Is Performance Budgeting Hopeless?

Decades of research and efforts to implement performance budgeting across federal, state, and local governments in the U.S. seem to consistently come down to the conclusion that no matter how rational it sounds, politicians don’t want to use it to make decisions.

Budgeting expert Dr. Phil Joyce tries to nuance this conclusion by calling it “performance-informed budgeting,” and notes that performance is but one of many factors used to make budget allocation decisions.

The ideal is that, with performance information, decision makers can make tradeoffs in spending based on how well programs deliver intended results.  But according to researchers, it basically hasn’t worked the way its proponents had hoped, at least at the state level, as reported in “State Performance-Based Budgeting in Boom and Bust Years:  An Analytical Framework and Survey of the States,” by Yilin Hou, Robing Lunsform, Katy Sides, and Kelsey Jones, in the May/June issue of Public Administration Review.

In that article, the authors say “the 1990s was a period in which PBB [performance-based budgeting] development flourished in U.S. governments,” but they also observe that the US governments were prosperous at the time.  They concluded:

“We have contrasted the use of PBB in boom years (1990s) against its use in bust years (currently) and found substantial difference between the two types of periods.  During good economic times when revenues are bountiful, PBB provides a bargaining tool that agencies conveniently use for budget justification purposes.  In contrast, during recessions when revenues fall below trend lines, agencies can expect and receive only reduced fiscal support, regardless of performance. .  .performance may not be a real consideration in deciding budget reductions.”

The authors’ case studies also support earlier researchers findings that while PBB may not be heavily used in the political budget process, “agencies are potential heavy users of it” in managing programs.

In a practitioner’s response to the article, by Scott Pattison (long-time executive director of the National Association of State Budget Officers), he reflects my feelings:  “Certainly the lack of use or limited use of performance data for budgetary decision making by state officials during periods of revenue decline is disconcerting to those who have long advocated performance information and measures as a good decision aid.”

He observes that states have been in “crisis mode” in recent years and have “resorted to mainly across-the-board cuts, furloughs, layoffs, and in some cases tax increases to attempt to achieve balance. . . Unfortunately, this means that both effective and ineffective programs are treated equally. . . “  Sigh. . . .

Tomorrow I’ll be attending a forum examining performance budgeting from an international perspective.  Maybe I’ll be re-inspired!

NOTE:  The two cited Public Administration Review articles are hotlinked with the permission of the American Society for Public Administration.