INTERNATIONAL JOURNAL OF ORGANIZATION THEORY AND
BEHAVIOR, 9 (1), 72-91
SPRING 2006
PERFORMANCE BUDGETING: DESCRIPTIVE,
ALLEGORICAL, MYTHICAL, AND IDEALISTIC
Richard J. Herzog*
ABSTRACT. The descriptions of performance budgeting, based on theory and
practice, allow for the application of Dante’s allegory in The Divine Comedy.
This allegory places performance budgeting into the spiritual domains of
heaven, hell, and purgatory. These domains are used to frame the theoretical
foundations of performance budgeting and to discuss a match with operational
reality. Performance budgeting practices often fall between heaven, the optimal
use of public revenues, and hell, the worst use of public revenues. It can be
argued that most performance budgeting efforts tend to congregate in purgatory.
Realizing purgatory allows for the recognition of principles that form the basis
for performance budgeting to be classified as institutional myth. As institutional
myth, the practice of performance budgeting is blocked from theoretical
idealism.
INTRODUCTION
This article builds through four distinct phases: descriptive,
allegorical, mythical, and idealistic. The descriptive phase provides the
background on performance budgeting. The allegorical phase introduces
a model that illustrates Dante’s allegory in The Divine Comedy. This
model of performance budgeting distinguishes among purgatory, heaven,
and hell. Performance budgeting is not typically in heaven or hell, but
instead often resides in purgatory. The mythical phase allows for a
discussion of principles and characteristics that advance performance
budgeting as institutional myth. The idealistic phase argues for the need
----------------------* Richard J. Herzog, Ph.D., is an Associate Professor, Department of Political
Science, Stephen F. Austin State University where he directs the MPA and CPM
Programs. His current research interests include public administration
education, the application of game theory to managing of diversity, and the
mental mapping of city managers’ uses of citizen input.
Copyright © 2006 by PrAcademics Press
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for revenue, expenditure, and outcome congruence in performance
budgeting. If all four phases are understood, a progressive and
comprehensive understanding of the performance budgeting context can
be achieved.
A DESCRIPTIVE PERSPECTIVE
Since the Hoover Commission in 1949, performance budgeting has
been arguably the most successful attempt to better manage the public’s
largesse and align spending decisions with results. At the federal level,
since the 1950s a series of other reform attempts—including the
Planning-Programming-Budgeting-System (PPBS), Management by
Objectives (MBO), and Zero-Based Budgeting (ZBB)—have been
viewed as failures (Rubin, 1990). These attempts have not significantly
shifted “the focus of the federal budget process from long-standing
concentration on the items of government spending to the results of its
programs” (General Accounting Office [GAO], 2004, p. 1). The focus of
these reform efforts, at all levels of government, has often been tied to
the good government rhetoric of rationality, objectivity, and
nonpartisanship when making budgetary decisions. Performance
budgeting has carried on the traditions of these reform efforts.
The Government Performance and Results Act of 1993 (GPRA)
continues to fuel attempts to better link congressional and executive
decision-making processes to the allocation of scarce resources and
expected results (GA0, 2004). Performance budgeting is widely used in
state and local governments (Kelly & Rivenbark, 2003), thus winning the
popularity contest. Some backsliding from the previous use of
performance budgeting in state governments has, however, been reported
(Lee & Burns, 2000). What is performance budgeting? Does
performance budgeting fulfill its theoretical expectations? First, let’s
look for definitional clarity.
Performance Budgeting Defined
Perhaps Jesse Burkhead (1956) was correct that there could be no
precise definition of performance budgeting due to variations in
operation. “Performance budgeting is a budget preparation and adoption
process that emphasizes performance management, allowing allocation
decisions to be made in part on efficiency and effectiveness of service
delivery” (Kelly & Rivenbark, 2003, p. 4). “Performance budgeting
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presents purposes and objectives for which funds are being allocated,
examines costs of programs and activities established to meet those
objectives, and identifies and analyzes quantitative data measuring work
performed and accomplishments” (Hyde, 2002, p. 454). Simply stated,
performance budgeting aligns “spending decisions with expected
performance” (GA0, 2004, p. 1). More technically, performance
budgeting answers several questions: What is planned? Why is it
planned? How much will it cost? When will it be provided? What
resources (human, financial, physical, technological) will be needed?
