AUGUSTA – Gov. Paul LePage’s administration has launched a new budgeting process that directs department heads to use a cost-benefit analysis when looking at programs and expenditures.

“Zero-base budgeting” directs state agencies to prioritize and justify all programs, activities and expenditures as if the agencies are starting from zero, Finance Commissioner Sawin Millett told reporters Wednesday in explaining the process. The current process, known as “incremental budgeting,” requires departments to justify only additions or deletions to their budgets, he said.

LePage and Millett met with department officials this week to go over the new budgeting method.

LePage wants state agencies to develop their budgets from a clean slate, rather than from a baseline number, and closely examine the organizational structure and all programs and activities, Millett said. One goal is to help identify where resources might be reallocated to better meet the departments’ missions.

In an interview Wednesday afternoon with MaineToday Media, LePage said it’s important for his team of commissioners to better understand the budgets they inherited from the previous administration.

“When we took office we took over a process that was already under way,” he said. “We got (the budget) passed through the Legislature, but the commissioners, myself, deputy commissioners, didn’t know what was in every single budget.”

LePage said zero-base budgeting introduces a “cost-benefit relationship” into the process. It also helps prioritize state spending, he said.

“When you have a program that’s been going for 10 or 20 years, you need to go back and make sure what you’re doing meets the mission of your agency,” he said.

Millett also said the process will help the state set priorities.

“It isn’t a question of fat or waste as much as let’s identify what we should be doing and concentrate on doing it well,” he said.

Maine finance officials have changed the budgeting process now and again over the years, depending on the leadership and the circumstances at the time.

With state funds tight and cutbacks expected in funding from the federal government, the anticipation is that the new budgeting process will identify potential savings down the road.

The effort is separate from a bipartisan task force that’s under legislative orders to find $25 million in budget savings. LePage has suggested that up to $100 million in savings may be needed to keep the state in the black.

But department heads have been asked to begin using zero-base budgeting for the supplemental budget process next year when legislators make adjustments to the current two-year, $6.1 billion budget that was adopted in June.

Zero-base budgeting is expected to be in full force when commissioners present their proposals for the two-year budget that will be passed by the Legislature in 2013 for fiscal years 2014-15, which begins in July 2013.

Zero-base budgeting in one form or another has been used or looked at by a number of other states and municipalities, including Idaho, Georgia, Alaska and Los Angeles, said state Budget Officer Dawna Lopatosky.

“We aren’t alone in this,” Millett said.