Governing Magazine/May 1999 MANAGEMENT COLUMN PERFORMANCE PHOBIA Squads of government officials fight performance-based budgeting like they would an outbreak of anthrax. By Katherine Barrett and Richard Greene As far as we can see, few management ideas make more common sense than performance-based budgeting. However, before defending the concept, we'd better be clear about what we think it is. It is amazing, after all, how many different definitions you can find of even the simplest idea, and performance-based budgeting is far from simple. In fact, some cynics in government seem to know that they can kill even the best practice by misdefining it and then successfully attacking the improper definition. Anyway, we're thinking of performance-based budgeting in a very broad way: as any effort that ties the allocation of program dollars to measures that indicate how well services or products are being delivered. People with no background in government management understand this concept intuitively. There's no leap of logic required to see that the decision of how much you should pay for something should be based on how well it delivers whatever it was you wanted it to deliver in the first place. This is true whether you're buying a car, a magazine subscription or a program to cut down on teen pregnancy. No state or city has been able to perfect its use of performance- based budgeting--in fact, nobody is even close. While efforts are being made to find the right kinds of measures to use and the proper way to interpret the data, a growing number of states--starting with Delaware, Missouri, Texas and Virginia--have derived benefits from the effort. But even as these states and many others are moving forward, there are squads of government officials who fight the use of performance- based budgeting like they would an outbreak of anthrax. Some of their arguments don't hold up to critical analysis; they are attempts to preserve the myth that legislators can reduce government spending exclusively through cuts in waste and inefficiency. Once performance- based budgeting is introduced, observes Lynn Muchmore, principal fiscal analyst for the North Carolina legislature, legislators may be forced to admit that programs of value are being reduced or eliminated. Suddenly, lunch isn't free anymore. Underlying other legislative objections is the notion that performance-based budgeting will rob elected officials of discretion and power. This was the issue in Maine, where legislators initiated the move toward performance-based budgeting in 1996 and then were horrified that the sample executive budget linked spending to achieving broad goals and not to the programs and line items with which they were familiar. Some might argue that legislators were just jealous of their ability to micromanage programs; others might argue that it's genuinely a legislator's job to maintain controls over specific appropriations. In any case, the legislature hit the brakes so hard that you could see the tire tracks from Augusta to the Canadian border. Fortunately, the branches of government in Maine seem to be slowly moving toward a compromise that will retain the program format along with performance data. And that's just the point. Information isn't the enemy of legislative power. It can be just a tool to make sure that power is used wisely. Other objections are based on the reasonable concern that legislators or executive branch officials will use performance measures in a formulaic way, without really understanding what they mean. For example, in Washington State, agency heads are jittery that Republican legislators will automatically cut budgets of agencies that don't achieve their goals. One executive branch official who has been working at developing performance-related measures shared her worries with us: "We have been very concerned that if we get this thing humming, the legislature could hijack it and turn it into something that none of us want," she says. In fact, properly used, performance-based budgeting could provide evidence that agencies need more, rather than less, money. In Montana, concerns that this idea might be turned on its head hobbled the move toward performance-based budgeting. "There was a nervousness in the executive branch that the legislature might just penalize agencies that didn't meet their goals, when they just might need more resources," one legislative staffer told us. Interestingly, all of the negatives we've heard about performance- based budgeting are based on theoretical fears of what might happen-- not real examples of disasters that have come to pass. States that have moved in this direction report that, in fact, the level of budgetary debate has improved dramatically. We're not saying that the folks who fear that politicians could misuse performance-based budgeting are necessarily wrong. But avoiding useful information out of fear that it could be misused is like banning the Internet because it will be used by some to commit fraud. And those who still believe that performance-based budgeting will inevitably lead to disaster might take some kind of dubious solace from Hawaii. It passed a bill in 1998 to start a task force to examine the possibility of adopting performance-based budgeting. This was a surprise to the state's budget office. Hawaii has been doing performance-based budgeting for years. The legislature apparently hadn't noticed. ---------------------------------------------------------------------- Copyright 1999, Congressional Quarterly, Inc. 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