And what will be the end result?
There are many other definitions of performance budgeting
(Heckler-Hudson, 2002; Gianakis & McCue, 1999), and the concept of
performance budgeting is predicted to evolve (GAO, 2004). Improved
definitional clarity may come from contemplating the term’s theoretical
roots and understanding its historical origin. Performance budgeting is
associated with the 1940 to 1964 time period (Henry, 2001) and it gained
prominence again in the early 1990s with documented resurgence labeled
the “reinventing government” movement (Osborne & Gaebler, 1992).
During the 1990s performance budgeting has been used synonymously
with results-oriented or outcome budgeting. Most scholarly works ignore
the revenue-side of performance budgeting. Decisions to raise, lower, or
retain revenue collection can have an enormous impact on performance
budgeting.
Performance: The Key
The “budgeting” in performance budgeting is better defined than
“performance.” When seeking definitional clarity “the concept of
performance is a bit more slippery” than budgeting (Joyce, 1999, p. 598).
A budget is simply a plan for taxing and spending. If we cite V.O. Key
(1940, p. 1137) we know that budgeting is determining, “On what basis
shall it be decided to allocate x dollars to activity A instead of activity
B?” There are many different bases for these decisions. The easiest bases
may often be what are best for the community, state, or nation or to
follow precedent and use a heavy dose of incrementalism. What often
happens in budgetary politics is the authoritative allocation of values
with price tags attached. Value preferences of collective bodies often
become the final fiscal arbitrators in these decisions. These preferences
are often molded by projected and retrospective costs, efficiency, and
effectiveness. The values can be associated with functional areas of
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government (i.e., defense, health, transportation, homeland security) or
they can have more general meaning (i.e., responsiveness, effectiveness,
accountability, equality). When performance budgeting becomes too
retrospective, control is emphasized and forward thinking, planning, and
management are displaced.
A Theory of Performance Budgeting?
Kelly and Rivenbark (2003, p. 6) maintain that “Performance
budgeting is not a theory.” Lewis (1952) established a theory of
budgeting that was based on performance using economic theory for
justification and consideration of alternatives. Performance budgeting
may not be able to develop the absolute basis for addressing Key’s
question. However, it appears that performance budgeting may not be
ready to join the dustbin with other budgetary reform efforts. Kelly and
Rivenbark (2003, p. 6) simply claim that performance budgeting is good
for expanding “managerial capacity in the organization.” In addition to
the management function, good budgeting should address the planning
and control activities. With attention to management, planning, and
control, performance budgeting becomes the dominant theory in the
practice of public budgeting.
Unless we can successfully argue for practice without theory,
performance budgeting should be grounded on theoretical foundations,
the rectangular box in Figure 1 where ideally these foundations should be
documented and instrumental in directing practice. Practice in turn will
modify theory. Performance budgeting theory has the opportunity to be
molded from national, state, and local levels of practice.
The more specific type of theory raises some interesting questions.
The age-old discussions of normative and descriptive theories provide
some guidance (Rubin, 1990). Normative theory is a way to understand
value preferences for allocating resources, and descriptive theory is a
way to understand behavior and processes. The combination of the
normative and descriptive theories may best serve performance
budgeting. To develop the ideals of performance budgeting will require
prescriptive theory. For example, prescriptive theory tells us how
performance measures should dominate budgetary processes.
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AN ALLEGORY PERSPECTIVE
Figure 1 illustrates an application of Dante’s allegory in The Divine
Comedy. The Comedy is labeled “the greatest of all allegories” (Ullén,
2001, p. 177). The Comedy, through various cantos, provides a fulfilling
end to a horrible beginning and intermediary quandary. Dante’s journey
from the inferno, to purgatory, to paradise is a useful analog to
understand the development of performance budgeting.
