Performance Budgeting in Texas. Performance is being integrated into the budget process for a number of state governments, as well. According to a 2012 study, 40 of 50 states report using performance budgeting in some form. However, few are as committed as the State of Texas, which began its performance budgeting efforts in the early 1990s. Under this approach, the governor prepares a statewide strategic plan and uses it to prepare a budget proposal. The legislature then adopts a biennial budget for the state that includes specific levels of performance linked back to the strategic plan.
A 2005 IBM Center study by Joe Adams provides a good overview of the evolution of the Texas approach, beginning with the creation of a statewide strategic planning process in 1991 under governor Ann Richards and continued by governor George W. Bush. When Rick Perry became governor, he initially de-emphasized the process, but the legislature found it useful continued the performance budgeting process.
A recent guide prepared by state legislative staff explains the process in some detail. It says that the governor and the Legislative Budget Board (which provides oversight when the legislature is not in session) prepare a mission statement and core principles, and then the 200 relatively independent state agencies each prepare a strategic plan. The most recent strategic plans covers the period 2011- 2015 and are used to develop agency budget proposals.
Each agency’s budget proposal includes a goal, an outcome, one or more strategies, and one or more outputs. These are then followed with Performance Measure targets for each outcome and output.
Budget proposals also include information that is typically associated with traditional budgets, as well, such as: number of employees, methods of finance, a listing of objects-of-expense, and capital budget.
Reflecting both formats – the traditional object classification and the performance-orientation – requires common financial and coding standards and a common technical approach. Developing these approaches can be just as challenging as the conceptual issues facing decision makers in how to best frame and measure performance among myriad services delivered by government.
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Performance Budgeting and Analytics in Baltimore. The City of Baltimore has a decade-long history of using analytics to drive its operations, which is rooted in its award-winning CitiStat process that engages the mayor and city executives in weekly, data-driven decision-making meetings. But starting three years ago, it began to introduce these performance-related elements into its budget process, which it dubs “outcomes budgeting,” which is a variant of performance-budgeting.
The budget isn’t developed around agencies, but rather around the six priority outcomes set by the mayor. Each priority outcome has a Results Team – including a member of the public – that develops a budget proposal to address that outcome. These proposals are comprised of a mix of services that reach across agency boundaries. As a result, the budget and account structures are structured around 240 specific services. Performance measures were developed for these individual services, and budget priorities are aligned with priorities in the CitiStat process.
Dollars are allocated by the mayor to the Results Teams, not to the agencies. The teams, in turn, recommend an investment portfolio of a mix of services to the mayor and her top executives. The Results Teams meet with agencies to rank agency-recommended proposals from high to low priority.
The budget director says this approach “shifts from an agency-centric view to a services-centric view,” and that “Evidence plays a big role in the process.” He says the new budget process has shown a light on the effectiveness of individual services provided by the city.