Performance-Based Budgeting

Performance-Based Budgeting

(Excerpted from America’s Priorities, by Charles S. Konigsberg)

Since World War II, various initiatives have been undertaken to implement “performancebased budgeting” (sometimes called results-oriented budgeting). The concept of performance budgeting is to “promote greater efficiency, effectiveness, and accountability in federal spending” by linking budget levels to results.1 The most recent iterations of performancebased budgeting are the Government Performance and Results Act (GPRA)2 and the Program Assessment Rating Tool (PART).

Various attempts to establish performance-based budgeting occurred in the decades prior to GPRA and PART:

1949: The Commission on the Organization of the Executive Branch. The Commission made a number of recommendations relating to the Executive branch, including the first formal recommendation that performance budgeting be incorporated into the Federal Budget process.

1960s: Planning-Programming-Budgeting-System (PPBS). PPBS was an attempt at performance budgeting originated in the Department of Defense under Secretary Robert McNamara, who brought his skills in modern systems analysis and cost-benefit analysis from the Ford Motor Company to the Federal Government. President Lyndon Johnson eventually mandated the use of PPBS across all government departments. However, PPBS was short-lived. The Nixon Administration terminated PPBS in 1971.

1973: Management by Objectives. The Nixon Administration’s replacement for PPBS was Management by Objectives, which was primarily focused on holding agency managers accountable for achieving outcomes set forth in the respective agencies’ budget requests.

1977: Zero-Based Budgeting. President Carter’s Zero-Based Budgeting, initiated by Office of Management and Budget (OMB) Director Bert Lance, required that a series of packages for different funding levels be prepared, with the overall intent being to directly link expected program results with a level of spending.

According to the GAO, there is consensus that these early efforts “failed to significantly shift the focus of the Federal Budget process from its long-standing concentration on the items of government spending to the results of its programs.”

1993:  Government Performance and Results Act (GPRA)

GPRA was enacted into law by Congress in 1993. (By contrast, the previous performancebased initiatives were initiated by Executive Order, rather than having the force of law.) The essential concept of GPRA was to “shift the focus of government decision making and accountability away from a preoccupation with the activities that are undertaken—such as grants dispensed or inspections made —to a focus on the results of those activities, such as real gains in employability, safety, responsiveness, or program quality.”

GPRA’s approach to achieving this shift in decision making was to require that agencies set goals, devise performance measures, and assess their results on a regular basis. More specifically, GPRA established three types of ongoing requirements for most Federal agencies:

  • strategic plans (covering five years and to be revised at least every three years),
  • annual performance plans, and
  • annual program performance reports (covering the previous three fiscal years).

Strategic plans, submitted by Federal agencies to the OMB and the Congress beginning in the fall of 1997, were to contain a comprehensive mission statement, general goals and objectives, and a description of how they are to be achieved.10 The agency strategic plans were to be the starting point for agencies to set annual goals for programs and to measure the performance of programs. A key element of the new process was to require mandatory consultations between agencies and Congress on program performance.

Annual performance plans, beginning with plans for FY 1999,12 were to provide the direct linkage between the strategic goals and what managers and employees do day-to-day.13 More specifically, the plans were to provide a quantifiable basis for comparing actual program results with the established performance goals.

Annual program performance reports, at the end of each fiscal year, were to complete the picture by comparing “actual program performance” with the goals set forth in the performance plan. Where a performance goal has not been met, the performance reports were to explain why not and set forth a plan for achieving the stated goal or explain why the goal is unrealistic. While the concept of GPRA is sound, overcoming bureaucratic inertia can be difficult. In 1998, congressional leadership asked the GAO to evaluate the first round of performance plans. The GAO found that while “all of the plans showed how agencies’ missions . . . related to their performance goals,… .most of the plans . . . contained major weaknesses that undermined  their usefulness…. [T]hey did not consistently provide clear pictures of agencies’ intended performance” and lacked credible criteria for providing accurate performance data.”

In a follow-up report prepared in 1999, the GAO found “moderate improvements” over the prior year’s performance plans but noted continuing weaknesses in attention to management challenges, presentation of how personnel and other resources are used to achieve results, and credibility of data.