FIGURE 1
Performance Budgeting and Spiritual Domains
Heaven/
Optimal
Use
of Public
Revenues
Purgatory/
Suboptimal
Use of
Public
Revenues
Locus of
Performance
Budgeting
Theory/
Practice
Hell/
Worst
Use of
Public
Revenues
In Figure 1, the theory and practice of performance budgeting is
positioned in the rectangular box. This box is where the descriptive phase
of performance budgeting is located. The theory and practice of
performance budgeting impact the spiritual domain classifications, which
in turn impact theory and practice (see Figure 1). Since performance
budgeting is often viewed as a reform based on idealism, it seeks the
optimal use of public revenues or heaven. Performance budgeting can
also fall into the worst use of public revenues or hell. The optimal and
worst use of public revenues has to be viewed from political
perspectives. These perspectives are influenced by values. The
suboptimal use of public revenues is purgatory (see Figure 1). Purgatory,
an argued contemporary status, is illustrated in Figure 1 by the space
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between the performance budgeting box and the optimum use of public
revenues circle. The proximity of purgatory and heaven in Figure 1
illustrates the possible transition from the suboptimal to the optimal use
of public revenues. The argument forwarded here is that theory is more
closely aligned with “heaven” and that reality is often considered “hell”.
The theory is associated with the “ought” of performance budgeting and
reality addresses the practice or “is” of performance budgeting.
Determining how wide the gap between theory and reality is in regards to
performance budgeting presents an interesting research question. The
gap would suggest performance budgeting is at the level of purgatory;
however, it may be difficult to determine the width of the gap between
theory and practice as described. This approach acknowledges the
potential for a false dichotomy between theory and practice.
Table 1 is an attempt to depict performance budgeting from a
theoretical perspective to allow for a discussion of realistic applications.
This perspective is important as performance budgeting is often viewed
as a reform. Budget reforms based on idealism may appear impotent,
which may detract from their potential impact. In Table 1, several
features related to budgeting are displayed in the first column. In the next
column, each feature is paired under the theory/heaven heading and in
the last column each feature is matched with the heading reality/hell that
TABLE 1
The Theory-Reality Match in Performance Budgeting
Feature
Framework
Accountability Basis
Approach
Theory/Heaven
Institutional
Cooperation
Fact
"Magic Formula"
Applications
Ability
Productivity
Enhancement
Multiple Tools
Expertise
Scope
Government wide
Benefits
Reality/Hell
Institutional
Warmongering
Value
Aim High or
Perform Poorly
Causal
Fallacy
Tool Time/Format
Lack Organizational
Capacity
Alternative
Structures
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is aligned with practice. In the following discussion each feature
becomes a subheading coinciding with Table 1. Each feature is discussed
from the theory and practice perspectives.
Framework
Theory
Performance budgeting is the tool to allow legislative, executive,
administrative, and the public to mesh in making mutually beneficial
budgeting decisions. This is called multiple participation in the budgetary
process (Seckler-Hudson, 2002). This cooperation must be explicit, not
implicit, and supported by the organizational culture. Performance
budgeting is designed to satisfy legislative bodies that hold the power of
the purse, chief executives that formulate the budget, managers inside
departments and agencies that provide products and services, and the
public that receives the outputs and is affected by the outcomes of
governmental activity. Performance budgeting, as descriptive theory
suggests, is designed to work throughout government as it serves
multiple constituencies under the rubric of institutional cooperation (see
Table 1). Performance budgeting will hinge on excellent executive,
legislative, administrative, and public communications that may have to
have “a willingness to revisit the basic organizational missions, goals,
and strategies on a regular basis” (Moynihan, 2005, p. 204).
