An incremental adjustment in budgeting means what?

Incremental adjustment in budgeting refers to the practice of making modifications to the current budget based on the previous year's budget. This approach allows for a systematic method of maintaining fiscal discipline while making necessary changes as needed. The essence of incremental budgeting is to use the prior budget as a base and then adjust it by adding or subtracting funding where required, typically influenced by expected changes in costs or program needs.

This method can offer several advantages, such as reducing the time and effort involved in developing a completely new budget from scratch. It also provides continuity and stability, as it reflects trends in spending and can accommodate small, gradual changes rather than large, disruptive reforms that could occur in a zero-based budgeting scenario.

In contrast, approaches like eliminating all past expenses or starting from zero for each new budget would disrupt established patterns and may not reflect the realities of ongoing financial responsibilities. While only increasing the budget seems straightforward, it might not take into account necessary budget cuts or reallocations that could be required based on performance analysis or changing priorities. Thus, adjusting based on the previous budget is a balanced approach that aligns with incremental budgeting principles.