PERFORMANCE-BASED BUDGETING IN LOUISIANA

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PERFORMANCE-BASED BUDGETINGINLOUISIANA
Putting the Pieces Together
Carolyn S. Lane Deputy Director Office of
Planning and Budget Division of
Administration State of Louisiana
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LOUISIANAS EXPERIENCE
History

• Performance indicators reported in budget for
  over 50 years, with increased usage in executive
  budget beginning in 1970s.
• Move to program budgeting in early 1990s featured
  administration guidelines for strategic planning,
  operational planning, and performance
  accountabilitybut no explicit, statutory
  requirement for these processes.
• Act 1465 of 1997 mandated performance-based
  budgeting.
• Some provisions of Act 1465 amended by Act 1169
  of 1999, Act 82 of First Extraordinary Session of
  2000, and Act 1057 of 2003.

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History
LOUISIANAS EXPERIENCE
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LOUISIANAS MANAGEMENT PROCESSES
STRATEGIC PLANNING State Strategic Plan
Louisiana Vision 2020 Statewide Initiatives
Childrens Cabinet Workforce Development Agency
5-Year Strategic Plans
STATE 5-YR BASELINE BUDGET PROJECTION
REVENUE ESTIMATING CONFERENCE
CONSENSUS ESTIMATING CONFERENCE
PERFORMANCE ACCOUNTABILITY La. Performance
Accountability System (LaPAS) Performance
Progress Reports Program and Contract
Evaluations Annual Management and Program
Analysis Reports Performance Audits Sunset Review
OPERATIONAL PLANNING OPERATING BUDGET
DEVELOPMENT APPROPRIATION CAPITAL
OUTLAY PLANNING 5-Year Plan (updated
annually Capital Outlay Request Tracking
System (CORTS) CAPITAL OUTLAY
BUDGET DEVELOPMENT APPROPRIATION
FINANCIAL ACCOUNTABILITY Comprehensive Annual
Financial Report (CAFR) Financial Compliance
Audits Inspector General Audits
PROGRAM MANAGEMENT BUDGET MANAGEMENT FACILITY
MANAGEMENT HUMAN RESOURCE MGT. CONTRACT MANAGEMENT
MONITORING IMPLEMENTATION AFS Reports Fiscal
Status Reports Internal Performance
Monitoring Contract Monitoring
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LOUISIANAS MANAGEMENT PROCESSES

• Strategic Planning
• Statewide Strategic Plans Initiatives
• Louisiana Vision 2020, 20-Year Economic
  Development Master Plan
• Master Plan for Higher Education
• Louisiana Workforce Development
• Louisiana Childrens Cabinet
• Human Resource Policies that benefit women and
  families
• Louisiana Recovery Authority
• Hurricane preparedness plans
• Civil Service workforce planning
• Office of Information Technology
• Gubernatorial special task forces and commissions

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LOUISIANAS MANAGEMENT PROCESSES

• Strategic Planning
• Agency 5-Year Strategic Plans
• Initial plans submitted July 1, 1998
• Revisions and updates, at a minimum, every 3
  years
• Must be carried to program level

CPTP training in strategic planning.
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LOUISIANAS MANAGEMENT PROCESSES
Components of the Strategic Planning Process
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LOUISIANAS MANAGEMENT PROCESSES

• Performance-based Budgeting (PBB)
• Performance-based budgets focus on return on
  investmentthat is, what do we get for our
  investment of state resources?
• Basic service level (or continuation of basic
  services)?
• Increased services (more services to same
  recipients or expansion of same services to more
  recipients)?
• Better (higher quality) services?
• More efficient services (cost savings in service
  delivery)?
• Mitigation or resolution of a problem?

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LOUISIANAS MANAGEMENT PROCESSES

• Performance-based Budgeting (PBB)
• PBB is budgeting for resultwith an eye on the
  price tag.
• PBB emphasizes program effectiveness and bases
  decision making (whether for continuation or
  enhancement of a program) on outcomes.
• However, the costs of achieving those outcomes
  must be scrutinized to ensure efficient service
  delivery and maximize allocation of scarce
  resources.

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LOUISIANAS MANAGEMENT PROCESSES

• Performance-based Budgeting (PBB)
• Annual Operational Plans
• Concise Executive Budget
• Detailed Executive Budget Supporting Document
• General and Ancillary Appropriation Bills
  including
• Program Descriptions
• General Performance Information
• Key Objectives
• Key Performance Indicators
• General and Ancillary Appropriation Acts with
  Performance Standards

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LOUISIANAS MANAGEMENT PROCESSES

• Performance-based Budgeting (PBB)
• Program Structure
• Strategic plans, operational plans, and
  performance-based budgets are geared to program
  structures.
• Funds are appropriated to budget units, BY
  program.
• A program is a grouping of activities directed
  toward the accomplishment of a clearly defined
  objective or set of objectives.
• Program structure is an orderly, logical array of
  programs and activities that indicates the
  relationship between each.

