Scott D. Pattison Executive Director National Association of State Budget Officers

444 North Capitol Street, NW, Suite 642 • Washington, DC 20001 • (202) 624-5382 • www.nasbo.org

OECD 10th Annual

Performance and Results Network November 24, 2014

With 50 states, advantageous to share information about successes and lessons learned from performance and results initiatives.

The states (along with their local governments) are the primary source of funds for elementary and secondary education and for prisons. States fund about one half of the health care program for low income individuals (covers 68 million U.S. citizens). States also cover significant portions of the costs of universities and transportation.

Use of performance and effectiveness information increased since recession and slow growth recovery period.

Subnational Governments in the US: Role of the States

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Where does the States’ Money Come From?

Funds Raised by State Income and

Sales Taxes 40.5%

Federal Funds 30.3%

State Funds Raised from Fees and

Designated Taxes (like gasoline tax)

27.1%

Money Raised from Bonds Issued

2.1%

Total State Expenditures by Funding Source, Estimated Fiscal 2014

Source: NASBO State Expenditure Report

For decades, state governments traditionally budgeted with a focus on “line items” (personnel, supplies, contractual services). Appropriations were made to agencies and departments for specific activities or objects.

Budgeting decisions were made on an incremental

basis, with money added to or subtracted from the base budget. Performance information and data were rarely used for budgeting or for management.

How States Traditionally Budgeted

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While the traditional approach to budgeting is still widely practiced, there have been a variety of alternatives or variations examined and used in the states over the years. States are experimenting with reforms intended to integrate more information into resource allocation decisions, particularly information on program goals and performance, while also seeking to focus more attention on assessing the validity of historical budget decisions.

One alternative to traditional line-item budgeting – and

the primary subject of this presentation – is performance budgeting, which states may also term as performance-based budgeting, outcome-based budgeting, evidence-based budgeting, or budgeting for results.

Using Performance

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State Governments can design their own approach to performance and results – there is no single method and the federal government does not specify how and if performance data should be used.

In every state, performance information is, in some way, incorporated into budget and management decisions. In some states, performance information is available and/or used during several stages of the management and budget process.

State performance budgeting practices generally link inputs or costs to program activities and goals, although it should not be inferred that this will always mean decreased funding when programs underperform their goals or increased funding when goals are exceeded. Performance budgeting use at the state level should probably be viewed along a continuum from minimal to extensive use, with significant variation on how this is accomplished. Every state utilizes performance differently.

States and Performance

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Priorities. Areas of focus and improvement are chosen.

Outcome areas may include education, healthy people, safety, jobs and innovation, healthy environment and improving government efficiency.

Benchmarking. States use benchmarking information to compare themselves to other states. As the budget is prepared, the priority areas and relevant benchmarks are determined and goals are set.

Grouping. Rather than budget for line items by

department, money is assigned to an outcome. Spending for the future must be linked to the outcome.

Forms of State Performance and Results Initiatives

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Using Teams. Teams are used to identify key outcomes and budgets for each of the key priority areas, with the provision that department directors cannot serve on a team in their department’s outcome area. As these teams focus on key outcomes, each agency works to link its programs to the outcomes (and in some cases more than one outcome).

Strategic Planning. Teams of representatives of both the

government and corporate sector make recommendations for what to include in a 10-year strategic plan for the state. The resulting plan is built on a framework of strategic priorities and outcomes and serves as a guide for budget decision making.

Forms of State Performance and Results Initiatives (2)

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“Why is our state spending money the way it is?” States want to improve state government

transparency for the public and decision-makers, improve performance measurement of state agencies, tie government programs and services to achieving objectives, and provide a foundation for using data to inform budgetary decisions.

States are also focused on making government spending and performance data more easily accessible and reliable.

Improving Information

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Top leadership’s involvement is key

Show agencies how they can use performance data to improve their programs

Focus on building capacity and improving outcomes, not cutting budgets

Staff training is critical

Agency Engagement and Buy-In

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“You can’t overstate the value of making sure

people understand the issues at hand, and the

process.”

Use a combination of different types of measures (output, outcome, efficiency, etc.)

Other “good government” efforts can be linked to and

enhance performance budgeting initiative

Integrate performance measures fully into budgeting and strategic planning

Performance measures should be limited in number but not too narrow

Purpose and Design

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“Our management’s attention is the scarcest resource in our state. We need them to focus.”

Implementation will not happen overnight Allow initiative to evolve and don’t impose a “one-size-

fits-all” model

Performance budgeting does not yield “answers” – rather, it helps you ask the right questions and serves as an informative tool

Sustaining the Initiative

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“We don’t count on performance measures

to make decisions by themselves.”

Decreasing Infant Mortality Increasing Jobs Improving Government Processes

Examples

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Management and Performance Innovation Room

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NASBO report, Investing in Results: Using Performance Data to Inform State Budgeting, released in summer 2014

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www.nasbo.org Merci!

Scott Pattison

(202) 624-8804

spattison@nasbo.org