A Critical Look at 'Use or Lose'

Abstract

Recent research approaches the “use or lose” (UorL) phenomenon in public budgeting as an economic question and have employed overly simplistic principal-agent models that result in recommendations that would likely be unworkable in practice. This paper views UorL as a governance problem rather than an economic one. By considering the laws, administrative rules, organizational structures, and institutional norms driving UorL behavior, it paints a more complete picture of the phenomenon. The paper begins with a more refined definition of UorL, reviews the literature for empirical evidence of it, describes the governance factors that influence it, critically evaluates the solutions proposed in the literature, and then makes new recommendations to improve the governance of programs and agencies to achieve better programmatic and financial outcomes.

Keywords: federal budgeting, use or lose, public management, governance

JEL Classification: D73, H30, H50