Performance-Based Budgeting With traditional budgeting (line item budgeting), governments allocate resources to positions, expense items, departments, or other “inputs” that don’t necessarily communicate what service is being performed. Budgeting in this way is used primarily as a tool for setting limits on expenditures and then monitoring expenditures against the pre-approved budget. The focus is entirely on what services cost, and not on the benefits from those services. It also does not allow for discussions on important policy questions. As a communication tool, a traditional budget actually communicates very little of the governments plans, strategies, and desired outcomes for the coming budget period.
Introducing goals, strategies, and performance measures into the budget provides far more information on the priorities of government, anticipated outcomes, and the effectiveness of government. However, there is a wide variation in how performance data is used during the budgeting process ranging from using performance data to justify departmental request to budgeting by the results to be achieved. The examples below highlight two different approaches.
Example: Outcome-based budgeting in Snohomish County, WAWith outcome-based budgeting, the budget for Snohomish County, WA is developed based on aligned goals, strategies, priorities and performance measures, as defined in the budget and other planning documents and actual resources (money) are allocated directly to achieving the stated goals. By assigning money to the anticipated outcome itself, the government can clearly communicate its priorities and can then go about “buying” results to those stated goals.
Outcome budgeting enables policy discussions and encourages questions such as:
- How much of this service do we provide?
- Did we achieve our target?
- How can we more efficiently achieve our goals
- How should we prioritize our goals to achieve the best results for our community?
An outcome-based budget not only allows for more informed decision making, it also makes government more transparent to citizens. A performance budget clearly communicates the priorities of government and how money is being spent. (Not who is spending the money). For more on Budgeting for Outcomes, see David Osborne and Peter Hutchinson, “Budgeting for Outcomes,” Government Finance Review, October 2004.
Snohomish County uses a budgeting for outcomes methodology based on a set of priorities developed with extensive input from the community. County staff organizes into “Results Teams” around the 7 major priorities and works to prepare the budget by developing goals, strategies, and performance measures shown below.
Transportation - Reasonable and predictable travel times
Public Safety Law and Justice - I want to feel safe and secure where I live, work, and play
Health and Vulnerability - "I want to improve the health of people in the community and reduce the vulnerability of those at risk".
Community Development and Services - I want to live in a thriving community, one with community services sufficient to support planned growth
Public Utilities and Infrastructure - I want to live in a thriving community, one that has infrastructure sufficient to support planned growth while preserving the natural environment and quality of life.
Leadership - Effective, Efficient, Transparent Government
General Services - I want to get the level of service I need at an affordable price and see that my dollars are spent wisely.”
The focus is on improving the efficiency and effectiveness of services to better respond to citizen priorities. Each team prepares a “Request for Proposal” that details goals and strategies that the County should provide. County programs then review the RFPs for appropriate services and submit plans to accomplish the goals. Throughout the process, departments are asked to set aside traditional paradigms about how government faces challenges. If a rule, policy, or process in place currently limits the effectiveness or efficiency of government, the County encourages staff to recommend changes. The focus of the entire process is on improving services and being as responsive as possible to citizens. Any suggestions to help accomplish that are encouraged.
The strategy map, included in the Request for Proposal, developed by the Snohomish County Transportation Results Team is shown below. It explains the main priority and all requested services for providing the desired outcome.
Example: Results Matter, the Metropolitan Government of Nashville and Davidson County, TN
By organizing their budgets into programs, which are distinct activities within a department, the Metropolitan Government of Nashville and Davidson County, TN (Metro) is able to more clearly identify the links between resources and performance. This approach emphasizes the results customers are receiving from each program. For example, Clinical Services and Immunization is a program within the Department of Public Health. The budget is $3,162,600 (FY 06) and the expected result from these resources is that 90% of 2 year-old children will be adequately immunization against preventable diseases.