BILL ANALYSIS �
SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
Mark Leno, Chair
Bill No: SB 14
Author: Wolk
As Amended: March 17, 2011
Consultant: Keely Martin Bosler
Fiscal: Yes
Hearing Date: May 12, 2011
Subject : State budget.
Summary : This bill provides a statutory framework for the
implementation of performance- based budgeting and for a
systematic program performance review by the Legislature.
Background :
Historic Budget Reform Efforts. There have been numerous
proposals to reform the budget process over the past
several decades. Historical reform efforts include, but
are not limited to, the following:
Pilot projects on performance budgeting in four
State departments starting in 1993 by then Governor
Pete Wilson.
Recommendations by the California Constitution
Revision Commission that convened from 1994 to 1996 at
the direction of statute and made various
recommendations regarding the State budget process and
alignment of programs between State and local
governments.
Recommendations by the California Citizens Budget
Commission in 1998 that proposed statutory and
constitutional changes to the budget process.
Recommendations in the Governor's 2004 California
Performance Review regarding the State budget process,
including a recommendation to adopt a biennial budget
and a performance-based budgeting system.
Recent Reform Efforts. The bipartisan California Forward
organization has sponsored recent efforts regarding
government reform. California Forward is an organization
that was created by California Common Cause, the Center for
Governmental Studies, the New California Network, and the
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Commonwealth Club of California's Voices for Reform Project
in March 2008. The organization's main goal is to
contribute to improving the quality of life for all
Californians by creating a more responsive, representative,
and cost-effective government. This organization is funded
by the following foundations: the California Endowment,
the Evelyn and Walter Haas Jr. Fund, the William and Flora
Hewlett Foundation, the James Irvine Foundation, and the
David and Lucile Packard Foundation.
In 2008, California Forward started a process of
consultation and engagement with the public and community
leaders regarding a government reform agenda. They have
made hundreds of presentations, consulted with hundreds of
community leaders, conducted focus groups and public
opinion research in the development of a reform agenda that
includes budget process reform and local government reform.
Performance-based budgeting and program performance review
are just two of the reforms proposed by California Forward.
California Forward's efforts culminated with a
comprehensive constitutional amendment in 2010 (SCA 19,
DeSaulnier) that contained various changes to the state
budget and legislative process. Specifically, these
amendments would have implemented a pay as you go system
for the majority of legislation, the Governor's budget, and
initiatives. This measure would have significantly limited
how one-time revenues could be expended. This measure
required the Legislature to review state programs once
every ten years. This measure would have also lowered the
vote threshold for the budget and increased the vote
threshold for fees when they are being used to fund a
program, service, or activity that was previously funded by
revenue from a tax. This measure would also have reduced
legislator pay if the budget was not passed by June 25 and
provided the Governor with mid-year cut authority if the
Legislature does not act prior to the 45th day of a fiscal
emergency. This measure was not passed by the Legislature
in 2010.
Two initiatives passed by the voters in November 2010,
including Proposition 25 and Proposition 26 enacted pieces
of the California Forward agenda. Proposition 25 lowered
the vote threshold for the budget to a majority vote and
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reduced legislator's pay if the budget was not passed by
the constitutional deadline. Proposition 26 also passed by
the voters increased the vote threshold for some fees,
including those that are being raised to fund a program
that was previously funded by revenue from a tax.
Proposed Law:
This bill does the following:
Legislative Intent. This bill states that the legislative
intent in enacting this measure is to provide a system of
analysis that supports a results-oriented framework for the
delivery of public services. The bill prioritizes
understanding the results of programs and funding that are
subject to realignment from the state to county
governments.
Legislative Process for Program Performance Review. This
bill requires the Joint Sunset Review Committee to adopt a
process, schedule, and deadline for reviewing the
performance of all programs at least once every ten years,
including tax expenditures. Programs include statutory or
constitutional provisions that authorize services, regulate
activities, evaluate services and programs, provide
preferences in the tax system, or otherwise confer a
benefit that would not otherwise occur. This bill does not
limit this review to only programs administered by state
agencies, but also programs administered by local agencies,
contractors or others that have a material relationship
with the state. The schedule shall provide for reviewing
programs with expenditures that total one-third or more of
total expenditures by July 1, 2015, and two thirds of total
expenditures by January 1, 2018. Expenditures to be
reviewed are not limited to those appropriated in the
budget act and the review shall include the participating
of the Senate Committee on Budget and Fiscal Review and the
Assembly Committee on Budget.
