This paper analyzes how expenditures of the city of San Francisco were altered in response to changes in municipal labor costs over the period 1945 through 1976. A hybrid of the demands and the organizational models of budgeting is used to measure the budgetary response to changes in the relative prices of labor inputs. Descriptive and econometric evidence reveals significant adjustments both among and within departments in reaction to changes in relative labor costs. The empirical evidence demonstrates that the city\u27s budgetary process is guided by simple allocative rules modified by price-responsive adjustments
