of PPB. Mottley suggests that one of the reasons for the lack of acceptance of PPB in civilian agencies may have been that it was adopted without the extensive strategic planning process which the military used. In his classic article on the Road to PPB, Allen Schick2 comments that planning, management, and control are always present in the budget process; the planning which Schick cites is strategic planning-emphasizing the process of deciding on the objectives as well as deciding on the resources needed to obtain those objectives. In examining cutback patterns, Levine, Behn, and Cyert3 all have emphasized that piecemeal cutbacks are not enough, that managers must have a vision of the organization and a strategic planning process to help them crystallize and obtain that vision or to change it as conditions change. The difference is that strategic planning allows a leader a proactive stance, as opposed to a reactive, event-controlled, reflexive reaction. Mottley suggests that good leaders are always haunted by the possibility of being unprepared and that that risk increases as technological change accelerates. Strategic planning puts a leader in a position to respond effectively to contin* Canada's envelope budget system is designed to manage both the process and outcome of the Canadian federal budget process. Programs are divided into envelopes and managed by cabinet committees who are given advance targets for their envelopes in the annual budget process based on the performance of the economy. The system functions within a five-year budget plan, emphasizes the provision of policy analysis, cabinet committee government, and substitution of new programs for old programs in the budget base. The envelope system seems to have improved the process of budgeting. While national budget systems do not translate perfectly, American jurisdictions may want to consider certain aspects of the envelope system.