Six months prior to the deadline for review of each
program, the joint committee shall refer the initial
program review to the appropriate policy committee of each
house of the Legislature. Within 90 days of the deadline,
the policy committees shall make recommendations regarding
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a program to the joint committee. A joint committee shall
propose legislation based on the policy committee
recommendations and other recommendations that will reduce
costs, improve outcomes, consolidate programs with similar
objectives, or terminate the program. The proposed
legislation of the joint committees shall be submitted to
the Rules Committee in each house and referred to
appropriate committees for public hearings and further
actions. This bill requires the proposed legislation to be
posted on the joint committee's website.
The bill also requires a more detailed analysis of the
potential benefits of a program if performance is improved
if a recommendation to terminate a program is made.
Defines and Requires Use of Performance-Based Budgeting.
This bill defines "performance-based budgeting" to mean a
system of budgeting that uses information on performance to
inform resource allocation decisions thereby establishing
clear accountability. Specifically, the bill specifies
that a performance-based budget identify and update the
following:
The mission and goals of the agency;
The activities and programs focused on achieving
those goals;
Performance metrics that reflect desired outcomes
for existing and proposed activities and a targeted
performance level for the following year;
Prior-year performance data and an explanation of
deviation from previous-year targets;
Proposed changes in statute, including the creation
of incentives or elimination of disincentives that
could improve outcomes or hold down costs; and
A description of the impacts and consequences to
the current recipients or beneficiaries of a program
proposed for modification or elimination.
This bill requires that budgets submitted to the department
and proposed by the Governor shall use performance-based
budgeting methods starting in 2014-15 and the data shall be
posted on the Governor's website. This bill requires that
the performance standards be included in the Budget Bill,
which may be amended by the Legislature. This bill would
also require performance standards and program performance
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information for programs that are not administered by the
state, but which confer a benefit that would not otherwise
occur were it not for the action of the state government.
Review and Development of Performance Data. This bill
requires the Legislative Analyst's Office to review the
adequacy of performance metrics and progress toward
targeted outcomes in preparing its review of the Governor's
Budget proposal.
This bill establishes a task force consisting of the
Director of Finance, the State Controller, and the
chairpersons and vice chairpersons of the Senate Committee
on Budget and Fiscal Review and the Assembly Committee on
Budget to do the following:
Review and comment on guidelines and procedures
drafted by the Department of Finance to be used by
state agencies to develop performance-based budgets;
Review and comment on a training program developed
by the Department of Finance to ensure successful
implementation of performance-based budgeting and
management by state agencies;
Review and comment on a plan prepared by the
department for systematically phasing in
performance-based budgeting, including ensuring that
by 2012-13 performance-based budgeting methods are
used in preparing, reviewing, and enacting one-third
or more of a realignment enacted in 2011-12.
Fiscal Effect:
This bill is likely to require new state spending of at
least ten million one-time to put in place a
performance-based budgeting system. The ultimate costs of
such a system will depend greatly on how this bill is
implemented. For example, will the Administration rely on
outside consultants or state staff and will the
Administration invest in new information technology systems
to manage this data.
At a minimum, there will be additional costs incurred by
the Department of Finance to put in place a system for
collecting and reporting the performance data required by
this bill. However, there may be additional costs borne by
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departments that have not already invested resources in the
collection of relevant performance metrics.
Furthermore, given the cumulative reductions to
administrative expenditures over the last few budget cycles
(across the board reductions to state operations and a
workforce cap), it is likely that redirecting existing
resources for this purpose may in the short-run reduce
other critical management activities.
In the long-term, there may be significant savings
attributed to the bill related to better management
decisions and informed budgeting decisions. However, these
savings are not likely to occur until sometime in the
future after the performance-based budgeting system is well
established in the culture of the government and
legislative process.
