BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 14 HEARING: 3/30/11
AUTHOR: Wolk FISCAL: Yes
VERSION: 03/17/11 TAX LEVY: No
CONSULTANT: Ewing
Requires the State Department of Finance to prepare the
Governor's budget proposal using performance-based
budgeting practices. Establishes a process for legislative
review of program performance.
Background and Existing Law
The California Constitution requires the Governor to submit
to the Legislature, within the first 10 days of the
calendar year, a budget for the ensuing fiscal year. The
Governor's budget must include itemized statements for
recommended expenditures and estimated revenues.
The State Department of Finance prescribes and manages the
development of a state budget and oversees state agencies'
financial practices. The Department ensures that budget
information reflects state agencies' activities and costs
and displays information on expenditures and objectives.
The Department helps state agencies use sound management
approaches.
California's long-standing practice in developing an annual
budget uses program budgeting and incremental budgeting.
Each program's budget is generally reviewed independent of
the budgets of other programs. The budget process
highlights the proposed increment of change in funding from
the current year to the budget year. California's budget
documents list the funding allocated across three fiscal
years - the prior year, the current year, and the budget
year - which is the year for which the budget is being
proposed.
Performance-based budgeting . Performance-based budgeting
is an alternate budget approach that can work with program
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and incremental budgeting. Budget information is linked
with information on program goals, the targeted
accomplishments of those entities, and the results that
have been achieved.
Performance-based budgeting and related approaches are well
established in the private sector. Public agencies began
to use performance-based budgeting approaches in the 1970s,
although some local governments started earlier. The
National Association of State Budget Officers reports that
25 states use some form of performance budgeting, often in
concert with incremental and program budgeting. Many
cities and counties also use forms of performance-based
budgeting.
Proposed Law
This bill directs the Department of Finance to provide
specific information to the Legislature when transmitting
the Governor's proposed state budget, including:
The agency's mission and goals.
The activities and programs focused on achieving
those goals.
Performance metrics reflecting desired outcomes
for existing and proposed activities and a targeted
performance level for the following year.
Information on prior-year performance and an
explanation of deviation from targets.
Proposed statutory changes, including the
creation of incentives or elimination of
disincentives that could improve outcomes or reduce
costs.
A description of the impacts and consequences to
the current beneficiaries of a program proposed for
modification or elimination.
The State Department of Finance must determine how
departments should establish performance information. For
those programs that are included in the budget but are not
managed by the state, the bill requires state agencies to
work with local agencies and other affected parties to
develop performance information.
The bill requires the Governor to post on the Web a summary
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of each state agency's mission, goals, prior-year
performance, and future-year objectives.
The bill requires the Legislative Analyst's Office to
review performance metrics and progress toward outcome
targets in its review of the Governor's budget.
The bill establishes a task force that includes the
director of the State Department of Finance, the
Controller, and the chairpersons and vice chairpersons of
the Senate Committee on Budget and Fiscal Review and the
Assembly Committee on Budget. The task force must review
the guidelines and training available to departments for
developing a performance-based budget.
The Joint Sunset Review Committee must adopt a process and
schedule for reviewing the performance of all programs at
least once every 10 years.
These standards apply to all state agencies and programs,
and all funds and phase in over three years, beginning with
the 2012-13 budget. The State Department of Finance must
give priority to using performance information to develop
the budgets for those programs impacted by 2011 realignment
legislation.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . California's budget process
relies on a decades old model: You get what you got in the
prior year - plus some increment of change, typically
growth. California's incremental budgeting model does not
encourage discussion or agreement on priorities, goals,
desired results, and the inevitable tradeoffs among
priorities. When officials have more money to invest or
must make cuts, they don't know which strategies or
programs are working. Program-based budgeting does not
provide the information that helps policymakers provide
needed oversight on service costs, program duplication, or
program improvements. Performance-based budgeting would
help policymakers deliberate on priorities, the desired
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outcomes of publicly funded programs, and the rate at which
programs should improve.
