BILL ANALYSIS �
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THIRD READING
Bill No: SB 14
Author: Wolk (D), et al
Amended: 5/19/11
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 8-0, 03/30/11
AYES: Wolk, Huff, DeSaulnier, Hancock, Hernandez, Kehoe,
La Malfa, Liu
NO VOTE RECORDED: Fuller
SENATE BUDGET & FISCAL REVIEW COMMITTEE : 16-0, 05/12/11
AYES: Leno, Huff, Alquist, Anderson, DeSaulnier, Emmerson,
Evans, Fuller, Hancock, La Malfa, Liu, Lowenthal, Rubio,
Simitian, Wolk, Wright
SUBJECT : State Budget
SOURCE : California Forward
DIGEST : This bill provides a statutory framework for the
implementation of performance- based budgeting and for a
systematic program performance review by the Legislature.
ANALYSIS : 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.
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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.
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, this bill requires state agencies to
work with local agencies and other affected parties to
develop performance information.
This bill:
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
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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 a designated committee named jointly by the
Rules Committee of both houses, 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.
Not later than six months prior to the deadline for review
of each program, the designated 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 a program to the designated committee. The
designated 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 designated 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 designated committee's
website.
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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 a separate
document when the Budget Bill is submitted. This bill also
requires performance standards and program performance
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.
The department shall include performance-based budgeting
information in the Governor's budget proposal in printed
and electronic formats if prepared and post the information
on its Internet Web site. The information shall include
information on the following:
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The mission and goals of each agency provided
spending authority in the budget proposal;
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;
A description of the impacts and consequences to
the current recipients or beneficiaries of a program
proposed for modification or elimination.
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.
Implementation of this act is contingent on an
appropriation of funding for its purposes in the annual
Budget Act.
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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
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
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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
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.
Comments
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
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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 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.
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.
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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 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Budget and Fiscal Review Committee:
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
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
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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.
SUPPORT : (Verified 5/19/11)
California Forward (source)
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
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
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Silicon Valley Leadership Group
Valley Industry & Commerce Association
WELL Network
AGB:nl 5/19/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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