Practice
First, conflict is endemic among political institutions. Conflict is
generated by a various parameters that may include partisanship,
ideology, policy preferences, and value differences. Attempts to
substitute performance budgeting and associated measures may not
mediate but often incite the conflict. Inclusion is replaced with exclusion
when legislative bodies are not consulted—and prefer that they are not—
in formulating performance measures. If interested, legislative bodies are
provided a denominator that they can comprehend and debate. Rather
than voting in alignment with the public interest, they have to vote on the
number of lives they would like saved, the caseworker ratio, or the
number of tons of solid waste collected for appropriate costs. Agency
heads, chief executives, and the public may be at odds with the
legislative performance decisions not only because the anticipated
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performance is too high or too low, but because the outcomes can only
be anticipated and they can be used by legislators to press for
accountability. For a variety of reasons, including institutional
warmongering, the ability of performance budgeting to work for the
federal government has been questioned (Seckler-Hudson, 2002;
McGinnis, 2003).
Accountability Basis
Theory
Performance budgeting is designed to generate a high level of
governmental accountability by following a management model and
taking politics and democracy out of budgeting. Robust performance
indicators, based on factual data, inserted into the budget process can
substitute for political choices. In theory, an emphasis on productivity,
efficiency, and effectiveness supplants other values. Department heads
and agency directors know what is important and how performance
measures will be used to achieve accountability. What becomes
important is speed of response time, checks issued, dollars collected,
cases worked, reduced death rates from fires, fewer deaths of children
from poisoning, and the associated quality-of-life increases. These
indicators will result in increased performance of government that will
ensure that legislative, chief executive, agency, clientele, and public
satisfaction will increase. Extreme public satisfaction will allow
governmental institutions to self-regulate, making public accountability
based on direct democratic principles obsolete. Public, political, and
administrative accountability are based on factual performance.
Practice
Political accountability will be based on values and relative
productivity, efficiency, and effectiveness as measured by the degrees to
which the values are upheld and outputs and outcomes are achieved. It is
difficult for the management models to supplant political models of
budgeting. Managers may not know with certainty how the performance
measures will be used. The use of the measures becomes political.
Professionalism within the public management ranks requires the use of
cost-effectiveness tools when available. Without the appropriate tools
and applications the credibility of the reports and measures will be in
question. As credibility is questioned, performance budgeting is
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discarded and allocation decisions revert back to values including
incrementalism. “Legislators . . . will not use performance measures if
they do not ‘believe the data.’” (Grizzle & Pettijohn, 2002, p. 57).
Approach
Theory
Performance budgeting is inserted into a process that influences
revenue allocation decisions. Program managers are required to include
“performance information along with their annual budget requests”
(Kelly & Rivenbark, p. 67). In this sense, performance budgeting is
mechanistic. Again, the common denominator is performance. Levels of
performance are associated with various costs. In retrospect, prescriptive
theory suggests that good performance should be allocated bigger
budgets and poor performance should be allocated smaller or no budgets.
Prospectively, costs determine levels of performance. In essence,
rationality by “magic formula” is developed. This logic assumes that the
level of financial resources is a reward for past or anticipated
performance. This logic is akin to the performance appraisal and
promotion processes used for human resource management in public
agencies. The appraisal process is retrospective and the promotion
process is prospective.
Practice
However, it appears that the performance budgeting process cannot
be based on rationality. It would be counter-intuitive to suggest that we
could cut budgets where good performance occurs and increase budgets
where poor performance lingers. Given this theory based on hypothetical
rationality and a new magic formula approach with performance
budgeting, managers may be inclined to aim high when designing
performance measures and to perform poorly when attempting to meet
performance targets. Aiming high and performing poorly would result in
budget allocation gains. However, such behavior would be irrational if
the values of public interest, accountability, and effectiveness are
important. Again the reality of performance budgeting will not allow for
the optimum use of public funds (see Figure 1).