2. This is a heavy lift with an uncertain future .
California has experimented with performance-based
budgeting, with mixed results. Successful use of
performance-based budgeting will require sustained
commitment from the Legislature and the Governor. It is
not clear that there is sufficient support to completely
retool how California prepares budget materials or makes
fiscal decisions. The committee may want to consider
whether performance-based approaches are more suited to
specific departments or programs rather than require the
use of this approach for all areas of government.
3. California has some experience with performance-based
budgeting . Beginning in 1993, the state adopted a pilot
project on performance budgeting in four state departments:
the California Conservation Corps, the Department of
Conservation, the Department of General Services, and the
Department of Parks and Recreation. In its analysis of
that effort, the Legislative Analyst's Office found support
for performance-based budget approaches yet found that
performance information had little influence on fiscal
decisions. A number of challenges limited the influence of
performance information for budgeting, including tensions
between multiple policy goals, lack of focus on outcomes,
and little focus on the cost-effectiveness of public
programs. The Analyst reported that performance-based
budgeting is more successful when there is collaboration
with the executive and legislative branches in developing
metrics and reporting procedures, bi-partisan support, and
when performance-based approaches are institutionalized
into the budget process.
4. Blue Ribbon Commissions have recommended
performance-based budgeting .
The California Constitution Revision Commission, convened
by statute from 1994 to 1996, recommended that California
adopt a performance-based approach to budgeting. In 1998
the California Citizens Budget Commission proposed
statutory and constitutional changes to the budget process,
including adopting a performance-based approach. In 2004,
the California Performance Review recommended that the
state adopt a performance-based budgeting system.
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5. Must policymakers defund programs that cannot show
results ? Some have suggested that performance-based
budgeting requires the state to defund programs that cannot
demonstrate effectiveness. But the state cannot eliminate
essential programs - such as child welfare or corrections -
when outcomes are poor. Under performance-based budgeting,
poor results do not require elimination. In contrast,
information on performance allows decision-makers to better
understand what programs have accomplished and explore why
some programs excel while others do not. That information
informs fiscal, policy, and management decisions.
Struggling programs may receive additional funds to address
deficiencies. Information on weak performance also can
justify modifying or eliminating programs.
6. Many agencies already focus on performance . In a March
2, 2011 informational hearing the Committee heard testimony
that more than two dozen state agencies are using
performance-based management approaches, and many have
developed performance and outcome measures. The federal
government requires performance and outcome reporting for
many federally funded programs. There also are components
of state law that require state agencies to develop and
report performance information.
5. Related legislation . SB 14 is not the only bill that
promotes changes in the state's budget process or calls for
establishing performance measures.
SB 15 (DeSaulnier) establishes multi-year fiscal planning
and includes intent language on the development of
performance reviews for all state programs.
AB 2 (Portantino) establishes a state accountability
framework for public colleges and universities and requires
this framework to measure the collective performance of the
state's system of higher education.
Support and Opposition (3/24/11)
Support :
AARP
American Association of University Women
American Federation of State, County and Municipal
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Employees
Bay Area Council
Business Council of San Joaquin County
California Alliance of Child and Family Services
California Association of Nonprofits
California Church IMPACT
California Forward
California Partnership for the San Joaquin Valley
California Senior Advocates League
California State Student Association
Contra Costa Council
Fresno Business Council
Greenlining Institute
Half Moon Bay Coastside Chamber of Commerce
Huntington Beach Chamber of Commerce
Kern County Taxpayers Association
Los Angeles Area Chamber of Commerce
Saving California Communities
San Francisco Chamber of Commerce
San Gabriel Valley Economic Partnership
San Mateo County Economic Development Association (SAMCEDA)
Santa Clara and San Benito Counties Building and
Construction Trades Council
Santa Cruz County Medical Society
Silicon Valley Leadership Group
State Building and Construction Trades Council of
California
WELL Network
Valley Industry & Commerce Association (VICA)
Opposition : Unknown.