What is Line Item Budgeting?

The first actions for budget reform were taken at the local level as part of a larger movement for general reform of local government. By the mid-1920s, most major American cities had adopted some form of budgeting system, in most cases, strengthening the chief executive’s budgetary role. At the state level, a strong movement for reform was under way between 1910 and 1920, centering on making the executive accountable by first giving them authority over the executive branch.

By 1920, budget reform had occurred to some extent in forty-four of the then forty-eight states and, by 1929, all the states had central budget offices. Throughout this same period, action was also being taken at the national level, triggered by President William Howard Taft who established a Commission on Economy and Efficiency. Their report recommended that a budgetary process be instituted under the direction of the president, a proposal greeted with considerable skepticism by those who feared any such grant of authority to the chief executive.

The central purpose in all these developments was control of expenditures, with emphasis on accounting for all money spent in public programs. Line-item budgeting was the first modern budget concept to gain acceptance, and it remained the predominant approach to budgeting through the 1930s. In this period, budgets were constructed on a line-item, or object-of-expenditure, basis, indicating very specifically items or services purchased and their costs.

The emphasis was on control with detailed itemization of expenses, central supervision of purchasing and hiring practices, and close monitoring of agency spending. The focus was on how much each agency acquired and spent, with an eye to completeness and honesty in fiscal accounting.