Benefits
Theory
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We can measure performance and there will be internal, external,
and institutional agreement on performance measures. A plethora of
techniques can help make the development of performance budgeting
measurements a science. Management behavior will seek improvement
of products and services. Increased or measured performance is a basis
for improvements and programmatic structures will be necessary. For
example, a recreation department may have to move from specific
activities such aquatics, arts and crafts, basketball, gymnastics, soccer,
and tennis instruction to various elderly, adult, and youth programs. Each
program would have productivity measures: line-item inputs matched
with outputs and outcomes. In education, the resources devoted to a new
reading program will be projected to increase test scores. The resources
for a program to improve police visibility will slow traffic speed to legal
limits. Partial “privatization” of the Social Security program will save it
and improve performance (i.e., return on investment). Public
management can and is willing to develop programmatic structures that
we can assess a program’s contributions to outcomes. Performance
metrics will evolve with human, technological, financial, and
environmental changes. Productivity is enhanced with performance
budgeting as an important part of normative, descriptive, and prescriptive
theories. Ultimately, allocation decisions based on line-items would
become obsolete.
Practice
Programmatic structure must be identified and costs must be
attributed to programs. These structures may not be practical in some
departments. For example, a recreation department would have to
itemize the direct and indirect costs of administrative time, supplies,
equipment, labor, technology, and physical resources to dozens of
separate programs.
The administrative rhetoric of improved performance and enhanced
productivity is difficult to measure and it is distorted. Performance often
does not relate to outcomes. To update Lewis’s example (1952), how
much damage is prevented and how many lives are saved for each
$10,000 spent for the fire prevention program? The impacts and
outcomes (lives saved) are more important than the demand, workload,
and activity measures. However, fire departments will emphasize the
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calls for smoke detectors, the safety visits to businesses, and the number
of presentations to grade school children.
What often happens is that what we measure will determine
behavior. If we measure the number of dollars collected in arrears for
child support, then the activity to get “dead beat” parents to pay will
increase. Does this activity increase the level of financial responsibility
of non-custodial parents, the desired outcome? If the number of citations
is measured, than local police officers will issue citations. Do the
citations improve the safety of our streets, the desired outcome? If there
are no clear answers to these questions, the causal fallacy may intrude as
prescriptive theory is questioned. Performance budgeting can overstate
its promise. Since performance budgeting can be retrospective, it is
difficult to know if this year’s decisions will match last year’s
performance.
Applications
Theory
Performance budgeting requires multiple tools throughout the
budget cycle (i.e., formulation, approval, implementation, auditing).
During the budget preparation phase the use of strategic planning and
program planning are required (Willoughby & Melkers, 2000). Strategic
planning is best at suggesting priorities and directing performance
measures included in program planning. Persuasion is an important tool
during the budget adoption phase. Legislative bodies and boards may
need to be convinced that the approved performance budget gets the
entity close to the optimal collection and use of public revenues. The
budget implementation phase offers the opportunity for allocation and
cost accounting tools to have an impact on performance budgeting.
Performance budgeting needs to be able to make adjustments (lower or
higher allocations) during the fiscal year. Cost accounting requires
implementation throughout the fiscal year. Performance budgeting
requires sophisticated evaluative tools during the audit phase of the
budget cycle. These tools may include cost-effectiveness analysis,
systems analysis, performance auditing, and program evaluation.
An additional human resource management motivational tool must
overlay the four phases in the budget cycle. Advocates of performance
budgeting must have the means and abilities to motivate others to devote
efforts to performance budgeting. Pay-for-performance or promotion-for-
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performance systems may be necessary and advocated to manage the
contributions of individuals and teams to the details of performance
budgeting.
Practice
Performance budgeting may not be viewed as a supplement to
multiple tools, but as a format. Typically, it is conceptualized as a standalone tool. The intricate associations with strategic planning, persuasion,
cost accounting, and cost-effectiveness analysis raise the complexity of
performance budgeting and decrease its acceptance by elected and
appointed broads and commissions and those most responsible for
formulation and implementation. Many of these tools do not currently
exist in public organizations. Therefore, performance budgeting is
ingrained as a formatting tool that can only be used in conjunction with
the budget formulation phase of the budget cycle. Performance budgeting
may follow the path of zero-base budgeting where the efforts do not
exceed the gains.
