Public Performance Budgeting

Principles and Practice

Elaine Yi Lu, Katherine Willoughby

• Publisher: Routledge
• Year: 2018
• eBook ISBN: 9781315525716
• Topic: Economics
• Subtopic: Bookkeeping & Budgets
• Index: Economics

Winner of the the inaugural 'Best Book Award' from the Association for Budgeting and Financial Management!

Performance budgeting involves costs, from the drafting and passage of legal foundations, and the political capital and will to implement it, to training personnel to create a performance-oriented culture, and information technology requirements to track performance. Through comprehensive examination of performance budgeting laws, in-depth interviews of those practicing in government agencies, and quantitative survey analysis, Public Performance Budgeting examines the influence of performance measurement and evaluation on all phases of the budgeting process. Lu and Willoughby present original research and case studies to explore how performance is linked to public budgets and government results, its impacts on budgeting systems, and possible unintended consequences. A summary assessment of how performance measurement could and should play a role in furthering performance budgeting is explored in a concluding chapter. The first of its kind to spotlight budget practice through the lens of juvenile justice, this book is required reading for all those studying public budgeting, management, and policy.

1

ONE MISSION SHARED BY GOVERNMENTS

Introduction

This book is about linking fundamental elements of public performance budgeting as practiced within a holistic framework and supporting theory with empirical evidence. We describe the legal foundations, perspectives about and practices of performance budgeting systems, and the implications of implementation for government capacities and public service performance. We argue that understanding performance budgeting from a more universal view is key to advancing these systems to “perform” better. By universal, we mean recognizing if and how performance budgeting may be engaged throughout the traditional public budgeting process—for budget development, deciding on appropriations, during implementation, and for final audit and evaluation.

It goes without saying that governments worldwide must continue to operate in a “new normal” of fiscal malaise. The financial debacle that has unfolded in Greece is testament to the ongoing budget stress that governments around the world face. Continually hoping for better times yet clinging to past promises and the public’s expectations of government for problem solving will not work in the short term and is not viable in the long term. Efforts that seek to infuse public budgeting processes with valid, reliable cost and performance data as well as an orientation for measuring and contemplating the results of government activities are vital to strengthening public sector fiscal sustainability well into the future.

In this sustained “new normal” it should not be surprising that the modern wave of performance budgeting introduced and applied by governments globally is unprecedented (see Williams, 2004). Still, despite the ubiquity of these efforts, there is limited understanding of successful implementation, particularly at the agency level. A systematic review of research related to performance budgeting in major academic journals from 2002 to 2011 (Lu, Mohr and Ho, 2015) finds some 27 factors as important when executing performance budgeting. Here, we investigate how these factors have been and could be packaged to support the successful practice of performance budgeting. To date, there is no definitive, holistic and dynamic framework for understanding performance budgeting. Commenting on the status of research about performance measurement more generally, Yang and Hsieh (2007, p. 861) observe that “the literature on government performance measurement is largely descriptive and prescriptive, with limited attention to theory building and hypothesis testing.” We believe this applies to performance budgeting as well as performance measurement, more broadly. Lu, Mohr and Ho (2015, p. 444) claim that “many studies [about performance budgeting] lack explicit theoretical frameworks to guide the qualitative and quantitative analyses.” In this book, we present original research covering the 50 American states and specific to state juvenile justice programming, to unveil how performance links to public budgets and government results, its impacts and possible unintended consequences. We advocate that it is no longer sufficient to claim that performance data informs budgeting. Instead, this book explores concrete ways and the extent to which performance information influences public governance.

What is Performance Budgeting?

While the diffusion of performance budgeting to governments around the world is a common trend of the past several decades, its definition is far from definitive. A longtime scholar of public budgeting reforms, University of Georgia Professor Emeritus Tom Lauth, once defined the concept plainly: “performance budgeting is about bringing performance to the same table where resource allocation decisions are made.” Management guru Peter Drucker and colleagues (2015, p. 50) suggest that the concept engenders performance to justify funding by asking leaders to consider, “Do we produce results that are sufficiently outstanding for us to justify putting our resources in this area?” They emphasize that, “Need alone does not justify continuing. Nor does tradition. You must match your mission, your concentration, and your results” (Drucker, Hesselbein and Snyder Kuhl, 2015, p. 51). Indeed, any definition of performance budgeting requires an understanding of how and to what extent performance relates to budgeting. The relationship of performance to budgeting is not a settled issue normatively nor understood well practically.

The Functional Aspect of Performance Budgeting

The vast literature about performance budgeting yields several recurring themes. First, performance budgeting is functional, in that it injects new functions into the budgeting process. In prior research, we define performance budgeting as those systems that require “strategic planning by executive agencies, the development of goals and objectives, a consideration of the costs of results, development of performance measures, and the evaluation of performance” (Lu, Willoughby and Arnett, 2009, p. 267). The National Association of State Budget Officers (NASBO) defines performance budgeting as “a budget process where information on program goals and performance is somehow incorporated into spending decisions, whether it be at the budget preparation, approval, execution or audit and evaluation stage” (NASBO, 2014, p. 1). Performance budgeting “in an ideal form” would utilize performance information throughout the budget cycle, the information would support decision making at every stage, and the allocation of resources and program execution based on such information would promote better results from government action, services and programs. Unfortunately, there is no known ideal structure for such a system, nor best practice of performance budgeting known to lead to such outcomes. A public performance budgeting system might include some or all of the following functional components that a government might require via law, executive mandate and/or administrative protocols or policy:

• assignment of responsibilities for performance measurement development

• assignment of responsibilities for review, revision of program goals and objectives

• establishment of benchmarks, long-range or strategic plans

• assessment of costs

• trend analysis

• evaluation of alternatives

• consideration of efficient and effective use of resources

• linkages between strategic plans with program goals, objectives and performance measures

• periodic evaluation, performance auditing or measurement and results reporting

As one might expect, systems vary wildly among governments. Many are “layered” efforts that include requirements that have been specified in law, by executive mandate and/or administrative policies over decades; many systems have evolved from long-standing practice in a particular government while others have been implemented as a “punctuated” reform. Still, there are terms and definitions relevant to a public performance budgeting system that regard measures, reporting, budgeting and management:

• needs measures—assessment of public service needs

• input measures—resources provided to conduct public service/activity/program

• short-term or output measures—volume of work in relation to time and resources

• intermediate or activity measures—volume of work

• long-term or outcome measures—degree to which program goals are accomplished

• program evaluation—analytical reports that assess program effectiveness and meeting objectives

• strategic planning—linking future plans that incorporate goals and objectives with budgets and cost data

• performance management—incorporation of performance budgeting and measurement reporting and management for continuous improvement, learning and to generate better results from government programs, services and activities

The Cultural Aspect of Performance Budgeting

Second, performance budgeting is cultural. It differs from traditional, input-focused budgeting by adding an output and/or outcome dimension to processes and decision making. This necessitates a paradigm change in budgeting culture. Public budgeting, though routine, is a complex process that operates in the realm of politics and with numerous interruptions along the way. One “rational” strategy of budgetary decision makers to reduce complexity is to incrementally revise a budget from the “base” (i.e., the budget of the prior year). In the eyes of Davis, Dempster and Wildavsky (1966, p. 530), “[t]he widespread sharing of deeply held expectations concerning the organization’s base provides a powerful (although informal) means of securing stability,” and key budgetary decision makers, such as executive agencies and budget offices and legislators, traditionally depend upon specific “calculations” given their role in the routine. The U.S. Government Accountability Office (GAO) (U.S. Government Accountability Office, 1997, p. 5) describes early application of a federal performance budget as intending to “shift the focus away from the inputs of government to its functions, activities, costs, and accomplishments.” Given the focus and mechanism of traditional budgeting, such a shift requires significant cultural movement, leading stakeholders to re-consider how to conduct budgeting and evaluate budgets. Such a challenge resembles character rebuilding. It takes time and is not easy to realize, totally or well (Andrews, 2004; Grizzle and Pettijohn, 2002; Kasdin, 2010; Melkers and Willoughby, 2005; Stalebrink and Frisco, 2011; Sterck and Scheers, 2006; West, Lindquist and Mosher-Howe, 2009). Still, the presence of a “performance culture” in government has been consistently identified as an important factor in conducting performance budgeting (Moynihan, 2015).

The Integrative Aspect of Performance Budgeting

Third, performance budgeting is integrative—a process where performance information and activities should and can be integrated with all four phases (i.e., proposal/development, approval/passage, execution and auditing) of the budgeting process. The metaphor is that budgeting and performance cannot run two parallel lines; instead, they should be shaped into a DNA-like set of twisted lines that communicate with one another. Relevant activities often include strategic performance alignment among programs, agencies and system-wide, performance measurement, reporting and evaluation, and the use of performance information in decision making. And, this integration could start with performance budgeting law. Lu and colleagues (Lu, Willoughby and Arnett, 2009, p. 266) find that “state leaders in ‘budgeting for performance’ have laws more likely to include specifics regarding performance measurement applicability across all budgeting phases—including measurement linkages to strategic plans, measurement reporting requirements, and stipulations regarding measurement and results evaluation and auditing.” This finding coincides with a previous call by Joyce (2003) for “a comprehensive framework for considering budget and performance integration” throughout the budget cycle. Traditional research about performance information and its linkages to budgeting have focused on interpretations of use by executive and legislative budget offices. Only more recently has attention been given to the agency perspective, concerning performance budgeting applicability within agencies (Lu, 2007). Research has demonstrated that agencies are most likely to be involved in performance measurement development, and actively involved in budget preparation and execution, and their budget requests are mostly respected in the budget approval process. In other words, whether or not an agency’s budgetary decisions are informed by performance has a rippling effect on the rest of the budget process (Lu, 2007).

The Relational Aspect of Performance Budgeting

Fourth, performance budgeting is relational. Inculcating performance data into government operational processes is often...

Table of contents

• Cover Page
• Half Title
• Title
• Copyright
• Contents
• About the Authors
• List of Illustrations
• Acknowledgements
• 1 One Mission Shared by Governments
• 2 Foundations for Performance Budgeting
• 3 State Juvenile Justice Services: Organization, Measurement and Budgeting
• 4 Performance Budgeting for Budget Development
• 5 Performance Budgeting for Making Appropriations
• 6 Performance Budgeting for Budget Execution
• 7 Performance Budgeting for Audit and Evaluation
• 8 Implications: The Powers and Perils of Performance Budgeting
• 9 Rethinking Performance Budgeting
• Appendix A: Research Methods
• Appendix B: Survey
• Index