Linking Performance and Budgeting: A Framework and Current U.S. Practice

Philip G. JoyceProfessor of Public Policy and Public

AdministrationThe George Washington University

April 2, 2008

Framework for Linking Performance and Budgeting

Linking Performance and Budgeting

Has many names—PB, PBB, MFR, etc. What all have in common is desire to

link inputs to outcomes (through outputs)

Reform in vogue throughout the world Goal—Performance-INFORMED

budgeting

Linking Performance and Budgeting: Conditions for Success

Public entities know what they are supposed to accomplish

Valid measures of performance exist Accurate measures of cost exist Cost and performance information

are brought together for budgeting decisions

Incentives for use of performance information

A Framework for Performance-Informed Budgeting

Historically—focus on legislature/budget office

Budget process has many stages--preparation (agency and central budget office), approval (legislative and chief executive), execution, and audit/evaluation

Questions in multi-stage approach Is performance information available? Is performance information used?

Perhaps greatest payoff is in budget execution

A Comprehensive View of Performance-Informed Budgeting

Stage Availability Use of Information

Budget Preparation--Agencies

-Agency strategic plan/performance plan

-Tradeoffs between bureaus-Budget justification to OMB

Budget Preparation—Budget Office

-Governmentwide/agency strategic/performance plans-Agency budget requests

-Tradeoffs between agencies-Executive budget

Budget Approval--Legislature

-President’s budget-Agency budget justifications

-Laws governing taxing and spending

Budget Approval--President

-Agency analysis of legislativel budget

-Signature or veto (also SAP)

Budget Execution -Performance expectations inlegislation

-Spending flexibility used to maximize performance

Audit and Evaluation -Performance and accountability reports

-Audits and evaluations focus on effectiveness of programs

Three Greatest Obstacles Created By Independent Legislative Bodies

Setting unclear or conflicting objectives

Making ill-informed budget decisions

Inadequately focusing oversight

Unclear or Conflicting Objectives

Desired state: “clarity of task and purpose”

Legislative bodies create ambiguity they must establish coalitions they lack expertise administrative flexibility is necessary

Additional problems are created by legislative involvement in budget execution

Result: multiple and conflicting goals for ministries

Ill-informed Budget Decisions

Desired state: collecting and using performance information to allocate resources

Challenges in the supply of appropriate cost and performance data

Demand is an even more difficult problem “pork barreling” incorrect or incomplete understanding of connections between

dollars and performance

Result: Budgeting by input, budgeting by anecdote

Oversight Focus

Desired state: legislative focus on comprehensive results

Most legislative bodies have oversight tools; incentives to use them vary

Attention tends to be episodic rather than comprehensive

Result: Little attentiveness to performance, signals to ministries that overall results don’t matter

Current Practice in U.S. Government

Federal Management Initiatives Predating Bush Presidency

Performance Budgeting (1950s) PPBS (1960s) ZBB (1970s) MBO (1980s) GPRA (1990s) NPR (1990s)

Bush Administration Management Agenda

Government-wide initiatives Strategic management of human capital Competitive sourcing Improved financial performance Expanded electronic government Budget and performance integration

Also nine program/agency specific reforms Standards for success in each management

area “Green/Yellow/Red Scorecard” first in Bush FY03

Budget

Performance Improvement Current “green light” criteria

Senior agency managers meet at least quarterly to examine reports that integrate financial and performance information, and use this information to make decisions

Strategic plans contain a limited number of outcome oriented objectives, and are consistent with PART reviews and the aforementioned reports

Full budgetary cost charged to mission accounts/activities; marginal cost of changing performance goals is accurately estimated

Agency uses PART evaluations to direct program improvements and PART ratings used to justify funding requests; fewer than 10% of programs have “results not demonstrated” label

Results thus far FY03 budget—3 yellow (EPA, DOT, SBA), 23 red FY08 (December 2007)--14 green (USDA, Commerce, Education,

Energy, EPA, Justice, Labor, DOT, GSA, NASA, NSF, SBA, Smithsonian, SSA), 12 yellow

PART—A New Method of Performance Measurement

PART—Program Assessment Rating Tool Currently has been used to evaluate almost 1000

(977) programs Overall ratings (effective, moderately effective,

adequate, results not demonstrated, and ineffective) Results not demonstrated for 21% of programs

(down from 50% for FY04) Effective or moderately effective for almost ½ of

programs Relation between PART scores and funding?

PART scores seem to be correlated with treatment in 2008 budget

BUT: relationship complex and also depends on other things (politics, ideology, policy priorities)

Effects of PART: Percentage Change 2008Requested vs. 2007Estimated

9.4% 9.

9%

-2.1%

-8.1%

-34.2

%

3.9%

2.6%

0.0%

0.0%

-14.6

%

-40.0%

-35.0%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Effective Moderately Effective AdequateResults Not

Demonstrated Ineffective

Per

cen

tag

e C

han

ges

in

Bu

dg

et 0

08vs

.007

Mean Pct.Change 008/007 Median Pct.Change 008/007

Congressional Response to Bush Management Initiatives

Interest has been greatest in the “management” committees

Interest is probably least in the appropriations committees

GPRA benefited from status as a law, but support was a mile wide and an inch deep

Congress has not focused at all on the PMA There have been attempts to pass a law

requiring PART/others to prohibit agencies from PARTing programs

PART reviews have not been used in Congressional budgeting decisions

Why Has the Congress not Made More Use of Performance Information?

It has only been recently that such information was available

There are other issues besides performance that affect resource allocation

There is no simple rule connecting performance and resources

Incentives that face members of Congress do not favor changes to the status quo

There is also no incentive to do systematic oversight, where the PART data in particular should be quite useful

More progress has been made in agencies’ use of performance information to manage resources

What’s Ahead? No reason to expect reverse of recent

trends Production/use of performance information by

executive Apathy/hostility by Congress

We know very little about potential management agenda of Presidential candidates

Even if it IS the same, it won’t look the same

A lot may depend on OMB director

State-Level Efforts—a Brief Advertisement Government Performance Project (GPP)

Joint academic/journalistic collaboration Gives management grades to the 50 states in four

categories Information is one of the management

categories in GPP Covers planning, use of performance information,

performance auditing and e-government Some states have progressed much farther

than federal government Results found at:

www.pewcenteronthestates.org/gpp_report_card.aspx

Distribution of Grades--Information

Linking Performance and Budgeting—Lessons Learned Performance is here to stay Production easier than use Measuring costs as hard as measuring results Use involves leadership and incentives Legislatures have been particularly reluctant Agencies can use performance to manage Performance data important to transparency

The Role of Technology in Managing for Results

Mission-focused technology Technology helps produce

performance/cost data for managers and politicians

Technology helps citizens connect to government

Technology enhances transparency