Performance-Based Budgeting: Lessons learned from implementation
Performance-based budgeting measures, reports, and factors the outcome of an agency or program into future budget allocations. Moreover, this approach to appropriations creates incentives for an agency or program to produce measurable results in order to justify spending. This type of budgeting is defined as an “allocation of funds to achieve programmatic goals and objectives as well as some indication or measurement of work, efficiency, and/or effectiveness” (Young 12). Performance-based budgeting originated in the 1940’s after World War II when Hoover’s administration faced debt that surpassed the nation’s gross domestic product. The Hoover Commission attempted to align spending decisions with expected performance by recommending a shift from the traditional emphasis of government inputs to outputs (GAO 1997). Performance-based budgeting was designed to reform budgeting practices to focus on the measurement and reporting of outcomes.
There are several goals associated with implementation of performance-based budgeting. The ability to inform the decision-making process is a top priority goal for PBB. Performance-based information ensures that budgeting is based on empirical data and spending decisions are soundly rationalized. Decision-makers can focus beyond changes to the baseline and consider the broader context of the budget decision (Howard 2012).
Holding an agency accountable for spending is another top priority goal for PBB. Increased accountability forces an agency or program to validate expenditures and demonstrate measurable results. Another goal of PBB is transparency, and the purpose of transparency is to make budgeting and government operations accessible to the public. Improvement of efficient spending by focusing resources on effective programs and budget cuts are also priority goals of PBB (Howard 2012).
Federal and State Government Implementation of Performance-Based Budgeting
There was a resurgence of performance-based budgeting in federal and state governments during the 1990’s. The passage of the Government Performance and Results Act of 1993 (GPRA) requires federal agencies to develop performance information and provide descriptions of effectiveness and efficiency of federal programs in order to improve the congressional decision-making process. Federal agencies are also required to publish strategic and annual plans, provide a description of specific program activities, and generate annual performance reports to review the agency’s success in achieving performance goals (GAO 2005). The purpose of this legislation is to establish a tangible linkage between program performance information and agency budget requests. Clinton’s administration established the National Performance Review (NPR) in 1993, and NPR was intended to encourage cooperation and systematic benchmarking, identify best practices, adapt and replicate best practices whenever possible...