Let's say you run the IT department of a company. You had a great year with very few computer upgrades or replacements needed, so you only spent 4/5ths of your budget. Next year your budget gets cut by that 1/5th. Now you have a rough year where everything seems to break, and while you could have covered it with the old budget, you can't under the new one; and the higher ups have allocated that money elsewhere. Now your stuck trying to make do, and you look bad doing so.

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As a result, you waste/use up the remaining budget so it doesn't get cut next year.