Government budgets. Yawn, right? Budgeting often brings to mind dense documents filled with line items and dollar figures. But what if budgets could clearly show what services and impacts your tax dollars actually achieve? What if spending decisions directly aligned with community priorities? Well, that’s exactly what performance budgeting aims to do.

Performance budgeting has become more popular with governments in recent years, and for good reason. Unlike traditional line-item budgets, performance budgets focus on outcomes and results. With taxpayers demanding more value for their money, performance budgeting communicates what they are getting for their tax contributions.

Transitioning to this approach does take work. You need to set strategic goals, collect and analyze data, establish performance targets, and track outcomes. It’s a team effort across budget, management, IT, and other departments. But with proper planning and support, performance budgeting can optimize spending and service delivery in your community.

This article will walk through what performance budgeting entails, its benefits, and how to implement it step-by-step. I’ll also share expert tips on leveraging outside help to launch performance budgeting successfully. So grab your favorite coffee or tea, and let’s dive in!

What is Performance Budgeting?

Performance budgeting bases funding decisions on the expected outputs and outcomes of programs and activities. The focus is on measuring and maximizing results to strategically allocate limited resources. Rather than looking at what was purchased, performance budgeting examines what was accomplished and whether it achieved desired impacts. 

This approach involves identifying strategic goals and objectives, analyzing current spending patterns, setting performance targets, allocating resources accordingly, tracking progress, and making data-driven adjustments. Having measurable output and outcome targets is key. Examples include the number ofLane miles repaved, police response times, jobs created, high school graduation rates, and so forth.

Performance budgeting provides a big picture perspective to budget planning. It facilitates priority-based spending that is aligned with organizational goals. This enhances accountability and transparency around resource allocation and program effectiveness. Performance budgeting also fosters a culture of continuous improvement by providing feedback loops on outcomes.

Benefits of Performance Budgeting

There are numerous benefits associated with implementing performance budgeting:

– Strategic alignment – Ties resource allocation directly to strategic goals and objectives

– Accountability – Provides concrete performance data to assess results

– Efficiency – Identifies spending patterns and reallocates funds to optimize value

– Transparency – Shows clear linkages between expenditures and outcomes 

– Priority-based spending – Shifts focus to high-impact programs that drive desired results 

– Data-driven decisions – Enables fact-based assessment and adjustments 

– Culture of continuous improvement – Creates feedback loops to enhance outcomes

– Stakeholder engagement – Facilitates input on community needs and priorities

In essence, performance budgeting maximizes the value and impact of limited public resources. It provides vital tools and processes to make smart, strategic budgeting and management choices.

Steps to Establish Performance Budgeting

Putting performance budgeting into practice requires careful planning and execution across eight key steps:

Identify Strategic Goals and Objectives

The first step is to define the strategic goals and desired objectives over the budget period. This provides direction for resource allocation and performance targets. Goals and objectives should align with the organization’s mission and priorities. They are often laid out in strategic plans.

Gather Data on Current Spending 

Next, collect expenditure and workload data on existing programs and services. Analyze spending patterns across departments, activities, and budget categories. This provides a baseline understanding of where and how money is currently being allocated.

Analyze Spending Patterns and Priorities

With baseline data in hand, assess the alignment between spending patterns and strategic priorities. Identify high-performing programs and services that warrant additional funding, as well as low-performing areas that could benefit from reduced allocations.

Set Performance Targets  

Based on the strategic goals, set specific, measurable performance targets for programs and services. Common categories include inputs, outputs, efficiency, service quality, and short-, mid-, and long-term outcomes. Targets should be reasonable but challenging.

Allocate Resources to Programs and Activities

With strategic alignment between goals and performance targets, allocate resources across departments and programs accordingly. Shift funds toward high-priority activities and away from ineffective programs.

Implement the Performance Budget

With the budget set, communicate expectations clearly to department heads and program managers. Provide training as needed on tracking performance and reporting. Then implement the budget.

Track Progress and Measure Success

Once the budget is operational, monitor and measure results against the performance targets on a regular basis. Are programs meeting their targets? Where are shortfalls or achievements occurring?

Make Adjustments as Needed

Use the performance data to identify necessary adjustments in resource allocation or performance targets going forward. This completes the feedback loop to support continuous improvement.

Following this step-by-step process requires concerted effort across budgeting, management, IT, and other functions. But it leads to fully integrated performance budgeting that achieves results.

Expert Help for Implementing Performance Budgeting

While the steps above provide an overview, executing performance budgeting can be challenging in practice. From clarifying goals to collecting data to reporting on performance, it requires new capabilities and mindsets. Fortunately, there are experts available to guide and support implementation. Types of expert help include:

Hire a Consultant

Consultants are available who specialize in public sector performance budgeting. They can provide hands-on guidance to establish goals, evaluate programs, set targets, track data, train staff, and more. Consultants enable knowledge transfer so staff builds internal competencies.

Attend Training Workshops  

Look into performance budgeting workshops offered through professional associations and non-profits. Send budget and management staff for hands-on training in implementation best practices, use of data, and overcoming common hurdles. 

Invest in Performance Budgeting Software

Software exists to facilitate and automate parts of the performance budgeting process. Look for user-friendly systems that integrate and analyze cross-departmental data on expenditures, workload, and results. This streamlines implementation and reporting.

Partner with a University

Local colleges and universities may have faculty experts in public budgeting and performance management. Explore research partnerships and student projects to leverage academic knowledge and analytical skills.

The right external support provides an objective perspective plus specialized expertise your organization may lack. It helps avoid common pitfalls and accelerate the learning curve so performance budgeting succeeds.

Conclusion

Performance budgeting is a powerful approach for strategically allocating resources based on measurable results. While the process requires upfront effort, the payoff is substantial in terms of accountability, value, and continuous improvement. Following the eight implementation steps equips organizations to budget based on outcomes versus line items. Securing expert help from consultants, training, software tools, and academic partners is recommended to smooth the transition and learning curve. With sound planning and execution, performance budgeting delivers on its promise to optimize spending and impacts for communities.