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PROGRAM STRUCTURE
Louisianas Management Processes
BUDGET SCHEDULE or DEPARTMENT
Budget Unit or Agency
Budget Unit or Agency
Program
Program
Program
Program
Activity Activity Activity Activity
Activity
Activity Activity Activity
Activity Activity
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LOUISIANAS MANAGEMENT PROCESSES

• Performance Accountability
• Quarterly Performance Progress Reports (PPRs) via
  Louisiana Performance Accountability System
  (LaPAS)
• Reviewed, analyzed, and reported to Joint
  Legislative Committee on the Budget by
  Legislative Fiscal Office
• Compliance is audited by Office of Legislative
  Auditor
• Performance Audits by Office of the Legislative
  Auditor
• Performance issues and actuals
• Validity, reliability, and accuracy of
  performance indicators

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LOUISIANAS MANAGEMENT PROCESSES

• Performance Accountability
• Performance-based Rewards and Penalties

• The Joint Legislative Committee on the Budget
  (or a subcommittee thereof) may authorize a
  reward or impose a penalty based on performance.
• A variance greater than 5 between performance
  standards and actual performance triggers
  eligibility for reward or penalty.
• Act 82 of the First Extraordinary Session of 2000
  makes compliance with performance-based budgeting
  processes an eligibility factor.
• Exceptional Performance and Efficiency Incentive
  Program (Act 1091 of Regular Session of 2001 and
  Act 111 of First Extraordinary Session of 2002)

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LOUISIANAS MANAGEMENT PROCESSES

• Performance Accountability
• Sunset Review
• Periodic review by legislature of state
  government entities
• Results in termination, re-creation as is, or
  re-creation with modification)

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LOUISIANAS MANAGEMENT PROCESSES

• Performance-based Contracting
• Mandated by Acts 739 and 1424 of 1997
• Professional, personal, consulting, or social
  services contracts over 5,000 must include
  purpose, goals, objectives, performance
  indicators, monitoring plan

See the Office of Contractual Review website for
more information on contracts and cooperative
endeavor agreements. http//www.doa.louisiana.gov/
ocr/index.htm
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INSTITUTIONALIZING PERFORMANCE MEASUREMENT
Louisianas Experience

• As the OPB worked with Louisiana departments and
  agencies to implement performance-based
  budgeting, managers raised numerous arguments
  against the usefulness or possibility of
  constructing meaningful performance measures.
  Some were founded on genuine issues many
  reflected needed changes in corporate culture.
  We had to address these concerns.

Humph, only when
Here are the top ten reasons cited by managers
who contended that This wont work in my
agency!
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TOP TEN REASONS WHY PERFORMANCE-BASEDBUDGETING
WONT WORK IN MY AGENCY

• It doesnt matter what we do because we have
  federal funding.
• 9. We just reorganized and we dont know what
  were doing yet.
• 8. Everything is just fine as it is weve
  always done it this way.
• 7. Were too busy getting REAL work done to
  bother with this.
• 6. We need more staff, more money, more time,
  more ( fill in the blank ) to do this.
• 5. We cant target outcomes theyre too
  specific.
• 4. We cant measure what we do.
• 3. Youll misinterpret any information we give
  you.
• 2. We cant be accountable because we have no
  control over anything.
• 1. Were different. That act shouldnt apply
  to us. We need an exemption.

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TOP TEN REASONS WHY PERFORMANCE-BASEDBUDGETING
WONT WORK IN MY AGENCY

• OFTEN FOLLOWED BY
• All right, just give me a form and tell me what
  you want me to say.

If I give them something, then theyll go away.
(Maybe this whole thing will just go away.)
NOTE This genie wont go back into the lamp.
But, were still trying to covert compliers into
true believers.
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INSTITUTIONALIZING PERFORMANCE MEASUREMENT
Louisianas Experience

• Make performance an integral part of agency
  management processes.
• Use metrics to understand and measure how a
  process works and the results it generates.
• Develop an internal performance accountability
  process.
• Integrate performance into policy and budget
  decision making and everyday program management.

CPTP training on process improvement.
CPTP training on internal accountability.
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INSTITUTIONALIZING PERFORMANCE MEASUREMENT
Louisianas Experience
POINTER When you break down a policy, program,
or process into its component parts, you use
"systems logic" to develop a model of how it
should work. INPUT OUTPUT OUTCOME
PROCESS
QUALITY
EFFICIENCY
CPTP training on process improvement.
Managers should use metrics to gauge and assess
program and processes, diagnose problems, and
formulate solutions.
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INSTITUTIONALIZING PERFORMANCE MEASUREMENT
Louisianas Experience
Metrics (performance indicators) measure process
and product.
Inputs
Outputs Outcomes
Process
(Products)
(Results)
(Demand)
(Services)
(Need)
(Size of Problem)
(Resources)
Outputs
(Expenditures compared to productivity caseload
per staff member.)
Inputs
Efficiency
(Cost per item produced, service provided, or
client served cost per result achieved.)
Outputs or Outcomes
Cost
Outputs or Outcomes
(Production or turnaround time timeliness of
results.)
Time
Quality

Effectiveness in meeting the expectations of
customers, other stakeholders and expectation
groups.



