What is a baseline budget?

A baseline budget is essentially a projection of spending that reflects the previous year's budget figures adjusted to account for inflation and any other known changes that may affect future spending. This approach serves as a reference point for assessing future budget requests and operations. By using historical data as a foundation, the baseline budget helps organizations create a more accurate and realistic financial framework. It provides continuity and allows for better comparisons when evaluating proposed budget changes or assessing the impact of financial decisions.

In contrast, other options present different concepts. A budget based on future predictions of revenue relies more on forecast models rather than historical data as a foundation. A budget incorporating new initiatives and objectives would typically adjust the baseline to reflect additional funding requests, rather than relying solely on previous spending levels. Lastly, a budget that excludes historical spending data deviates from the principles of baseline budgeting, which is fundamentally rooted in past expenditures as a baseline for future planning.