Ability
Theory
Political, administrative, and managerial capacity will support
performance budgeting and the required reforms. Organizations are
looking for true reform or continued application and improvement of
performance budgeting. Political officials will devote time and effort to
performance budgeting, administrators are willing to be the focal points
of performance budgeting, and managers will work with staff and
subordinates to pursue the aims of performance budgeting. Political
officials, administrators, and managers have the expertise to play their
roles as performance budgeting is being formulated, implemented, and
evaluated in the public interest.
Practice
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Performance budgeting can become “pseudo-reforms that relieve the
pressure for reform without creating the problems associated with
meaningful reform” (Kelly & Rivenbark, 2003, p. 219). It takes capacity,
competence, and time to develop a performance budget. In many
agencies the call for performance budgeting is met with several new
management directives and the combination can tax organizational
capacity. During the start-up of the Government Results Performance
Act (GRPA) in the mid 1990s there were ten additional management
requirements (e.g., Chief Financial Officers Act of 1990, The Paperwork
Reduction Act of 1995, and Customer Service Executive Order of 1993)
and departmental “programs related to quality of work life, other
personnel issues, and other management initiatives” (Radin, 1998, 312313). Performance budgeting assumes that elected officials,
administrators, and managers all have the requisite competence to engage
in performance budgeting. Competence must be assessed and often
upgraded if performance budgeting is going to be established beyond
reform rhetoric. Meaningful performance budgeting can start over cups
of coffee, but it takes years for full implementation. At local levels of
government it typically takes a minimum of two years for authentic
performance budgeting to be established. Agencies in the federal
government were given four years, to 1997, after the passage of the
GPRA in 1993 to draft performance plans.
Scope
Theory
Performance budgeting is designed to be adopted government wide:
all bureaus, agencies, departments, and programs will formulate and
implement it. Comparisons with similar services and products external to
agencies will allow benchmarks to be established and performance is
equated with closeness to that mark.
Practice
Performance budgeting works best with programmatic structures.
Bland and Rubin (1997, p. 126) maintain that “performance measures are
more meaningful and useful when combined with a program format.”
Performance budgeting may not be practical government wide if
programmatic structures are not forthcoming and may not be realistic as
a comprehensive budget reform (Willoughby & Melkers, 2000).
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Alternative structures including departments, divisions, activities, and
offices often dominate budgetary thinking.
The theories and depictions of performance budgeting do not match
the operational reality. This mismatch may afford performance budgeting
the status of myth. This status leads us to argue that purgatory and the
suboptimal use of public revenues is the prominent domain of
performance budgeting.
A MYTH PERSPECTIVE
The explanation of performance budgeting’s failure to provide the
optimal use of public revenues is clarified by institutional myth. By
meeting principles to be classified as institutional myth, performance
budgeting falls into the suboptimal use of public revenues or purgatory
(see Figure 1). This purgatory occurs with other public administration
practices as a tension is created between the “is,” or reality, and the
“ought,” or theory. There can be a tendency to bypass the operational
realities presented by performance budgeting and allocate revenues based
on values (Kelly & Rivenbark, 2003). These tensions and tendencies in
this purgatory space are capable of creating myth when good governance
is the main objective. The myth can reference performance budgeting
features that exist in theory but not in practice. The practices associated
with myth may bond ideological opposites, merge politics and
administration, and promote good over evil practices in public
administration. Other practices associated with the myth may hinder the
optimal use of public revenues as they stifle ideological viewpoints,
displace political discourse, and promote evil practices in public
administration.
An institutional myth includes idealized or glamorized conceptions
that cannot be scientifically or objectively verified or placed into
practice. These conceptions are institutionalized in many public
administration practices where stated policies, promises, procedures, and
rules do not occur in reality. These practices become victimized by the
theory-reality gap. Within public budgeting there are several documented
myths including annual budgets (Caiden, 1982), zero-base budgeting
(Lauth, 1978), and incrementalism (LeLoup, 1978). As practiced, other
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budgeting concepts—for example, cost accounting, capital improvement
plans, and target-base budgeting—could reach the status of myth.
