 |
|
||
This first appeared as an ASPANET On-Line column in September 2001.
by John M. Kamensky
Last month, ASPA columnist Colin Talbot described the British government’s recent experience with performance budgeting. His is a cautionary tale, about how a bold effort to put in place three-year performance contracts tied to a fixed amount of resources has begun to dissolve in the face of political and economic changes.
The U.S. federal government’s experience is quite different. Over the past decade, it has moved toward performance budgeting at a far more measured pace. However, the new Administration has given it a renewed impetus.
In August, President Bush released his management agenda for the coming year. As expected, one of the five key priorities described in his agenda is to better integrate budget and performance. This past spring, Office of Management and Budget (OMB) Director Mitch Daniels met individually with key agency heads and asked them to develop performance-based budgets for fiscal year 2003 for at least two of their programs. As a result, as agencies submitted their draft budgets to OMB earlier this month, nearly 100 programs will be judged on a totally different basis than in the past.
But what does “performance budgeting” really mean?
In the past few months, federal agency staffs have been scrambling to understand performance budgeting and have found there are no clear answers.
At an abstract level, it’s simple: performance budgeting is a new accountability model that is prospective instead of retrospective. A 1997 General Accounting Office (GAO) report describes how its intellectual roots reach back to the 1949 Hoover Commission. More recently, performance budgeting is the logical next step in the implementation of the 1993 Government Performance and Results Act. Paul Posner, GAO’s director of budget issues, says the major risk is expecting too much too soon, but the major reward is that it will transform the budget dialogue from a debate over inputs to a discussion that clarifies expectations about results and performance.
At a more concrete level, however, it’s not so simple. A May 2001 National Academy for Public Administration (NAPA) Performance Results Forum concluded: “It is hard to make performance-based budgeting more effective unless we can agree on what it is.” It seems there are two dimensions everyone agrees on – the availability of performance information and the use of that information to make budget decisions. Beyond that, the definition of performance budgeting seems to depend on who is the user.
Many legislative oversight staff view performance budgeting as a mechanistic decision-making tool, linking the units costs of activities to outputs and using that as a key determinant of budget allocations between programs and between agencies. In contrast, many departmental and agency planning and budgeting staffs see it as a budget presentation or formatting challenge that won’t make much of a difference in how their agencies do business. Still others, mostly agency leaders, see it as a managerial tool useful in budget execution at the agency level. And, many bureau-level leaders see it as a potential accountability tool to be used as part of the incentive systems for federal managers. State governments that have active efforts to infuse performance into budgets find that about 90 percent of the action is at the agency level, as part of the execution phase of budgets, not in the central budget office or legislative resource-allocation phase.
The consensus approach to performance budgeting at the federal level, according to NAPA, OMB, and GAO observers, seems to be “using performance information in the budget process,” not mechanistically driving budget decisions based on performance data.
No matter what perspective is taken, the implementation reality is clearly complex and there won’t be any one-size-fits-all approach. A 1999 GAO report details these complexities: “Key challenges include a lack of credible and useful performance information, difficulties in achieving consensus on goals and measures, dissimilarities in program and fund reporting structures, and limitations of information and accounting systems.” It describes how performance budgeting may be easier for an agency, like the Social Security Administration, which can account for its activities within a single-year budget, than it would be for NASA when it plans a three-year mission to Mars. It found few agencies attempted to link resources to their performance plans. However, even given these difficulties, it concludes “the concept of performance budgeting will likely continue to evolve.” In fact, in August 2001, GAO published a framework for results-oriented budget practices in federal agencies where it describes current promising practices.
The President’s performance budgeting initiative’s ultimate goal is to integrate cost and performance into a single oversight process that budgets the full cost of resources where they are used. For this approach to work, agencies will have to first develop activity-based financial systems and then allocate to each program the full costs of running them. The President plans to submit legislation to make this possible.
This will ultimately allow OMB to compare similar programs and make tradeoffs. OMB says it will “formally integrate performance reviews with budget decisions” starting this coming month. It has already selected objectives for a few important programs in each agency and is assessing what these programs are doing to achieve these objectives. It hopes that, over time, high-performing programs will be reinforced and non-performing activities will be reformed or terminated.
All this suggests that, unlike the British, the American performance budgeting experience is far more complex and incremental in its approach – and may possibly have a better chance of becoming a permanent way of doing the business of government. But, while there’s a lot of activity, we’ll have to wait until February 2002, to see the results of OMB’s initial efforts!