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Budget Reform with Performance Based Budgeting, Part Three

March 19th, 2012

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In our first two posts on Performance Based Budgeting we discussed some basics about the budget reform and some concerns about its implementation.  In the final post in our series, we will talk about what’s happening with Performance Based Budgeting in Mississippi and in other states.

As discussed in the first post of the series, according to the National Association of State Budget Officers, twenty five states use some kind of performance budgeting.  Mississippi currently collects some performance information that is reported by state agencies to the Joint Legislative Budget Committee annually on their agency budget request.

A proposed bill in the House (and one that died in the Senate), expand Mississippi’s Performance Based Budgeting efforts.

Bill Highlights:

  • Require the Governor to develop an annual state strategic plan that includes a “vision, mission and philosophy for state government” and “statewide goals and benchmarks for achievement”
  • Require agencies to develop individual plans that correspond with the state plan that include “achievement goals for each functional area of state government”
  • Establish a system of performance audits and evaluations to determine whether agencies have met their prescribed goals,
  • Require production of a Budget and Assessment Report prior to the legislative session that reports on agency performance measures
  • Reduce the number of appropriation bills to nine—each corresponding to a “functional area” of government in the strategic plan.

Recently, Mike Morrissey, a Texas official, testified to the House Appropriations committee on Texas’s experience with Performance Based Budgeting.  He stressed the difficulty of creating quality performance measures and in prioritizing which of those measures that are included in appropriations bills and cautioned against selecting too many or too few measures.

The Pew Center on the States, an advocate of Performance Based Budgeting, has studied how it has been used in four other states in their report, Trade-Off Time .  Those states are Indiana, Maryland, Virginia, and Utah.   Each of those states has used Performance Based Budgeting to inform policymakers and find ways to improve state government efficiency.  However, as noted in the report, one approach does not fit all scenarios.  Performance Based Budgeting does not always mean less funding for poor performance and more funding for better performance.

According to the authors, “In some cases, leaders provided less money to initiatives that were performing well, which contributed to improved efficiency. Conversely, in order to follow through on their initial promise, decision makers invested more resources into some programs that had not yet met
their goals.”

The bottom line is that Performance Based Budgeting can enhance budget transparency and be a useful tool for budget reform in Mississippi.  Much depends on its implementation, however.  Broadly used, Performance Based Budgeting could even be used to judge the effectiveness of our state’s tax expenditures.  Performance measures must be defined carefully.  Performance Based Budgeting should be used with the acknowledgement that it is one piece of the puzzle for creating a responsive budget, but that it cannot replace discussions around state needs and priorities.

Co-authored by:
Sara Miller, Senior Policy Analyst and Francinia D. McKeithan, Policy Analyst/ SFAI Policy Fellow

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