March 28, 2014
When times are tight and states have effective performance budgeting processes, they are less likely to resort to across-the-board cuts. Are there lessons here for the federal government?
New research findings by a team led Daniel Mullins at American University examine recent state-level trends in the use of performance budgeting or “budgeting for results” approach. This research, presented at the annual conference of the American Society for Public Administration, offers some insights for any future federal performance budgeting initiative.
Performance budgeting is the use of information on the performance of programs and agencies to inform decision-makers in the executive and legislative branches as they make trade-offs during the budgeting process. For example, can an agency show progress in reducing the costs of job training? Budgeting for results is similar, but is at a higher level. It examines the results achieved from programs and uses those results as the basis for making budget trade-offs. For example, which strategies or mix of programs will be most effective for reducing unemployment— better high school preparation, vocational job training, economic development?
The federal government has periodically attempted performance budgeting initiatives—the most widely known is the Defense Department’s Planning, Programming, Budgeting and Execution System. But Office of Management and Budget Director Sylvia Burwell has announced that starting in fiscal 2016, agency performance will be factored into budget decisions governmentwide. Separately, OMB has said agencies will have discretion on how to develop their approaches to making this happen through the new agency strategic review process. So it may be worthwhile to see how states are approaching this.
Formal Initiatives in 44 States
Performance budgeting has been an enduring budget reform initiative for many decades, with many variations, at the federal, state and local levels. But the most prevalent use seems to be in state governments. According to the research team led by Mullins, as of 2013, 44 states had formal initiatives in place for executive branch-led performance or results budgeting. Of these, 38 require performance information to be included in budget requests to their state legislatures.
The approaches used varied, but those the researchers deemed more successful had several common process-related features:
An institutionalized commitment. This includes elements such as a statewide strategic plan, agency-level operating plans tied to the statewide strategic plan, periodic monitoring of agency progress during the course of the year, priority-setting and resource allocations aligned with goals and informed by performance measures.
Effective mechanisms for public input. Availability of a statewide forum, or other mechanism, in which citizens can provide input and gain a broader understanding of the scope of a state’s priorities and choices that must be made.
Transparency in decision-making processes. Presentation of performance information, along with independent and open monitoring of measures.
Obstacles to Measuring Performance
The researchers highlighted many difficulties in performance budgeting, validating many earlier research, including studies by the Government Accountability Office. These include:
But in addition to these technical issues, the researchers say there is often a tension between the rational/technical elements of performance budgeting and the political/philosophical elements. They say a key question is: “Is public sector budgeting an outcome or a process?” To date, they say, “performance budgeting has not been successful at elevating outcomes about process.” Nevertheless, states are moving forward.
What Some States Are Doing
The researchers highlighted what several states were doing in terms of best practices around each of the three success factors they identified.
Institutionalized participation and commitment:
Effective mechanisms for public input:
Transparency in decision-making processes:
The researchers gleaned a handful of lessons learned from their review of state performance budgeting efforts. Several of them have potential implications for any federal efforts to adopt a performance or results approach to informing budget decision-making:
Clarifying priorities. A key benefit of linking performance information to budget decisions—at least in the executive branch’s budget formulation efforts—is that this approach can help clarify priorities and help align agency strategies to achieving results, especially if a result reaches across agency boundaries.
Measuring contributions. At the state level, the use of performance budgeting approaches tends to disadvantage programs that cannot demonstrate how they contribute to measurable outcomes. These predominantly tend to be social services that depend on changing behaviors over a long period of time that may be influenced by the broader environment (e.g., homelessness, obesity, domestic violence, disengaged youth). Since federal programs are largely grants to states, localities and nonprofits, measures of contributions may be even more difficult.
Making trade-offs. At the state level, leaders have not yet developed an approach for making trade-offs across budget functions. For example, should they fund more early childhood education or more infrastructure investment? States’ experiences with performance budgeting seems to be more effective in making trade-offs within a budget function. This may be the same at the federal level, where performance budgeting may be more useful to appropriations committees than to the budget committees.
Avoiding over-standardization. An interesting finding that seems to have a federal parallel is that creating overly standardized systems can be problematic: “Agencies need flexibility in determining how to collect, organize and interpret information to meet their unique service delivery responsibilities.” This insight has been a guiding principle of the Office of Management and Budget in its implementation of laws such as the Government Performance and Results Act, as well as its approach to budgeting.
While the research team at American University tended to be a bit more skeptical than I about states’ progress in performance budgeting, its findings are encouraging and continue the trends begun decades ago in the field of performance budgeting.
(Image via larry1235/Shutterstock.com)
March 28, 2014