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INSTITUTIONALIZING PERFORMANCE MEASUREMENT
Louisianas Experience

• The volume of performance information that must
  be managed can be staggering.

Watch out for the shotgun or kitchen sink
approach--reporting just about every type of
measurement or statistic that is already gathered
or can be counted easily. This leads to a heavy
emphasis on transactional data--inputs and
outputs--rather than results.
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INSTITUTIONALIZING PERFORMANCE MEASUREMENT
Louisianas Experience

• As you hone your planning and performance
  accountability skills, you learn to focus on the
  quality of performance indicators rather than the
  quantity.
• Further, you learn which performance information
  needs to remain at internal agency levels for
  management purposes and which should be reported
  externally for performance-based budgeting.

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INSTITUTIONALIZING PERFORMANCE MEASUREMENT
Louisianas Experience

• Concentrate on the development of balanced sets
  of performance indicators in order to provide a
  clear picture of performance without overwhelming
  users with needless detail.
• Louisiana uses five types of performance
  indicators
• Input
• Output
• Outcome
• Efficiency
• Quality
• A balanced set may include more than one of any
  indicator indicator type and none at all of some
  but must have at least one measure of outcome,
  efficiency, or quality.

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INSTITUTIONALIZING PERFORMANCE MEASUREMENT
Louisianas Experience

• Present performance information at different
  levels in order to surface key data while
  maintaining the availability of support and
  explanatory material.
• Louisiana uses
• Key Performance Indicators
• Supporting Performance Indicators
• General Performance Information
• Explanatory Notes

• Get consensus among data users on indicator types
  and levels before indicators are reported.

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INSTITUTIONALIZING PERFORMANCE MEASUREMENT
Louisianas Experience

• A key performance indicator is a performance
  indicator that is included in the Executive
  Budget Supporting Document and the General or
  Ancillary Appropriation Act.
• Factors in determining key level include
• Most direct measure of outcome?
• Critical success factor?
• Big ticket item?
• Hot button item?
• History and who values?
• Key indicators have performance standards and are
  reported each quarter in LaPAS.

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INSTITUTIONALIZING PERFORMANCE MEASUREMENT
Louisianas Experience
A supporting performance indicator is a
performance indicator that is included in the
Executive Budget Supporting Document, but not the
General or Ancillary Appropriation
Act. Supporting indicators have performance
standards and are reported at mid-year and
yearend in LaPAS.
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INSTITUTIONALIZING PERFORMANCE MEASUREMENT
Louisianas Experience

• General performance information (GPI) is included
  in the Executive Budget Supporting Document and
  may be included in the General or Ancillary
  Appropriation Act. However, values for general
  performance indicators are reported for prior
  year actual only.
• GPI may include
• Multi-year histories or trends
• External comparisons (national or regional)
• Disaggregated data
• GPI do not have performance standards but are
  reported in LaPAS at mid-year (prior year actual
  figure) and yearend (yearend actual figure).

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MANAGING VOLUME AND ACCURACY
We needed a bigger boat.
Thats why we built LaPAS. (Louisiana
Performance Accountability System)
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LaPAS FUNCTIONS

• LaPAS provides an electronic, paperless reporting
  medium for quarterly performance progress reports
  by state agencies.
• LaPAS maintains a database of performance
  information for use in
• Agency management
• Policy and budget development and decision making
• Rewards and penalties based on performance
• LaPAS makes performance information readily
  accessible to the public, with its View and
  Search functions available via Internet.

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MANAGING ACCURACY Louisianas Experience
The usefulness of performance indicators is
dependent upon their validity, accuracy, and
reliability.
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MANAGING ACCURACY Louisianas Experience

• Watch out for
• High balls and low balls (unrealistically high or
  low performance targets)
• Instant replays (reporting the same performance
  level over and over, regardless of circumstances)
• Greased pigs (indicators for which name,
  definition, or method of calculation change so
  often that you cant get a handle on them)
• Orphans (indicators for which no one claims
  responsibility)
• Statistical illiteracy (calculations that dont
  add up)
• Limp excuses (meaningless explanations of
  performance variances)

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MANAGING ACCURACY Louisianas Experience

• Get the right start by developing meaningful,
  valid, accurate, and reliable performance
  indicators.
• Agencies required by statute to provide
  documentation for each performance indicator
  identified in the strategic plan.
• Strategic planning guidelines include performance
  indicator documentation sheet.

