ASPA Presentation - Performance Budgeting at the State Level (3-2014)


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Most State Governments Use Performance Budgeting (or Budgeting for Results). A Team of Researchers from American University Assess Progress and Provide Case Examples at a Panel at the annual national conference of the American Society for Public Administration, March 2014, in Washington, DC.

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  • NASBO Report
  • ASPA Presentation - Performance Budgeting at the State Level (3-2014)

    1. 1. Performance Budgeting / Budgeting for Results at the State Level: The Emperor Has No Clothes Daniel R. Mullins, The American University John L. Mikesell, Indiana University Chad Smith, The American University Marvin Ward, The American University Chase Bricker, The American University Presented at the 75th Anniversary Conference of the American Society for Public Administration, March 18, 2014, Washington DC
    2. 2. Common Features of Performance Budgeting Systems • Government-wide Strategic Plan • Operating agency plans (consistent with government-wide strategic plan) • Desire for results (outcome) oriented performance measures • Monitoring / presenting performance measures • Performance audits • Transparency in government objectives, operations & performance Expected Outcomes of Performance Budgeting • Increased trust in government • More attention of agencies to the “right” objectives • Improved information base for prioritization and allocation choices
    3. 3. Difficulties Along the Way / Obstacles to Performance Measurement • Difficulties gaining precise agreement on the primary purpose of programs and activities and the multi-dimensional nature of those purposes and cost of establishing meaningful measures • Tendency to focus on what is measureable: Potential for what’s being measured to crowd-out less measurable, but no less important, agency objectives • Inability to disentangle the effect of one agencies actions (program) from that of others and the environment • Measurement manipulation: Incentives for agencies to choose easily achievable targets (or cheat in measure construction and data collection) to limit the risk of underperformance • Superficial nature and interpretation: Inability to use performance measures to make choices between spending across functions (education, health, recreations, public safety, transportation) • Failure to link performance measures to budget outcomes
    4. 4. Important Issues • Is public sector budgeting an outcome or process? Lack of objective standards defaults to a focus on process. Performance budgeting has not been successful at elevating outcomes above process. Rational/technical versus political/philosophical. • Measuring performance is more difficult than it might appear. The “new” performance budgeting directs attention away from agencies internal operations toward outcomes of the services provided. The primary function of public sector budgeting is financial control, which requires a focus on inputs, creating strong pressure to revert back to an input focus.
    5. 5. Special Difficulties (biases against) Softer, Client Oriented Services • Outcomes are reliant on co-production (changing the behavior of the service recipient) • Greater difficulties in establishing agreement on goals, steps toward goal accomplishment and appropriate measures • Difficulty quantifying and summarizing program effects • Lack of effective quantifiable indicators • Ambiguity of outcomes due to environmental effects • Questions of measurement veracity • Low political access of clientele.
    6. 6. State –Wide Goal Setting and “Dashboards” State-wide goal setting and assessment resemble program budgeting w/o systematic cross-cutting evaluative commitment and quantitative Indicators of limited value (under these circumstances, their value has to come from process rather than the substance of measurement). Guiding principles for an effective process design: •Institutionalized executive, legislative and public commitment •Effective mechanisms of public input •Transparency Budgeting for results resembles more of a state-wide, strategic goal setting process, often with progress reports, than a performance based budgeting system. Agency performance is often not effectively tied to goal achievement and resource allocation is driven more by gubernatorial priorities than measures of performance. Dashboards are often uses to convey “performance” on goal achievement to interested parties and the public, but the information contained in these dashboards generally provides only a superficial and indirect assessment of agency/program results.
