BILL ANALYSIS
AB 1382
Page 1
Date of Hearing: May 20, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 1382 (Niello) - As Introduced: February 27, 2009
Policy Committee:
AppropriationsVote:
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires budgets submitted to the Department of
Finance (DOF) by state agencies, and subsequently by the
governor to the Legislature, beginning with the 2011-12 fiscal
year, to utilize performance-based budgeting (PBB) methods.
Specifically, this bill:
1)Requires a PBB submitted by a state agency to identify or
update the following:
a) The mission of the agency or judicial branch;
b) The goals established to accomplish the mission;
c) The activities developed to achieve the goals;
d) A performance goal and outcome-oriented performance
measure for each activity for which an appropriation is
made or requested;
e) A cost-per-unit of services for performance results, as
specified.
f) Whether activities are duplicated by other government
agencies.
g) Legislatively approved output and performance standards.
h) Prior-year performance data on approved performance
measures.
i) Proposed performance incentives and disincentives.
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2)Requires the budget, as introduced by the governor to include
performance standards for each state agency, which may be
amended by the Legislature.
3)Requires a task force, consisting of the DOF, the State
Controller (SCO), and the Chair of the Joint Legislative
Budget Committee to:
a) Develop procedures for state agencies in developing PBBs
for the 2011-12 fiscal year.
b) Develop training and education for budget personnel to
facilitate PBB methods.
FISCAL EFFECT
1)Major GF implementation costs, potentially in the hundreds of
millions, to state departments, the administration and the
Legislature to implement a PBB system of budgeting. Based on
the state's previous experience with a PBB pilot in the
mid-1990's, the cost for a four-department pilot was about $5
million. Implementation estimates by DOF are "at least" $300
million, primarily for staff and information systems, based on
the participation of about 245 departments.
In addition DOF estimates ongoing GF costs of about $90
million.
2)In a 1993 report on PBB, the LAO commented on the costs of PBB
and the administration's proposed PBB pilot project:
"Experience in other states and a review of the DOF's proposal
for California indicates that, while significant benefits are
typically anticipated, the only certainty is that there will
be costs to implement the pilot project. These costs reflect:
a) Staff time devoted to establishing and maintaining
performance budgeting.
b) The development and maintenance of strategic plans.
c) The development and maintenance of management
information systems to collect, monitor, and evaluate
performance.
d) The implementation and maintenance of new programs
designed to continuously improve the quality of work
performed."
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3)To the extent PBB leads to more efficient and effective
budgeting, costs may be offset to some degree in the future.
Direct savings are difficult, if not impossible, to be
quantify.
COMMENTS
1)Rationale . According to the author and the sponsor,
California Forward, there is a general lack of performance
goals and metrics in the development of the state budget. The
current budget model does not facilitate discussion or
agreement on priorities, goals, desired results, and the
inevitable tradeoffs. State program's goals and targets must
be supported with information on results that allows public
managers to report their progress and future targets.
2)California's PBB Experiment Unsuccessful. In 1993 Governor
Wilson initiated a performance-budgeting pilot program
involving four departments (General Services, Consumer
Affairs, Parks and Recreation, and the CA Conservation Corps).
DOF was responsible for the oversight of the program, and was
required to evaluate the pilot.
DOF states flatly that the PBB pilot was "unsuccessful" and
"did not meet the initial expectations for the development of
performance outcome measures and did not produce the
anticipated savings."
In 2003 comments regarding the PBB pilot project, the LAO
noted that "implementation costs were high and included
developing performance measures and developing and maintaining
new budgeting and accounting systems," and referenced the
LAO's 1996 review that found PBB "did not significantly change
the budget process or produce cost savings."
3)Concerns.
a) Who determines PBB priorities and objectives? Is the
objective of state prison punishment? Is it rehabilitation?
Is it both? How are potentially disparate political and
societal viewpoints bridged to identify funding and
performance objectives? If the goal of state prison is
punishment and incarceration, California is doing quite
well, and could probably decrease funding to meet this
objective by shedding costly programs and increasing staff
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ratios. If the goal is rehabilitation, once could easily
argue the system needs an infusion of funds for
programming. Performance criteria ultimately require some
consensus regarding priorities, which is arguably no easier
- or cheaper - to achieve than the messy process of
supermajority budgeting.
b) 2/3 Budget Vote Requirement Impedes Majority Rule .
California is one of three states with a 2/3 vote
requirement for a state budget. As annually evidenced,
numerous budget and non-budgetary issues must be resolved
to obtain a 2/3 vote, in some cases reversing what the
majority has accomplished via the budget process. Shifting
to an alternative process, such as PBB, does not address
the 2/3 vote threshold, which often requires performance
priorities to be ignored in pursuit of a 2/3 vote.
c) Unrealistic Implementation Timeline . This bill requires
implementation of PBB for the 2011-12 Budget. Such a
deadline appears optimistic. To develop guidelines,
procedures, training programs, and actual performance
measures would presumably require significant lead time,
depending on the size and complexity of programs and
departments.
d) Facing a $20 billion budget deficit, is this the time to
implement a costly budget process change? As noted by the
DOF and the LAO, PBB is resource intensive - significant
investments in staff and funding are necessary. Many
programs and departments have suffered significant budget
cuts in recent years. Given the state's sensitive fiscal
condition, is it realistic - or smart - to redirect
resources to PBB?
4)Provisions of the bill are not clear . For example, the bill
references a Joint Legislative Budget Committee report
regarding PBB, pursuant to the State Constitution. No such
report exists, nor is it referenced in the State Constitution.
Descriptions of what a PBB budget should include are
convoluted at best (Sec. 1 (a)(5)).
5)LAO's 1993 critique of PBB, Performance Budgeting: Reshaping
the State's Budget Process, remains a valid and succinct
summation.
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"While performance budgeting may offer promise, states have
had difficulty realizing that promise. Part of the problem has
been the reluctance of executives to change their budget
decision making from one based on policy and political
considerations to one based on performance. In addition,
Legislatures, used to considerable control in approving
budgets through emphasis on process and procedure, have had
difficulty embracing the fundamentally different approach of
performance budgeting, which stresses program missions, goals,
and outcomes?
In short, the Legislature has to give up the traditional type
of budgetary control it exercises over departments. It would
relinquish the more detailed short-term control it now has
over the resources given an agency/hopefully in return for
more longer-term control over the mission, direction, and
outcomes of the agency. This is not an easy task, as has been
shown in those states which have implemented performance
budgeting."
6)Potential Author's Amendments . There are late indications the
author may propose significant amendments addressing concerns
such as timelines, clarity, cost and purpose.
Analysis Prepared by : Geoff Long / APPR. / (916) 319-2081