By the end of the Clinton Administration in 2000, CRS noted growing congressional involvement with GPRA. CRS noted that 74 laws enacted in the 106th Congress (1999–2000) included GPRA-related provisions.

The beginning of the Bush Administration saw an increasing emphasis on performance based budgeting but a shift away from GPRA. In August 2001, the President’s Management Agenda was announced, emphasizing “budget and performance integration” as one of five government-wide initiatives. This was followed up in February 2002 with inclusion in the President’s Budget of a new effort to measure performance of over 100 programs, separate and apart from the GPRA process.

Building on that effort, in the summer of 2002 OMB announced a new “Program Assessment Rating Tool” (PART) to be used by OMB and agencies to evaluate over 200 programs during the course of preparing the President’s FY 2004 budget. OMB explained that PART was intended to “inform and improve agency GPRA plans and reports, and establish a meaningful, systematic link between GPRA and the budget process.”

Bush Administration: Program Assessment Rating Tool (PART)

The Bush Administration’s PART is a set of questionnaires to be completed annually by Federal managers to assess the effectiveness of Federal programs. The questionnaires include 25 questions divided into four categories.  Based on responses to these questions, and the prescribed weighting of the various categories of questions, OMB gives each program one of five overall ratings: 1, effective; 2, moderately effective; 3, adequate; 4, ineffective; or 5, results not demonstrated.

While PART has been the subject of considerable criticism, the GAO has found that “PART has helped to structure and discipline OMB’s use of performance information for its internal program analysis and budget review, made the use of this information more transparent, and stimulated agency interest in budget and performance integration. . . . Several agency officials also told us that the PART was a catalyst of bringing agency budget, planning, and program staff together since none could fully respond to the PART questionnaire alone.”

One of the ironies of the PART process is that it appears to be biased against block grants—despite the fact that block granting is often favored by conservative public policy analysts. One analysis notes that under PART, “programs that operate through grants, whether competitive grants or block grants, are rated lower on average than all other programs. When OMB rated block/formula grant programs . . . in FY 2005, . . . it found no block/formula grant programs were ‘effective’ . . . [and] found 43 percent of block/formula grant programs to be ineffective while determining only 5 percent of programs overall were ‘ineffective.’”

GPRA Modernization Act of 2010

(This section excerpted from CRS Report: GPRA Modernization Act of 2010)

On January 4, 2011, the GPRA Modernization Act of 2010 (GPRAMA) became law. The acronym “GPRA” in the act’s short title refers to the Government Performance and Results Act of 1993 (GPRA 1993), a law that GPRAMA substantially modified. When GPRA 1993 was enacted, it was regarded as a watershed for the federal government. For the first time, Congress established statutory requirements for most agencies to set goals, measure performance, and submit related plans and reports (hereafter, “products”) to Congress for its potential use.

After a four-year phase-in period for GPRA 1993 and 13 years of the law’s full implementation, GPRAMA makes substantial changes. Among other things, GPRAMA

  • continues three agency-level products from GPRA 1993, but with changes;
  • establishes new products and processes that focus on goal-setting and performance measurement in policy areas that cut across agencies;
  • brings attention to using goals and measures during policy implementation;
  • increases reporting on the Internet; and
  • requires individuals to be responsible for some goals and management tasks.

In making these changes, GPRAMA aligns the timing of many products to coincide with presidential terms and budget proposals. The law also includes more central roles for the Office of Management and Budget (OMB), an entity that often seeks to advance the President’s policy preferences. GPRAMA also contains more specific requirements for consultations with Congress.

