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

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

• Philip G. Joyce
• Professor of Public Policy and Public
  Administration
• The George Washington University
• April 2, 2008

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Framework for Linking Performance and Budgeting
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Linking Performance and Budgeting

• Has many namesPB, PBB, MFR, etc.
• What all have in common is desire to link inputs
  to outcomes (through outputs)
• Reform in vogue throughout the world
• GoalPerformance-INFORMED budgeting

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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

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A Framework for Performance-Informed Budgeting

• Historicallyfocus 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

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A Comprehensive View of Performance-Informed
Budgeting
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Three Greatest Obstacles Created By Independent
Legislative Bodies

• Setting unclear or conflicting objectives
• Making ill-informed budget decisions
• Inadequately focusing oversight

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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

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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

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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 dont
  matter

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Current Practice in U.S. Government
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Federal Management Initiatives Predating Bush
Presidency

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

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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

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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 budget3 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

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PARTA New Method of Performance Measurement

• PARTProgram 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)

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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

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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

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Whats 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 wont look the same
• A lot may depend on OMB director

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State-Level Effortsa 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

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Distribution of Grades--Information
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Linking Performance and BudgetingLessons 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

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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