Final Installment in the Four-Part Performance Management Series: PERFORMANCE BUDGETING in Federal, State & Local Government
Rivenbark, William C., Kelly, Janet M., The Journal of Government Financial Management
The premise of performance budgeting is simple: Resource allocation should follow achievement in efficiency and effectiveness of service delivery. Mostpublic managers would agree that a performance approach to budgeting is useful. In fact, we assert that public budgeting systems often have a performance component. Some systems are formal, encompassing most agencies and departments; others are informal, applying only to selected programs. Budget analysts routinely consider how well a program has performed in the prior and current years of operation when they offer a recommendation forthe next fiscal year. Senior administrators also consider performance, including how programmatic goals align with the organization's mission when they review budget recommendations. We know less about the deliberative process of elected officials, but it seems reasonable to assume that program performance is germane to it.
Yet if we polled these budget officers, executives and elected officials, many of them would say that they are not engaged in performance budgeting because the final budget decision is not determined solely by performance. These public servants have an outcome definition of performance budgeting.
They believe that when high-performing programs are not rewarded with more resources (or when resources are not withdrawn from low-performing programs) performance budgeting has failed. We argue that performance budgeting has been successful when program performance information is part of the budget deliberation process, even if counterintuitive outcomes result. We offer a process definition of performance budgeting, one that recognizes that public officials operate in an environment of constrained resources and public preferences. An attempt to force any determinant budget process into this environment is destined to fail. Moreover, it is undemocratic.1
The roots of performance budgeting are deep. Most budgeting scholars trace them back to the Hoover Commission in the late 1940s, but we found evidence of a performance-based budget approach in the work of the New York Bureau of Municipal Research around the turn of the 20th century. The roots of performance budgeting also are wide. Certain federal agencies, states and localities have been experimenting with some form of performance budgeting since the early 1950s. If you examine the major federal budget reforms (planning-programming-budgeting, management-by-objectives and zero-based budgeting), the link between program and budget outcomes has been an important component in each reform. The reason many public budgeting scholars and practitioners believe that these reforms have failed has been their outcome-based definition of success. For example, if budget allocation patterns did not change significantly after zerobased budgeting was implemented, then it must not have been effective as a budget reform. But what evidence do we have that resources were misallocated prior to the adoption of zero-based budgeting? Similarly, if budget allocation patterns do not change significantly after implementing a performance budgeting program, we might conclude that the existing pattern was consistent with legal mandates, fiscal constraints and public preferences. This is hardly a damning indictment of performance budgeting.
The purpose of this article is to address the current status of performance budgeting in federal, state and local government. However, we judge the success of performance budgeting within the context of the budget process rather than a budget outcome. Therefore, we begin with a process definition of performance budgeting to guide our findings. We conclude with limitations and possibilities of performance budgeting and offer some suggestions for expanding our understanding of performance budgeting in all government levels.
PERFORMANCE BUDGETING: DISCUSSED AND DEFINED
Performance budgeting is an element of performance management, where program performance is relevant to every managerial decision, not just to resource allocation. …