A New Approach to Performance Budgeting: Agency Strategic Planning and ServiceBased Budgeting

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A New Approach to Performance Budgeting Agency
Strategic Planning and Service-Based Budgeting
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The BasicsMany Factors and Perspectives
Influence State Government Budget Development

• Changes in regulations and laws
• Demand for services
• Increase in number of clients
• Automation
• Increases/decreases in federal funds
• Traditional practices
• Public sentiment
• Priorities of the Governor and General Assembly

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The BasicsMost States View Budget Development as
a Zero-Sum Game Whereby Competing Demands Must Be
Balanced

• Fiscal Conditions (increases/decreases in
  available revenues)
• Fixed Costs (mandatory demands vs. discretionary
  actions)
• Economy (efficiency and cost savings, i.e. price
  per unit of service)
• Effectiveness (continuing need for existing
  programs and agencies)
• Priorities (agency budget requests vs. Governors
  agenda)
• Overall performance (quality of operations, focus
  on outcomes and return on investment).

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The IssuesAgency Strategic Planning vs. State
Budget Development

• Agency strategic plans may not be based on fiscal
  realities (visionary vs. practical)
• Agency goals and objectives may not address
  statewide priorities (agency budget requests vs.
  statewide priorities)
• Agency performance measures may not adequately
  address overall performance (hard to measure
  desired outcomes and degree of state influence to
  achieve results may be limited)
• Agency strategic plans almost never address
  potential enterprise-wide or efficiency
  improvements (planning silos)

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The IssuesAll Spending Decisions Are Not
Focused on Results

• Types of Spending Decisions
• Maintenance or fixed costs requirements (rent,
  insurance, gas, retirement/social security, etc.)
• Case load or unit cost thresholds (school
  enrollment, cost per unit, xx per capita, etc.)
• Political considerations (budgeting is a
  compromise process)
• Results oriented actions (true investments, deal
  or no deal!)

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Bringing It TogetherGuidelines For Improving
Performance Budgeting

• Tie agency planning efforts to state goals (be
  really strategic in approach)
• Some things are more important to measure than
  others (concentrate efforts on what moves the
  needle decisions that are true investments and
  results-oriented)
• Dont just record performance, evaluate it (have
  a thrust for what works and why it works)
• Look outside agency silos (create new
  enterprises for desired results)
• Recognize results and reward performance
  (promote consistency and desired behavior)

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The Virginia Experience
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Virginias Budgeting System is Evolving
1980 Program Budgeting and Evaluation
1995-96 Agency strategic planning and
Performance Measures
2005 Service Planning Performance-Based
Budgeting
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Previous Budget Structure
Program structure Level of
control  
Function Subfunction Program    
Central budget control (by fund, by positions)
  Subprogram Element Cost
center Object of expenditure
Agency budget control
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Previous Performance Budgeting Process
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Previous Dual Structure Orientation
Budgeting
Programs/Subprograms

Accounting System
Strategic Planning
Activities

Virginia Results
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The Task At Hand
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Establishing a Vision and Goals for the
Commonwealth
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Making a ChangeEstablishing a Statewide
VisionThe Council for Virginias Future

• Created in 2003 (Code of Virginia 2.2-2684) to
  advise the Governor and the General Assembly on
  the implementation of a Roadmap for Virginia's
  Future. Responsibilities include
• developing a set of guiding principles that are
  reflective of public sentiment and relevant to
  critical decision-making
• establishing a long-term vision for the
  Commonwealth
• conducting a situation analysis of core state
  service categories
• setting long-term objectives for state services
• aligning state services to the long-term
  objectives
• instituting a planning and performance management
  system consisting of strategic planning,
  performance measurement, program evaluation, and
  performance budgeting and
• performing plan adjustments based on public input
  and evaluation of the results of the Roadmap.

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Composition of Council on Virginias Future

• The Council shall be composed of 18 members that
  include eight legislative members and ten
  nonlegislative members as follows
• The Governor,
• The Speaker of the House,
• The majority and minority leaders of the House of
  Delegates,
• The Chairman of the House Committee on
  Appropriations,
• The President Pro Tempore of the Senate,
• The majority and minority leaders of the Senate,
• The Chairman of the Senate Finance Committee,
• One nonlegislative citizen member appointed by
  the Speaker of the House,
• One nonlegislative citizen member appointed by
  the Senate Committee on Rules,
• Two Cabinet Secretaries appointed by the
  Governor, and
• Five nonlegislative Citizen members appointed by
  the Governor.

