A good resource-allocation decision is indicated to be one that uses existing resources to meet community needs so that services are reasonably efficient and effective while fulfilling legal and ethical requirements. Planning is emphasized as a crucial aspect of good budget decisions. Planning includes documenting and analyzing community needs and setting priorities for meeting them. Illinois budget law is explained and applied to local government's use of the budget process to allocate resources. The operating budget and the capital budget are identified as the two types of budgets, and the rationale for separating them and the kinds of decisionmaking processes involved for each type of budget are explained. The methods of budgeting discussed are line-item budgeting, performance budgeting, program budgeting, and zero-based budgeting. Management requirements for the budgetary process are considered under the topics of setting policy, estimating expenditures, reviewing expenditure estimates, revenue estimates, budgetary forecasting, preparing the budget document, budget review and adoption, and budget execution. Criminal justice budget items for municipal and county governments are listed, and a glossary of budget terms is provided, along with references. For part 2, see NCJ 82411.