OPB provides guidelines.
CPTP training in strategic planning.
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MANAGING ACCURACY Louisianas Experience

• Standardize the way performance information is
  reported for budget development and verify the
  data reported.
• The OPB provides guidelines and formats for
  reporting performance in operational plans and
  other budget request forms. Operational plan
  workshops for OP coordinators are conducted each
  fall.
• Throughout budget development, the OPB works with
  agencies to improve and refine performance
  information. Input from legislative staff is
  welcomed.
• LaPAS (performance database) enables verification
  of prior year and current year performance data.

Guidelines training provided.
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MANAGING ACCURACY Louisianas Experience

• Make performance reporting as easy as possible
  for agencies and as controlled as possible for
  record keepers.
• The OPB provides reporting guidelines and LaPAS
  user guides.
• The OPB populates LaPAS and controls agency
  access agencies do minimal data entry during
  reporting periods.
• LaPAS automatically calculates variances between
  performance standards and actuals.
• LaPAS maintains an audit trail.
• LaPAS allows easy viewing and paperless reporting
  but has a print function for user convenience.

Guidelines user guides provided.
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MANAGING ACCURACY Louisianas Experience

• Review and audit performance information.
• OPB and legislative staff review and analyze
  performance data during budget development and
  throughout fiscal year.
• Louisianas Legislative Fiscal Office (LFO)
  reviews and analyzes agency quarterly performance
  progress reports (PPRs). LFO presents a summary
  report to the Joint Legislative Committee on the
  Budget.
• Performance audits are conducted by the
  Performance Audit Division of the Office of the
  Legislative Auditor.

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INTEGRATING PERFORMANCE INTO BUDGET DECISION
MAKING Louisianas Experience
Louisiana Vision 2020
CAPITAL OUTLAY REQUEST TRACKING SYSTEM
AGENCY STRATEGIC PLAN
PERFORMANCE ACCOUNTABILITY
CAPITAL OUTLAY BUDGET DECISIONS
OPERATIONAL PLAN
OTHER BUDGET REQUEST FORMS ADDENDA
PERFORMANCE PROGRESS REPORTS
OPERATING BUDGET DECISIONS
AUDITS OTHER REPORTS
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INTEGRATING PERFORMANCE INTO BUDGET DECISION
MAKING Louisianas Experience

• Incorporate statewide goals, objectives,
  benchmarks, and management initiatives into
  budget development.
• This enables us to make strategic investments in
  high priority areas.

• Louisiana Vision 2020 and annual Vision 2020
  Action Plan (per Act 1036 of 1999).
• Gubernatorial agenda
• Louisiana Recovery Authority
• Childrens Cabinet

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INTEGRATING PERFORMANCE INTO BUDGET DECISION
MAKING Louisianas Experience

• Establish the link between resources and results
  early and maintain that link through budget
  development, appropriation, and budget control
  processes.

• Set performance standards linked to
  appropriation levels.
• Performance standards are the expected levels of
  performance associated with a performance
  indicator for a particular period and funding
  level. They link dollars and results.
• Performance standards are one way to demonstrate
  RETURN ON INVESTMENT--what we can expect to
  receive for our money.

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INTEGRATING PERFORMANCE INTO BUDGET DECISION
MAKING Louisianas Experience

• Establish the link between resources and results
  early and maintain that link through budget
  development, appropriation, and budget control
  processes.

• During budget development, performance indicator
  values associated with the funding level
  recommended in the executive budget and
  appropriation bills are proposed performance
  standards.
• During the appropriation process, performance
  indicator values become performance standards
  linked to the funding amounts actually
  appropriated in the appropriation acts.
• Performance standards may be modified only
  through approved processes (BA-7s or August 15th
  Performance Adjustments).
• Performance standards are monitored and tracked
  through the Louisiana Performance Accountability
  System (LaPAS).

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INTEGRATING PERFORMANCE INTO BUDGET DECISION
MAKING Louisianas Experience

• How are we doing?
• Louisianas scores In national ratings
  (Government Performance Project) of state
  Managing for Results efforts
• 1995 B
• 1999 B
• 2001 B
• 2005 A-
• We are still working on
• Continuing culture change
• Strengthening integration of performance and
  budget
• Automating more performance-based budgeting
  processes
• Continuing training

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For more information, please visit the Office of
Planning and Budget website at
http//www.doa.louisiana.gov/opb/index.htm

• Look for
• Executive Budget Documents
• LaPAS
• Performance-based Budgeting Forms and Guidelines
• MANAGEWARE A Practical Guide to Managing for
  Results
• Links to performance-based enabling legislation
  and appropriation acts