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Performance-Based Budgeting: Concepts and Examples

LEGISLATIVE RESEARCH COMMISSIONPROGR A MREVIEWANDINVESTIGATIONSCOMMITTEEP erformance-BasedBudgeting: Concepts and ExamplesPrepared by:Greg Hager, HobsonGinny Wilson, , Committee Staff AdministratorResearch Report No. 302 PROGRAM REVIEW & INVESTIGATIONS COMMITTEESTAFF REPORTG inny Wilson, Staff AdministratorPROJECT STAFF:Greg Hager, HobsonGinny Wilson, Report No. 302 LEGISLATIVE RESEARCH COMMISSIONF rankfort, KentuckyCommittee for Program Review and InvestigationsAdopted: June 14, 2001 This report has been prepared by the Legislative Research Commission and printed with state Budgeting: Concepts AND EXAMPLESA dopted by Program Review and InvestigationsiFOREWORDOn September 20, 2000, the Program Review and Investigations Committeedirected staff to prepare a general primer on Performance-Based budgeting . TheCommittee instructed staff to provide a general guide to budgeting systems, consider howdifferent budgeting systems incorporate information on off-budget funds, and discussbudgeting systems used in selected other Program Review and Investigations Committee adopted the staff report onJune 14, report is the result of dedicated time and effort by Program Review staff,Ginny Wilson, , Committee S

performance-based budgeting, which is intended to hold agencies accountable for what they achieve. The basics of performance-based budgeting are as follows: 1. Objectives. Agencies should develop strategic plans of what they intend to accomplish. These plans should contain objectives based on outcomes that the public values. 2. Performance ...

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Transcription of Performance-Based Budgeting: Concepts and Examples

1 LEGISLATIVE RESEARCH COMMISSIONPROGR A MREVIEWANDINVESTIGATIONSCOMMITTEEP erformance-BasedBudgeting: Concepts and ExamplesPrepared by:Greg Hager, HobsonGinny Wilson, , Committee Staff AdministratorResearch Report No. 302 PROGRAM REVIEW & INVESTIGATIONS COMMITTEESTAFF REPORTG inny Wilson, Staff AdministratorPROJECT STAFF:Greg Hager, HobsonGinny Wilson, Report No. 302 LEGISLATIVE RESEARCH COMMISSIONF rankfort, KentuckyCommittee for Program Review and InvestigationsAdopted: June 14, 2001 This report has been prepared by the Legislative Research Commission and printed with state Budgeting: Concepts AND EXAMPLESA dopted by Program Review and InvestigationsiFOREWORDOn September 20, 2000, the Program Review and Investigations Committeedirected staff to prepare a general primer on Performance-Based budgeting . TheCommittee instructed staff to provide a general guide to budgeting systems, consider howdifferent budgeting systems incorporate information on off-budget funds, and discussbudgeting systems used in selected other Program Review and Investigations Committee adopted the staff report onJune 14, report is the result of dedicated time and effort by Program Review staff,Ginny Wilson, , Committee Staff Administrator, Greg Hager, , and ShermanDirectorFrankfort, KentuckyJune 14, 2001iiiSENATE MEMBERSD avid L.

2 WilliamsPresident, LRC Co-ChairRichard L. Roeding President Pro TemHOUSE MEMBERSJody RichardsSpeaker, LRC Co-ChairLarry ClarkSpeaker Pro TemDan Kelly Majority Floor LeaderLEGISLATIVE RESEARCH COMMISSIONG regory D. Stumbo Majority Floor LeaderDavid K. Karem Minority Floor LeaderState Capitol 700 Capital AvenueFrankfort KY 40601 Jeffrey HooverMinority Floor LeaderCharlie Borders Majority Caucus Chairman502/564-8100 Jim CallahanMajority Caucus ChairmanDavid E. Boswell Minority Caucus ChairmanCapitol FAX 502-223-5094 Annex FAX 502-564-6543 Bob DeWeese Minority Caucus ChairmanElizabeth Tori Majority Barrows Majority WhipMarshall LongMinority WhipRobert ShermanDirectorWoody Allen Minority WhipMEMORANDUMTO:The Honorable Paul E. Patton, GovernorThe Legislative Research Commission, andInterested IndividualsFROM:Senator Katie Stine, Co-ChairRepresentative H.

3 Gippy Graham, Co-ChairProgram Review and Investigations CommitteeSUBJECT:Adopted Committee Report: Performance-Based Budgeting: Concepts and ExamplesDATE:June 14, 2001On September 20, 2000, the Program Review and Investigations Committee votedto have staff prepare a general primer on Performance-Based budgeting . The Committeeinstructed staff to provide a general guide to budgeting systems, consider how differentbudgeting systems incorporate information on off-budget funds, and discuss budgetingsystems used in selected other Program Review and Investigations Committee staff reviewed literature andselected case studies on states use of performance budgeting . based on all theinformation that formed the basis for this report, it was clear that performance budgetinghad many compelling arguments in its favor.