Various aspects of performance budgeting appear to be promulgated
by institutional myth. Myths have many advantages in performance
budgeting. Myths have principles. Each principle suggests different
functions and purposes (positive and negative). Myths can inform
politics or might serve as a mechanism to improve governance. For
example, performance budgeting myths can promote understanding,
mediate oppositions, justify budget decisions, and lend legitimacy to
governmental institutions.
The construction of a myth is serious public business. The
application of myth requires reflexivity and reflection by practitioners as
they realize that theory is a guide, which may or may not have
application to practice. By understanding these myths there is an
opportunity to push performance budgeting toward improved theory and
practice. The results from governments suggest that performance
budgeting has been given at least a chance in practice.
Performance budgeting meets three characteristics related to the
principles of myth. First, as documented in the previous section labeled
Allegory, there has to be a recognizable theory-reality mismatch or a
heaven and hell dichotomy. Within this mismatch or dichotomy, theory
becomes the ideal and it can only partially explain and help us
understand reality. If theory matches reality, myth disappears. Many of
the features of performance budgeting do not occur in practice so they
relegate performance budgeting to the status of myth. Practice benefits
from myth recognition as the limitations of performance budgeting are
recognizable.
Second, there have to be advantages to myth. These advantages can
improve understanding and provide prescriptions. Attempting to
understand practice or performance budgeting with only theory would be
a prescription for disaster. However, the advantages to myth may allow
for attempts to create a theory-reality match. In fact, with the
development of better theory or practice there may become less interest
in displacing the myth. Reality may be too complex or contain too much
uncertainty. However, the explanation provided by myth is invaluable in
understanding the practice. Good governance often becomes comfortable
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with institutional myth. The theory building required to displace the
myth will require “heavy-lifting” by scholars and practitioners.
Third, myths will not have universal appropriateness. Parts of the
myth apply to some cases or situations but not to others. A phrase like
“that is the way it worked at Agency X” does not mean it will work at
Agency Y. Applications of performance budgeting may not work equally
well at each level of government or in nonprofit organizations. By
employing myth, practitioners may fantasize about the value of
performance budgeting. However, the realities within a particular
agency or the level of government will often determine appropriateness
of performance budgeting.
AN IDEALISM PERSPECTIVE
Performance budgeting is part of a process starting with revenue
generation and ending with an impact or outcome related to the
expenditure of public funds. Preferably, revenues and expenditures
would be matched. For example, a particular dollar collected in property
taxes would improve public safety for the dollar expenditure. However,
the revenue side of performance budgeting has been dismissed by an
emphasis on performance and spending issues. Performance budgeting
can supplement but not replace the budget processes. Performance
information should enhance the political debate over allocation
decisions, but it cannot settle the debate (Posner, 2003).
Ideally, performance budgeting should coincide with conscious
revenue decisions, since revenue is finite because of the revenue
constraints and competitions that affect governmental budgeting.
Elementary decisions as to where the money is coming from need to be
addressed. Often the government needs to question and consider
modifying revenue streams to meet the needs of performance budgeting.
For example, what are the performance budgeting implications of
increases in cigarette and gasoline taxes that are offset by decreases in
property taxes? Does the source of public revenue have a bearing on
optimal use?
In part, a business model can be used. The customer provides an
outlay of cash for a product or service and receives a predetermined or
perceived level of value. These outlays fuel private enterprise through
market mechanisms. If the citizen pays a solid waste collection fee he or
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she will receive a predetermined level of value. A higher fee should
maintain or increase value and a lower fee would decrease value. An
additional code-enforcement officer should add value to the service for
those interested in code compliance. Management uses performance
budgeting to maximize or minimize values.
