Using Performance Information for Budgeting

The 1990s witnessed a resurgence of the effort to introduce more performance information into the budget processes of many governments across the world. In the United States, this has manifested itself in moves toward “performance-based budgeting” in the national government as well as in state and local governments. Despite these efforts and numerous attempts to study these new reforms, a specific and clear framework that integrates performance information into the budget process has been elusive. In particular, much of the extant literature on “performance-based budgeting” focuses almost exclusively on the use of performance information by elected officials to make macro-level resource allocation decisions. While this is certainly a relevant focus, it is not a complete one. Such a narrow view of performance measurement and budgeting runs a great risk of oversimplifying a very complex system. This paper argues that the more important (and complete) question concerns the extent to which performance information is available and used at each stage of the budget process—budget preparation, budget approval, budget execution, and audit and evaluation. By framing the question in this way, the researcher may be able to identify a great many more subtle differences from one place (agency, state, local government) to another. After suggesting this more complete framework for consideration of the availability and use of performance information for budgeting, the paper uses 1998 data on state governments collected by the Government Performance Project (a joint effort of Syracuse University and Governing magazine, funded by the Pew Charitable Trusts) to attempt to determine the extent of availability and use of performance information in the states. The paper finds that strategic planning is widespread, although the incidence of agency-level planning is greater than that of statewide planning. Further, almost half of the states have made significant progress in developing cost accounting systems. While two-thirds of the states have outcome measures, only 10 of them were using these measures to set targets for performance. Finally, the availability and use of performance information in the budget process is greater at the agency level than it is in the central budget offices or (particularly) in the agencies. The paper argues that scholars should consider studying performance-based budgeting by focusing more attention on analysis of agencies or policy areas, and less attention exclusively on centralized institutions. Changing the research focus in this way would provide a more complete picture of the availability and use of performance information for budgeting. It might prevent scholars and practitioners from reaching erroneous conclusions concerning the effect of these reforms. Through broadening the scope of research we are more likely to discover how much progress has been made, and how much work remains to be done.