Last week, in part one of our examination of budget reform, we discussed some of the basics of Performance Based Budgeting. This week, we will outline some concerns about the how Performance Based Budgeting might be implemented.
Performance Based Budgeting aims to collect and evaluate performance data on programs and use that data to inform funding decisions. However, its effectiveness much depends on how a program’s performance is defined and how the data collected are used.
- First, the standards by which public programs are measured should be crafted with public input and with acknowledgement of the outside factors influencing their results.
By their very nature, state agencies deal with complex problems, often with multiple influencing factors and without easy ways to measure results.
- Second, budgeting decisions should continue to be based primarily on public needs and priorities.
While the budget process is not always smooth, the reason budget decisions are made by our legislature is because they reflect the priorities of the public through representative government. The most “successful” programs may not be the priority programs or vice versa. Would one want to cut public safety spending, because the crime rate went up?
- Third, after years of budget cuts, how does one account for the chronic underfunding of programs contributing to an agency’s shortcomings?
Many programs have had year after year of budget cuts. The Mississippi Adequate Education Program is in line to be underfunded by about $1 Billion since it was last fully funded in 2008. Responsible implementation of Performance Based Budgeting would take into account lower funding levels and their impact on a program’s performance.
Finally, Performance Based Budgeting, if implemented, should be applied to all state programs, including those administered through the tax code, like economic development tax breaks.
Performance Based Budgeting is designed to judge the effectiveness of programs funded through the appropriations process. However, tax expenditures and incentives should also be reviewed for their effectiveness. They are enacted for a public purpose but are not regularly reviewed and in most cases data are not available to the public about how they are used.
Performance Based Budgeting can be used to inform the budget process and to improve budget transparency. It should not however replace public budget deliberations that take into account the needs and priorities of the people.
In the final post from this three part series, we will look at how Performance Based Budgeting is being used in other states.
