Performance-Based Budgeting in a Performance-Based Budget-Cutting Environment. (Views You Can Use New Ideas for Management)

Article excerpt

Times are tough for budgeteers. State budget short falls of approximately $40 billion are expected in the current fiscal cycle. (NASBO. Budget Shortfalls. Strategies for Closing Spending and Revenue Gaps.) Thirty-nine states had a reduction of their fiscal year (FY) 2002 enacted budgets by $15 billion after they were passed-20 more states than in FY 2001. (NASBO and NGA. The Fiscal Survey of States.) A national recession has swept in and stymied politicians and public officials. The stock market is at an all-time low. Okay, maybe times are not that drastic, but the current fiscal environment for state and local jurisdictions is tougher now than it has been in the past decade.

Rosy Times for Performance Measurement

Times are rosy for performance managers. The measurement of government performance--department performance measures, balanced scorecards, individual performance contracts, managing for results, and performance-based budgeting--is at an all-time high. In a recent Government Accounting Standards Board (GASB) survey of city and county officials, 70 percent of those responding indicated that a majority of their departments were using input and output measures, while nearly 50 percent noted the use of outcome measures. (GASB: Performance Measurement at the State and Local Levels: A Summary of Survey Results.) On the state level, at least 47 states have performance-based budgeting requirements. (Melkers and Willoughby. Budgeters Views of State Performance Budget Systems: Distinctions Across Branches.)

Officials at all levels of government are beginning to not simply collect and report performance information, they are using this information to manage how elected officials direct the public's money and how policy makers manage programs once policies are in place. Performance management has never had a greater penetration into how governments work than it does now--and that penetration continues to evolve.

It is indeed the best of times, the worst of times. But what happens when these two worlds collide, when the momentum of performance gathering runs smack into the realities of budget reductions? Are jurisdictions able to leverage the information that is available through performance-based budgeting (PBB) and performance management to make thoughtful budgetary decisions in an era of fiscal constraints?

The Theory

Performance measurement is not a new concept. Harry Hatry in Performance Measurement: Getting Results details performance measurement back as far back as the 1950s and 1960s, and performance-based budgeting back to the Department of Defense of the late 1960s. More serious discussion on the subject took root with Osborne and Gaebler's Reinventing Government and the passage of the Government Performance and Results Act (GPRA) in the early 1990s. Since then, there has been a national debate on the various uses of performance data. The most basic rationale is that departments can begin to measure the outcomes of the services they provide, which gives citizenry some accounting of their return on investment for their tax payments. But the seed of this basic performance idea has given way to a veritable tree of knowledge: performance measurement data has been set up to be used all across governments to prepare program budgets, in program evaluation, for individual performance evaluations, and to develop performance- based budgets. Performance measurement has morphed into performance management. This rationale of measuring the outcomes of service delivery serves as the theory behind PBB -- funding decisions regarding programs can be made depending on what level of service delivery policy makers desire.

Revenue Shortfalls

In a time of plenty, few governments--if any--had to worry about running out of money to fund new programs. Indeed, as budgets across the land doubled and tripled over the decade of the 1990s throwing budget money towards new programs and systems was easy. …