By design, many of GPRAMA’s products are required to be submitted to Congress for scrutiny and potential use. The law also provides opportunities for Congress and non-federal stakeholders to influence how agencies and OMB set goals and assess performance. This report provides an overview of GPRAMA’s products and processes. In addition, the report highlights potential issues for Congress. Related questions that Congress might consider include the following:

  • Are agencies’ and OMB’s consultations with Congress working well? Are agencies and OMB defining goals and assessing performance in ways that reflect underlying statutes and congressional intent?
  • Are the representations that agencies and OMB make about government performance perceived by Congress, federal personnel, and the public as credible and useful? What are the implications of evidence that is presented?
  • Are agencies and OMB implementing GPRAMA with desired levels of transparency and public participation?
  • Are agencies, OMB, and Congress focusing effectively on crosscutting policy areas to better coordinate efforts and reduce any unnecessary duplication?
  • Are agencies and OMB implementing GPRAMA in a responsive, effective manner? Is GPRAMA working well? If not, what might be done?

(end of CRS excerpt)

GPRA versus PART

The Bush Administration made explicit its preference for PART as the primary mechanism for performance-based budgeting: “[W]hile well-intentioned,… [GPRA] did not meet its objectives. Through the President’s Budget and Performance Integration initiative, augmented by the PART, the Administration will strive to implement the objectives of GPRA.”24 In 2004, OMB issued guidance formally instructing agencies to submit a “performance budget” for FY 2005 that would replace the annual GPRA performance plan.

There has been considerable debate, however, about the wisdom of replacing GPRA with PART. For example, GPRA requires an agency, in developing its strategic plan, to “solicit and consider the views and suggestions of those entities potentially affected by or interested in such a plan.”26 PART does not require the involvement of impacted stakeholders. In addition, GPRA requires mandatory consultations with Congress; PART does not.

Others have questioned the objectivity, openness, and accuracy of PART’s assessment methodology, suggesting that the PART process ignores congressional intent, conflicts with GPRA and inappropriately preoccupies agency planners and resources.27 The GAO has concluded that “by using the PART process to review and sometimes replace GPRA goals and measures, OMB is substituting its judgment for a wide range of stakeholder interests…. Although PART can stimulate discussion on program-specific measurement issues, it cannot substitute for GPRA’s focus on thematic goals and department-and-governmentwide . . . comparisons.”

Moreover, the GAO continues to favor GPRA as an effective framework for improving information sharing and cooperation among Federal agencies. The GAO report also reiterated previous recommendations that (1) OMB develop a government wide performance plan (as required by GPRA but never implemented); and (2) Congress consider amending GPRA to require a government wide strategic plan.

Cautionary Notes about Performance-Based Budgeting

The GAO correctly points out that “pursuing a closer alignment between performance planning, budgeting, and financial reporting is essential in supporting the transition to a more results-oriented and accountable federal government.” GPRA was a useful management tool before taking a back seat to PART, and its full potential has yet to be tapped. At the same time, it is also important to understand the limitations of GPRA and other performance-based budgeting tools such as PART.

Budgeting, ultimately, is about the allocation of limited national resources among competing priorities. GPRA, PART, and other performance measures can tell us—within limits—whether an existing program is fulfilling its objectives and how programs can be restructured to do a better job of achieving objectives, but they cannot tell us what our budgetary priorities should be.

For example, negative performance assessments of FEMA’s handling of Hurricane Katrina can tell us that the management systems at FEMA and DHS require substantial restructuring and that resources can be more effectively used and better outcomes achieved. However, those performance assessments do not necessarily lead to budgetary conclusions. The appropriate response to FEMA’s poor performance in the Katrina catastrophe could lead policymakers to seek a restructuring at the same budgetary level, a restructuring with a smaller budget, or a restructuring with a larger budget. The poor outcomes alone do not tell us the appropriate level of funding for emergency management, nor do they set the relative priority of such funding compared to other high priorities, such as homeland security.

Moreover, even the best performance measures have limits, for a variety of reasons: (1) some outcomes are inherently difficult to measure, like foreign aid programs and research and development programs; (2) there is frequently a time lag between programmatic actions and outcomes; and (3) it may be difficult to distinguish or separate out the outcomes of a particular federal effort from various nonfederal influences, such as state, county, local, and nonprofit activities.

In short, performance-based assessments should be used to maintain an ongoing commitment to achieve the best possible results or “outcomes” from the programs Congress has chosen to fund, but they should never be used as a principal basis for setting budgetary levels. The allocation of resources among competing priorities are decisions that belong to elected policymakers in the Congress.