Except you are completely disregarding the obvious outcome: others wasting money to not have their buget cut. And the alternative could be even worse: departments running out of money and imploding because of unexpected costs without any budget headroom.

The point is not that investing the company's money wisely doesn't make sense but that looking hat how much each department used and then basing the next budget on that alone is the opposite of wise because those departments are run by humans that will be looking out for themselves first.