    7. 7. Meaningful Agency Centered Performance Measurement Requires • Government-wide strategic plan identifying goals over a multi- year period • Agency operating plans with objectives tied to government- wide plans • Meaningful agency/program results (outcome) oriented performance measures • Priority setting/resource allocations aligned with goals and informed by performance measures • Presentation and independent and transparent monitoring of measures • Independent auditing of measures
    8. 8. Agencies that formally participate* State ProgramLevel Performance Measures MeasuresAvailable Online Executive Legislative Judicial Independent Other MeasuresRequired inBudgetRequest FormallyReviewed orAudited Review/Auditpart ofFormalReport Alabama Alaska X X X X X Arizona X X X X X Arkansas California Colorado X X X X X Connecticut X X X X X X X X X Delaware X X X X X X X X Florida X X X X X X X X Georgia X X X X X Hawaii X X X X X Idaho X X X X X X Illinois X X X X X X Indiana X X X X X X X Iowa X X X X X X Kansas X X X Kentucky X X X X X Louisiana X X X X X X Maine Maryland X X X X Massachusetts X X X Michigan X X X X X Minnesota X X X X X X Mississippi X X X X X X X Missouri X X X Montana X X X X Nebraska X X X X X X Agencies that formally participate* State ProgramLevel Performance Measures MeasuresAvailable Online Executive Legislative Judicial Independent Other MeasuresRequired inBudgetRequest FormallyReviewed orAudited Review/Auditpart ofFormalReport Nevada X X X X New Hampshire X X New Jersey X X X X X New Mexico X X X X X X X X X New York X X X North Carolina X X X X X X X X X North Dakota X Ohio Oklahoma X X X X X X Oregon X X X X X X Pennsylvania X X X X X Rhode Island X X X X X X X South Carolina X X X X X South Dakota X X X X X X X Tennessee X X X X X X Texas X X X X X X Utah X X X X X Vermont X X X X Virginia X X X X X X X Washington X X X X X X X West Virginia X X X X X X Wisconsin X X X X X X X Wyoming X X X X X X X TOTAL 39 41 44 13 12 24 2 38 25 13 *Based upon and Updated to 2013 from 2008 NASBO report
    9. 9. State Findings (highlights) InstitutionalizedParticipationandCommitment IOWA: Performance budgeting evolved over time and has been dependent on gubernatorial disposition. It originated under Governor Branstad when, in 1997, he required performance measures to be submitted in the executive budget. In 2005, the Government Accountability Act required strategic planning, agency performance planning, performance measurement, results-based budgeting, performance reporting, performance audits, and return on investment. By 2010, it was no longer considered particularly important. With Branstad’s return to the Governor’s Office in 2011, performance measures and performance management has taken on revived importance. TEXAS: The role of the executive in Texas is constrained in budget matters. Texas lacks an executive budget process and an executive level central coordinating focal point for budget development and performance monitoring. Agencies submit Legislative Appropriations Request directly to the legislature (and comptroller). Budget preparation instructions are provided by the Legislative Budget Board in conjunction with the Governor’s Office of Budget, Planning and Policy. Legislative appropriations requests are required to include performance measures and priorities. The LBB has established an agency performance review board directed at improving the efficiency and performance of both state and local operations and finances. It also provides detailed instructions on the desired characteristics of performance measures. The Texas legislature has the strongest performance budgeting role of any state reviewed.
    10. 10. EffectivePublic Input MICHIGAN: The state legislature has introduced legislation to require the creation of the Michigan Progress Board to monitor, propose and hold public hearing on Michigan’s State priorities and their achievement. The legislation has not yet been adopted. WASHINGTON: Governor has established a Committee on Transforming Washington’s Budget composed of broad public membership to submit ideas for restructuring, cost saving, outsourcing and addressing service needs. Four public hearings on budget and state wide priorities were conducted by the Governor last year. Transparency TEXAS: Texas Transparency is a web portal managed by the Texas Comptroller intended to provide information and transparency regarding the usage of public resources. With the exception of the Annual Financial Report, Legislative Budget Estimates and General Appropriations Act the information provided is not useful for performance assessment. Narrative explanations of performance are omitted. Beyond this, however, the Legislative Budget Board website provides links to multi-year performance data bases for agencies as well as links to more useful and very detailed departmental budget submissions. This is supplemented by the bi-annual Government Effectiveness and Efficiency Reports. These are not, however, easily accessible and the absence of narrative and high level of detail make consumption difficult. WASHINGTON: Quarterly forum to assess state and agency progress on priority areas are open to the public. A brief annual report is provided with the public as the intended audience. GMAP website provides a dashboard and includes links to the websites of each agency that contributes to a designated priority area and a snap shot of selected performance measures. Links to agency action plans are also provided. The site, however, misses an opportunity to function as a central location for detailed performance reporting. Only a small number of performance measures are available and there is little linkage to resource requirements of comprehensive programmatic activities. It provides a superficial overview of state activities and accomplishment.
