State Resource Allocation and Budget Formats: Towards a Hybrid Model
Reddick, Christopher G., Journal of Public Budgeting, Accounting & Financial Management
A report from the General Accounting Office (GAO) in 1993 argued that despite long-standing efforts in states regarded as leaders in performance budgeting, performance measures have not attained sufficient credibility to influence resource allocation decisions (GAO, 1993). Instead, according to most of the state legislative and executive branch officials interviewed by the GAO, resource allocations continue to be driven for the most part by traditional budget practices which focus on incremental changes in detailed categories of expenses. The GAO survey was conducted in the early 1990s. This was during the early stages of the implementation of performance measures in state governments. In this study, we examine the impact of performance budgeting along with other budget approaches on resource allocation during the 1990s. In contrast to the findings of the GAO report, we found evidence that performance budgeting along with other budgetary approaches had an impact on state resource allocation.
The re-introduction of performance budgeting in the 1990s may be viewed by many practitioners with a great amount of caution and skepticism primarily because of the demise of past reform efforts such as program budgeting and Zero-Based Budgeting (ZBB) (CBO, 1993). These approaches essentially were viewed as not living up to their expectations of producing a more systematic budgetary process. This study is an attempt to see if performance-based budgeting and other budget approaches achieved results, since at the end of the day they will be judged on their results. We found that performance budgeting is achieving results in terms of its impact on expenditure levels, but these results must be explained in combination with other budget approaches.
A study has examined quantitatively the impact of incrementalism on subnational budget outcomes in the UK (Boyne, Ashworth, & Powell, 2000). Furthermore, an extensive body of research using survey evidence examines performance budgeting in the U.S. states (Willoughby & Melkers, 1998; Lee & Burns 2000). There are very few studies that evaluate these approaches together to systematically demonstrate their impact on state budget outputs. In addition, most of the recent empirical work has focused on performance budgeting to the exclusion of other theories.
This article is a step back towards testing rival budget approaches instead of concentrating upon one at a time. State budget outputs are a mechanism for evaluating these approaches. This is demonstrated in Table 1, with survey evidence from the National Association of State Budget Officers (NASBO) from 1989 to 1999. The survey results indicate that most states use some combination of incremental budgeting, program budgeting, zero-based budgeting, and performance budgeting.1 Therefore, to focus entirely on one approach only provides part of the picture. In this study, we present the idea of hybrid budgeting. This is essentially an amalgamation of the various budget approaches (Grizzle, 1986).
This study is notably different from the existing literature in several important respects. First, we focus on examining rival theories of budgetary decision-making. Most of the existing empirical literature has usually explored one explanation at a time. This traditionally has been incrementalism but more recently the emphasis has shifted towards performance budgeting. We extend the literature by testing a pooled time series cross-section version of this approach. Second, we test the results of the above approaches on actual state budget outputs. Do these budget approaches have an impact on resource allocation over time and across the fifty states? Most of the existing work on performance budgeting is derived from survey evidence. However, a notable exception was the study done by Jordan and Hackbart (1999) which tests performance budgeting against a series of independent variables. The work on incrementalism is primarily time series oriented, such as the study by Baumgartner, Jones, & True (1998) of a punctuated version of incrementalism. …