4 Its stress on accountability for resultsachieved by programs could produce a more effective government that concentrates onthe problems that Kentucky residents most care about. Unfortunately, since so few stateshave implemented performance budgeting , there are no model states with long termsuccess that Kentucky can emulate. At this point, there is evidence that performancebudgeting can be implemented; the jury is still out and may be for some time onwhether the reform accomplishes its mission of making government more accountableand quality is not unique to proposed changes in the budgetary system. Publicpolicy reforms are usually adopted based on the quality of the arguments behind themand with a less than ideal amount of practical experience for support.

5 Even thoughperformance budgeting does not have a long track record, it is possible to review thebudgeting literature and the efforts at implementing PBB so far to help clarify the theorybehind it and learn from what other states have done. The following conclusions weredrawn from the review:1. Legislators must determine whether they want to hold agencies accountable for whatthey spend or what they achieve. They must also decide if they want to focusprimarily on changes to the base budget or regularly review current spending as wellas requests for performance budgeting is a tool that can improve accountability in the use of publicresources. To date, it has not been shown to be a good tool for improving efficiencyin the use of public If a state is to implement performance budgeting successfully.

6 A key decision makerin the budget process either the governor or a leader in the House or Senate musttake a strong advocacy role in promoting the There should be widespread agreement among decision makers on the objectives theywish programs to performance measures should be carefully defined to accurately capture outcomesdue to program Sufficient technical and staff resources should be devoted to initial training andongoing maintenance of the performance measures should be independently validated on a regular Careful planning should limit the number of performance measures to a small set ofwell-crafted If they want agencies to take performance monitoring and reporting seriously,legislators must demonstrate that they take it It should be acknowledged that performance budgeting , or any other so-called rational budgeting system, provides only part of the information policy makers useto allocate funds among competing or requests for additional information should be directed to Dr.

7 Ginny Wilson,Committee Staff Administrator for the Program Review and Investigations OF iMEMORANDUM .. iiiLIST OF TABLES .. viEXECUTIVE SUMMARY .. viiINTRODUCTION ..1AN OVERVIEW OF Functions of budgeting ..3 A Brief History of Budgetary performance budgeting ..10 Measures of performance ..13 Choosing the Base ..15 Deciding What is IN PRACTICE: STATE Base Additional Funding Requests ..26 Iowa ..27 Massachusetts ..31 Texas ..39 Texas Department on Satisfaction with the System ..50 Louisiana ..52 CONCLUSIONS ..61 BIBLIOGRAPHY ..67 APPENDIX A: Predominant Budget OF TABLESFund Structure Used by budgeting Office of Aging Services, Current Services Budget Summary ..24 Kentucky Office of Aging Services, Program Narrative ..24 Kentucky Office of Aging Services, Reported performance Measures.

8 25 Kentucky Office of Aging Services, Additional Operating Budget Items ..27 Iowa Department for Elder Affairs, Mission Statement and Policy Department for Elder Affairs, performance Measures ..29 Funding Request by Program Department for Elder Affairs, Legislative Budget-Briefing Document ..32 Excerpt from FY 1993 Massachusetts Budget Message, Gov. William F. from FY1993 Massachusetts Budget Submission, Volume II-Line Items Report of Budgetary Governor s Appropriation Recommendation, Office of Elder Affairs ..35 Funding for Aging Services in Texas ..44 Texas Legislative Budget Board: Legislative Budget Estimates for the 2000-2001 Biennium, Department on of Exceptional Items Requested, Texas Department on Aging FY2002 ..47 Texas Department on Aging, Budget and performance Assessments ..48 Results of performance Measures Review, Texas Department on Aging.

9 51 Excerpt of Documents Prepared by the Louisiana Office of Planning and Budget 3/22/00 ..56 Legislative Research CommissionProgram Review and InvestigationsviiEXECUTIVE SUMMARYAt its September 2000 meeting, the Program Review andInvestigations Committee voted to have staff prepare a generalprimer on Performance-Based budgeting . The Committeeinstructed staff to provide a general guide to budgetingsystems, consider how different budgeting systems incorporateinformation on off-budget funds, and discuss budgetingsystems used in selected other of BudgetingThe simplest definition of budgeting is that it is a systematicway to allocate resources. Various types of governmentbudgeting systems have been developed to serve multiplepurposes, including financial control, management, planning,priority setting for scarce funds, and accountability in the useof public traditional line-item budget, wherein legislators specifyallowable spending on inputs (salaries, supplies, travel), wasfirst developed to guard against the misuse of public budgeting , often used with line-item budgets,assumes that funding for existing programs will continue atabout the same level as in the past.

10 Most attention is given toconsidering requests for changes in agency base budgeting has been criticized for holding publicagencies accountable only for what they spend. Therefore,some budget reformers have recommended the adoption ofperformance- based budgeting , which is intended to holdagencies accountable for what they achieve. The basics ofperformance- based budgeting are as follows:1. Objectives. Agencies should develop strategic plans ofwhat they intend to accomplish. These plans should containobjectives based on outcomes that the public performance measures. based on their strategic plans,agencies should develop specific, systematic measures ofoutcomes that can be used to determine how well agenciesare meeting their objectives. Examples : student test scoresfor education programs; mortality rates for Program Review &InvestigationsCommittee requested aprimer on budgets holdagencies accountable forwhat they spend budgetshold agenciesaccountable for whatthey Research CommissionProgram Review and Investigationsviii3.


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