    11. 11. Agency Centered Requirements State-wideStrategic Plan WASHINGTON: Nine-hundred Individual agency activities are mapped to eleven target categories and collapsed into six value areas prioritized by the governor. Each results area has a defined performance structure with explicit objectives. Activities are ranked in the results and value areas. Agencies justify budget requests ex-ante based on linkage to gubernatorial priorities and agency performance indicators are included in every decision package. Agencies attempt to game the system by adapting performance measures and their interpretation to reflect priority initiatives. MARYLAND: Establishes as State Comprehensive Plan, with “key performance areas” and a list of indicators. Contributions of individual agencies or programs to the satisfaction of performance areas are not identified. An annual performance report is published charting the state’s performance in key areas. AgencyPlansTiedtoState-wide Goals TEXAS: Individual agencies produce performance reports and strategic plans. Biannual Government Effectiveness and Efficiency Reports assess 76 issues over the course of 600 pages and provide insight into agency performance. VIRGINIA: The 2010-2012 executive budget includes “key objectives and performance measures” for executive agencies. These state intended actions and specify measures (and sometimes targets) for success. However, systematic reporting of performance outcomes is not included. Submission is more of a statement of intentions. For 2012 – 2014, this section was removed from the executive submission, eliminating reference to performance objectives and measures from the budget. The present situation is an absence of performance reporting in the budget. Agencies produce individual strategic plans. “Key measures” are identified for monitoring. MARYLAND: Agencies are required to provide in their annual budget submission a statement of strategic action plans, organizational mission and guiding principles, goals and objectives and performance measures. Included is a statement of strategic plan measures collected by agencies, but specific linkage between individual key state goals and program measures is not provided. Budget office review is intended to assess the agencies alignment with the administration’s priorities.
    12. 12. MeaningfulAgency/ProgramPerformanceMeasures MICHIGAN: The data provided by MiDashboard are trends of broad indicators and are not linked to any agency activity, goals or objectives. The executive budget presentation provides cursory performance information. The current dashboard implementation is no substitute for this, let alone the detailed performance information provided in individual agency annual performance reports. The information for performance assessments is not standardized across agencies or even across programs within agencies. It has evolved based on management information needs unique to individual functions, services and programs. Rather than a deficiency, the result is that information provide within functions is much more germane to decision making within that function. Quite detailed, quarterly performance reporting is also required of recipients of state grants and contracts to demonstrate the quality and quantity of their service provision. VIRGINIA: State agencies and grant recipients/contractors are required to submit performance information with budget proposals. Agencies must develop priorities and strategies to realize these priorities. Program structure is developed along administrative divisions and decision packages. Fiscal impacts for packages are also identified. Pre-budget planning is not limited by resource constraints and performance measures are considered important to budget justification. Measures are intended to include both productivity and outcomes. “Key measures” are identified for monitoring during execution. Agencies produce specific detailed performance reports.
