It can, but it can also create massive uncertainty, and for many city and municipal functions, things only work if you can count on recurring funds over a long period of time (i.e., established bus lines, long-term maintenance projects, etc.).  And why spend time and effort implementing particular projects and services that people rely on if you run the risk of having them cancelled every single year?

It's not that nobody has ever thought of the concept of zero-based budgeting before, but it has a lot of its own problems.  There's a reason some things are in the box and some things are not.