Performance-Based Budgeting : Beyond Rhetoric

Abstract

Performance-based budgeting has long
 been a recommended reform in both industrial and developing
 countries. Yet considerable ambiguity remains on how to
 define and implement this approach. A relatively strict
 definition is that performance-based budgeting allocates
 resources based on the achievement of specific, measurable
 outcomes (Fielding Smith 1999). This definition promises a
 rational, mechanistic link between performance measures and
 resource allocations, with the ability to state the level of
 outputs that can be achieved with an additional amount of
 resources. But outputs cannot always be quantified
 precisely-and while performance information offers benefits
 to governments, it cannot eliminate the inherently political
 nature of budgeting. Over the past decade U.S. state
 governments have experimented extensively with performance-
 based budgeting. Yet while 47 of 50 states claim to use some
 form of it, driven by legislative or administrative
 requirements, there is no evidence that any state relies on
 a strict performance-based system. Even though U.S. state
 governments have fairly high human and financial capacity,
 they have encountered limitations in implementing
 performance-based budgeting-raising questions about the
 potential benefits of this approach.