    13. 13. ResourceAllocationsAlignedwithGoals,InformedbyPerformance Measures IOWA: Flexible performance agreements between each department director and the Governor, Lieutenant Governor and the Governor’s Chief of Staff establish annual expectations, are the basis for evaluating department director performance and are to be consistent with an assessment of progress on agency goals and objectives. Agency plans are intended to include a statement as to how different levels of funding would affect results achieved. Failure to meet targeted performance requires explanation and the establishment of a mediation plan. Largest programs receive the most consideration. Measures are easiest to apply “when dollars correlate to materials.” Indicators are more difficult to establish for education and human services. The effect of performance measures on budgetary success is unclear. Resource allocation adjustments tend to be driven by economic conditions. WASHINGTON: The Office of Financial Management (OFM) has been tasked with the meaningful effort to link performance to resource allocation and is charged with introducing budgeting for results and assisting agencies to improve performance. However, the budget process now decouples strategic planning from the budget submission, given a general view that such plans were more valuable to agency managers than budget analysts and decision makers. Plans are no longer required to be submitted to the OFM and there are no longer any “required elements” in strategic plans. Further, the executive budget request includes virtually no agency or program performance information. Requests are generally for administrative entities. Separate agency activities reports are the basic budget presentation related to performance. These are coupled with quarterly performance reports, but are considered part of the analysis function and not an element of budget request justification. Agencies have found performance measures a useful vehicle for arguing for more resources. The influence of performance measures has increased during tight fiscal conditions, but they have less importance across functions. Still, resource reductions are generally not driven by performance information and agencies lacking concrete measures are not at a disadvantage. The state goes for where the money is for reductions. There appears little substantive linkage between performance and resource allocation.
    14. 14. Monitoringof Measures IOWA: Performance reports are produced monthly, quarterly and annually. Quarterly performance review meetings are conducted by the Governor and Lt. Governor. VIRGINIA: “Key measures” are monitored through budget execution and quarterly management reports are produced identifying progress on targets. Deviations are flagged for further review. AuditingMeasures IOWA: Data verification through performance auditing does take place, but it is not comprehensive. Both the State Auditor and Legislative oversight committee provide some review of performance. The State Auditor does perform performance audits, but they tend to be ad hoc and tend to occur when performance indicators show problematic results. WASHINGTON: Verification of performance information is spotty. Budget office staff conduct performance assessments as an informal audit. The State Auditor also performs performance audits, but does not specifically verify the accuracy of performance data. Still performance audits are quite systematic, but are done with significant time lags. The OFM, GMAP, joint legislative audit office and legislative committees perform ad hoc investigative functions.
    15. 15. Goals Measures Revenue Performance Communication Enforcement Performance Communication Enforcement Subtotal 5 2 5 20 10 7 Total 12 37 Transport. Financial Safety Condition Financial Safety Condition Subtotal 78 40 70 73 40 78 Total 188 191
    16. 16. Lessons and Implications • Disadvantage of services with less measurable outcomes, but performance budgeting may strengthen the role of the non-profit sector by strengthening the perceptions of accountability through measurement, irrespective of the saliency of those measures. • Performance budgeting systems have not bridged the gap for making trade-offs across functions and performance measures are not generally linked to broad resource allocation choices. • At its worst, performance budgeting provides window-dressing support for executive priorities. At its best, it provides a vehicle for establishing state priorities and motivating agencies to consider their actions within the context of those priorities. • To be effective, standardized systems are problematic. Agencies need flexibility in determining how to collect, organize and interpret information to meet their unique service delivery responsibilities. • Performance budgeting may require a more systematic demonstration of the value added by nonprofit entities to explain programmatic worth and argue for resources. • State budget officials reveal that past resource allocation choices have not been heavily driven, particularly across functions, by performance measures. Larger nonprofit entities have also indicated an absence of discernible effect. • Performance budgeting / budgeting for results has had the most discernible effect on clarifying executive level priorities and aligning agency strategies with those priorities. Performance indicators are simply one input to decisions and that input tends to be constrained (as it should be) to informing internal operations and within function comparisons.