Source : California Forward
Support:
AARP
American Association of University Women
American Federation of State, County and Municipal
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 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
Marin Builders' Association
San Francisco Chamber of Commerce
San Gabriel Valley Economic Partnership
San Mateo County Economic Development Association (SAMCEDA)
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Santa Clara and San Benito Counties Building and
Construction Trades Council
Santa Cruz County Medical Society
Saving California Communities
State Building and Construction Trades Council of
California
Silicon Valley Leadership Group
Valley Industry & Commerce Association (VICA)
WELL Network
Opposed : None on file.
Comments :
1. What Problem Does this Bill Seek to Solve? The
purpose of this bill is to create in statute a
systematic legislative review of the performance of
state government reviews. Presently, there are
reviews of pieces of state government that occur in
the Budget Subcommittee process and policy
committees. However, these reviews are usually
related to a specific incident or a specific budget
issue and do not review all programs from a policy
perspective or in any systematic manner. This bill
could help the Legislature develop a system that
would collect longitudinal performance data
systematically for more effective input into the
budget and legislative process.
This bill also establishes a performance-based
budgeting system to be used by all state departments
in the development of a budget and in the subsequent
review of the budget by the Legislature. This bill
assumes that performance outcomes are not being used
in a widespread manner by managers in state
government or by the control agencies or Legislature
in evaluating and prioritizing expenditures in the
annual budget process. Performance data has been
collected by some programs and departments and is
used to inform management decisions and budgetary
decisions. However, at present, there is not a
systematic approach across state government to
collect relevant performance data and use it to make
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management decisions and inform budgetary decisions.
This bill attempts to put a system in place to make
performance data a regular part of government
operations.
2. Will Data Change the Culture and Decision Process?
Departments across state government currently
collect performance data on programs, contracts, and
other aspects of their operations. While this data
is not necessarily collected systematically across
state government, this data is often used to inform
budgetary decisions. For example, the Franchise Tax
Board is constantly evaluating audit techniques and
other tax enforcement efforts to determine the most
cost effective way of investing limited audit
resources. Some departments literally have dozens
and dozens of performance metrics; however, it is
not always clear whether they are being used to
inform budget decisions or other management
decisions. Ultimately, using data to inform
management decisions and budget decisions needs to
be an ingrained part of the culture of the
administration and legislative review. Practically
speaking, performance data, while important, is
often just one of the inputs used to make decisions
and without leadership and commitment at every level
of government to rely on data to inform decisions,
data will not, in itself, change the outcomes of the
decision makers.
3. Agreeing on Metrics and Goals First Big Hurdle.
In the Legislative Analyst's review of the state's
performance-based budgeting pilots of the early
1990s the Analyst found that performance-based
budgeting was more successful when there was a
collaboration with the executive and legislative
branches in developing metrics and reporting
procedures. Clearly, widespread buy-in into a
system of performance metrics would result in a more
successful integration of data into a
decision-making process. However, what happens if
there are divergent views on the fundamental goals
of a program or department? These debates, while
not a reason to forgo performance data, are a real
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hurdle to the successful integration of data into
the management and legislative process. For
example, numerous expert panels and actual data have
shown that the residential restrictions placed on
sex offenders in California have had no and possibly
negative impacts on public safety. Nevertheless,
proposals to change this law have not been
forthcoming.
4. Suggested Amendments. The Committee would like to
recommend the following amendments:
a. This bill has designated the Joint Sunset
Review Committee as the primary committee
responsible for reviewing the performance of all
programs at least once every ten years. The
Committee would like to recommend that a joint
committee be named jointly by the Rules Committee
of both houses to complement this legislation
instead of the Joint Sunset Review Committee.
The work to implement this statute would be new
and it would be appropriate for the respective
houses to work together on a mutually agreeable
system for accomplishing this workload in the
most effective and efficient way possible.
b. The Committee would suggest that the
performance-related data not be included in the
budget bill, but instead be included in the
budget submissions made by the Governor. This
would not preclude the Legislature from including
specific performance metrics in the budget bill
as determined appropriate by the Legislature.
This amendment would streamline the actual budget
bill and it is unclear what value, including
these metrics in the actual budget bill, it would
add.
c. The Committee would also like to
recommend that this statute go into effect only
upon appropriation in the budget process. This
bill, even under the most conservative estimates,
will have costs to implement. Given the State's
current fiscal crisis, investments in this effort
should be weighed against other investments made
in these difficult fiscal times.
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