Last week, I walked into one of my club meetings and saw about 20 pizzas and 200 Insomnia Cookies on the table. These meetings usually attract about 20-30 people, so everyone was confused why there was enough food to feed a small army. We asked our treasurer why he ordered so much food, and he said we had a few hundred dollars left in the budget, and SU Treasury has a policy that if we don’t spend at least 90% of our budget in a given semester, we take a penalty in the form of a budget cut for next semester’s programming. Long story short, our club bought every member a whole pizza to avoid budget cuts for next semester.
This may seem like a waste of money, but it’s a reality with the use it or lose it model of budget allocation found in many bureaucracies. The theory behind the model makes sense – if they don’t use the money, it means they were given too much and we should give them less next time around. However, it fails in practice because nobody is willing to take that budget cut next time around. This leads to a plethora of wasteful spending (e.g. 20 pizzas and 200 cookies for 30 people). And all that money being wasted comes right out of our student activities fees.
It’s not just WashU Student Union that uses wasteful use it or lose it policies, the U.S. Government does it too. Budgets for federal bureaucracies are determined by the agency’s spending in the previous year, giving agencies the incentive to spend as much money as possible. This can be seen clearly in the end of each fiscal year, when government agencies go on massive spending sprees in order to avoid leaving any money left over, which will ultimately be cut from their budgets. And it’s not even like the agencies are spending the money on things that will be useful in their missions. For example, at the end of 2016, the Army spent $25,301.64 on cornhole sets and $14,306 on T-shirt cannons, and the Department of Transportation spent $20,000 on a grand piano. This is all taxpayer money that could be going to much more important causes.
The use it or lose it problem, whether on the small scale at WashU or the large scale in the federal government, is a major cause of wasted money. Effectively managing budgets has always been difficult, but giving incentives to spend as much as possible definitely isn’t the right approach. No solution will ever be perfect, as it will either waste money or make cuts that are so deep that the organization cannot effectively carry out its mission. Some suggestions for better systems include penalizing wasteful spending, allowing unused funds to roll over, and forcing organizations to create budgets from scratch each year. It is unclear which of these, if any, would be best, but one thing is for sure: use it or lose it policies have to go.