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Organizational Framework
EXECUTIVE BRANCH
COUNCIL ON VIRGINIAS FUTURE
LEGISLATIVE BRANCH
Planning Group
Council Steering Committee
Planning, Budgeting Assessment Advisory
Sub-Committee
Governors Performance Leadership Group
CEO Advisory Group
Private Sector Reengineering Advisory Group
Innovation Improvement Advisory Sub-Committee
Performance Leadership Steering Group
Private Sector Reengineering Support Teams
MAP
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The Council on Virginias Future Has Articulated
Seven Long-Term Objectives For Virginia

• Be recognized as the best managed state in the
  nation.
• Be a national leader in the preservation and
  enhancement of our economy.
• Elevate the levels of educational preparedness
  and attainment of our citizens.
• Inspire and support Virginians toward healthy
  lives and strong and resilient families.
• Protect, conserve, and wisely develop our
  natural, historical, and cultural resources.
• Protect the publics safety and security,
  ensuring a fair and effective system of justice
  and providing a prepared response to emergencies
  and disasters of all kinds.
• Ensure that Virginia has a transportation system
  that is safe, enables easy movement of people and
  goods, enhances the economy, and improves the
  quality of life.

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Scorecard at a Glance

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Linking Strategic Planning and Performance
Budgeting at State Agency Level
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A Mandate for Change at Agency Level

• HB2097(03) (affecting 2.2-2681 - 2.2-2687)
• each agency shall develop and maintain a
  strategic plan for its operations defined in the
  legislation as the systematic clarification and
  documentation of what a state agency wishes to
  achieve and how to achieve it. The objective of
  strategic planning is a set of goals, actions
  steps, and measurements constructed to guide
  performance. 
• HB1838(03) (affecting 2.2-1508)
• The Executive Budget document is to include a
  statement of major goals, objectives, and
  specific outcomes related to expenditures for
  programs in each agency.

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Process Design Strategic Plan

• Service area structure is key
• Generally, service areas are what agencies do
  for the citizen or for other agencies
• They consist of allocations of resources toward a
  specific objective
• Each service area forms the basic unit of both
  budgeting and of planning
• Principal objectives of these plans are
• To provide agencies with a tool to assist them in
  self-management
• To give decision makers uniform and dependable
  data for budgeting and accountability
• To link state resources to results
• To eliminate current fragmented processes of
  strategic planning, budget development, workforce
  planning, capital planning, and technology
  planning

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Service Area Structure
Current Structure

• Programs/Subprograms

Budgeting
Accounting System
Strategic Planning
Activities
Virginia Results
Future Structure
Budgeting

• Service Areas

Accounting
Strategic Planning
Performance Measurement
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Service Area Structure
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Budget Bill Display
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Process Design
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Agency Strategic Plan Content
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Looking At The EnterpriseThe Executive Progress
Report

• Current Performance
• Productivity
• Major Initiatives and Related Progress
• Virginia ranking
• Customer Trends and Coverage
• Future Direction and Priorities
• Impediments

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Agency Strategic Plan Content
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The Revised Budget System Will Foster
Transparency By Linking Together Expected
Results, Funding, and Actual Performance For
State Government Service
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Integrating Planning and Budgeting
Old New
COVF Vision Objectives Guiding Principles
DPB Data Repository
Legislators
Agency Strategic Plan
Agency Budget Performance Measures
X objectives and measures submitted to
DPB/VaResults
B U D G E T P R O C E S S
S E R V I T C
I E E D A R T E
O A B S U T D R
G C E T T U R
E
Service Area
Budget Performance
Service Area
Budget Performance
Agency Selects X objectives and measures
Service Area
Budget Performance
Service Area
Budget Performance
Program
Program
Service Area
Budget Performance
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Tying Agency Planning and Budgeting Efforts to
Statewide Goals
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Virginias Performance Leadership System for
State Government
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Virginias Performance Leadership SystemLevels
of Results Accountability
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Bringing It TogetherGuidelines For Improving
Performance Budgeting

• Tie agency planning efforts to state goals (be
  really strategic in approach)
• Some things are more important to measure than
  others (concentrate efforts on what moves the
  needle decisions that are true investments and
  results-oriented)
• Dont just record performance, evaluate it (have
  a thrust for what works and why it works)
• Look outside agency silos (create new enterprises
  for desired results)
• Recognize results and reward performance (promote
  consistency and desired behavior)

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VISITwww.dpb.virginia.govVirginia Department
of Planning and Budgetwww.future.virginia.govC
ouncil on Virginias Future