Assessing the Impact of Performance Budgeting: A Survey of American States.

• Author: Willoughby, Katherine G.

This article summarizes the findings of a survey on how performance measurement has influenced state budgeting regarding budget actors, budget cycles, and the perception of government by the media and citizens.

Over the past decade, state governments have established legal and administrative requirements for performance-based budgeting systems that incorporate requirements for measuring and reporting agency and program performance results. Such systems require stronger roles for planning and goal setting, and stipulate the conduct of performance measurement and reporting about program results.

This article addresses state government budget officers' perceptions of the importance of performance measurement and performance-based budgeting (PBB) in particular. It investigates how and when performance measurement information is used in decisions about spending by this select group of budget actors. This research should be helpful to governments as they begin to experiment with methods of presenting indicators externally via financial and program reports in order to provide stakeholders (citizens, other governments, investors, etc.) with reliable information about their performance.

Methodology

The data reported in this research represents one component of a major study of performance measurement used in state and local governments. The study is part of a multi-year effort by the Governmental Accounting Standards Board (GASB) to extend its SEA Research project. Funded by the Sloan Foundation, more than 30 case studies (1999) and a major mail survey (2000) were conducted by the GASB Performance Measurement Research Team. Overall, the project focused on the depth and breadth of the actual use of performance measures by governments for budgeting, management, and reporting.

For the mail survey, 121 questionnaires were mailed to budget offices and 434 were sent to heads of selected agencies in all 50 states. In addition, more than 700 questionnaires were sent to budget officers and department heads in local governments across the country. Overall, 1,311 survey instruments were mailed out and 491 received, for a response rate of 37 percent. This article is limited to questions related to budgetary decision making by state budget officers. Thus, the findings are based on a subset of subjects of the mailed survey; the research is concentrated on 62 responses from executive and legislative budget offices in the 50 states, representing a 51 percent response rate for that group. This subset includes responses from 37 states, with 15 states providing responses from both the executive and legislative branch budget offices. Admittedly this is a small sample. However, the subjects represent a very specialized budget actor (the executive or legislative budget officer) who retains a global view of the budget process and the use of performance indicators across many agencies and programs during such a process.

Integrating Performance Measurement

The history of the development and use of performance measurement by governments in the United States is well-documented. While the focus of this article is on the state level, it is clear that the initiatives being witnessed at that level of government also are evident at the federal and local levels.

Similar to trends at the local and federal levels, state governments have had deliberate and steady pressure to build performance monitoring and reporting systems in which performance measurement is a chief component. In the early 1990s, both the National Governors Association and the National Conference of State Legislators encouraged states to incorporate performance measurement and monitoring into their budgeting systems. During this time, most states complied either by passing legislation, issuing executive orders, or establishing administrative guidelines requiring some type of performance-based budgeting system. By the late 1990s, all but three states had performance-based budgeting requirements, with most establishing these requirements after 1990. More specifically, as shown in Exhibit 1, of 47 states with some performance related requirement, 31 have legislated performance budgeting to be conducted, while 16 have initiated the reform through budget guidelines or instructions. By the end of the last decade, only three states, Arkansas, Massachusetts, and New York, did not have either type of mandate to conduct PBB.

Use of Performance Measures

Performance budgeting is defined as a process that requests quantifiable data that provide meaningful information about program outputs and outcomes in the budget process. The widespread adoption of performance budgeting requirements at all levels of government in the United States reflects the support for and emphasis on changing the way that budget decisions are made. It does not reflect, however, actual use of performance data in the budget decision processes.

In order to accurately assess the implementation of performance budgeting requirements and activities in the states, we the way that performance measures and data actually are being used in state budget processes must be understood. The researchers are particularly interested in the actual use of performance measurement and a results orientation during steps in the budget cycle and regarding budget decisions. Specifically, these steps include:

* budget development,

* preparation of the chief executive's budget recommendation,

* appropriation of funds, and

* budget execution.

The first step in the budget cycle involves budget development--that period during the budget cycle prior to submission of a recommended budget by the executive and passage of the appropriation bill or bills by the legislature. This period encompasses consideration and packaging of budget needs on the part of agencies and departments. The next step involves assessment of agency budget requests by the executive budget office in order to prepare the budget recommendation for the chief executive to present to the legislative body. Legislative branch members then consider the executive budget recommendation when deliberating about final appropriations. Following appropriation of funds, budget execution begins. The cycle is completed with the...