However, values are often difficult to define. What is invaluable to
some constituents may lack value to others. A solution is to provide
quantitative and qualitative measures when defining values. A city
manager recently asked the police chief, “How do you determine the
value of having a police officer on patrol?” This is a good question. One
answer is that the value of an officer on patrol is determined by a number
of factors. Overall, the quality of life in the community is enhanced.
Officers provide a multitude of services that result in safer streets,
responsive government, and initial criminal justice. (Criminal elements
would not see the value.) We can document workload and output
statistics of an officer (quantitative measures), but the impact and
outcomes of an officer’s efforts (qualitative measures) are more difficult
to report.
Citizens without complaints may see values in services and goods if
the fee or tax is not too high, or hidden, or if the services and goods are
subsidized. Management can manipulate value with technological,
human, and environmental resources. Further manipulation can occur
with budget deficits and debt financing. Potentially, citizens underpay for
the level of services received which forces the costs forward and other
generations may “pick-up the tab.” Today’s value will be paid for by
tomorrow’s fee and taxpayers.
In the absence of addressing revenue questions, the ends of
performance budgeting can be evaluated. The Office of Management and
Budget developed a Program Assessment Rating Tool or PART and
applied it the fiscal year 2004 budget. The lack of credible evidence on
results constrained “OMB’s ability to rate program effectiveness, as
evidenced by the almost 50 percent of the programs rated ‘results not
demonstrated’” (GAO, 2004). It is clear that evaluation methods need to
be closely linked with performance measures. The formulation of
performance budgets needs to be aligned with assessments if optimal
goals are to be reached and if performance measures are to be used in
budgetary deliberations. These deliberations need to focus on revenue
and expenditure decisions. The question becomes ‘How well do we
measure what we are measuring?’
PERFORMANCE BUDGETING: DESCRIPTIVE, ALLEGORICAL,
MYTHICAL, AND IDEALISTIC
89
Without a clear progression from revenue collection to outcomes
and impact, how do we equate value? What value do citizens receive
from property taxes? Difficulties in answering these questions keep the
theory and practice of performance budgeting in limbo. Within this
purgatory the optimal use of public revenues remains elusive. Without
attention to revenue generation, managers can only fictitiously match
inputs to outputs when assessing performance.
After revenue streams and products or services are identified on a
programmatic basis, some level of performance can be determined.
Difficulties arise when attempts are made to apply performance
budgeting according to theory and to dismiss reality. These difficulties
help relegate performance budgeting to the status of institutional myth.
As institutional myth, performance budgeting is fettered to purgatory and
the authoritative allocation of values or politics determines the collection
and use of public revenues. Performance budgeting becomes a
“buzzword” or a pseudo reform that may enter oblivion with other
budgetary initiatives.
CONCLUSIONS
The discussion of four distinct phases of performance budgeting—
descriptive, allegorical, mythical, and idealism—has made certain
conclusions possible. To improve understanding, build better theory, and
improve practice, scholars and practitioners need to continue to provide
descriptive documentation on the successes, challenges, and failures of
performance budgeting. Operational reality can benefit from improved
normative, descriptive, and prescriptive theories. Eventually,
performance budgeting can build a basis for addressing V.O. Key’s
question. The allegorical phase documents the theory/heaven-reality/hell
match, allowing performance budgeting to be placed into purgatory.
Performance budgeting theory and practice can be improved with a
closer theory-practice match. Without a closer match, performance
budgeting will remain in limbo as it can be applied without realizing the
full complement of prescribed benefits.
Until a closer theory-reality match develops, performance budgeting
will fall under the veil of institutional myth. As myth, performance
budgeting can be a fantasized or glamorized practice with good and bad
outcomes. With knowledge of performance budgeting as institutional
90
HERZOG
myth, we can improve our capacity to understand and practice
performance budgeting. By understanding performance budgeting as a
myth, it is hoped that it can be released from purgatory. Idealism best
argues that the optimal use of public revenues should have a uniform trail
from collection, allocation, expenditure, and outcomes. With continued
attempts at idealism, performance budgeting hell can be avoided.
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