performance-based budgeting in louisiana carolyn s. lane deputy director office of planning and...

PERFORMANCE-BASED BUDGETINGIN

LOUISIANA

Carolyn S. LaneDeputy DirectorOffice of Planning and BudgetDivision of AdministrationState of Louisiana

Putting the Pieces Together

September 2006 Louisiana Office of Planning and Budget

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LOUISIANA’S EXPERIENCEHistory

Performance indicators reported in budget for over 50 years, with increased usage in executive budget beginning in 1970s.

Move to program budgeting in early 1990s featured administration guidelines for strategic planning, operational planning, and performance accountability—but no explicit, statutory requirement for these processes.

Act 1465 of 1997 mandated performance-based budgeting.

Some provisions of Act 1465 amended by Act 1169 of 1999, Act 82 of First Extraordinary Session of 2000, and Act 1057 of 2003.


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"It is the intent of the legislature that performance-based budgeting practices

be established throughout Louisiana state government. The legislature

recognizes the value of relating funding to expected performance in order to

ensure efficiency and economy in the expenditure of state funds."

-- Act 1465 of 1997

LOUISIANA’S EXPERIENCEHistory


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LOUISIANA’S MANAGEMENT PROCESSES

STRATEGIC PLANNINGState Strategic Plan – Louisiana Vision 2020Statewide Initiatives – Children’s Cabinet & Workforce DevelopmentAgency 5-Year Strategic Plans

OPERATIONAL PLANNING OPERATING BUDGET DEVELOPMENT & APPROPRIATION

CAPITAL OUTLAY PLANNING 5-Year Plan (updated annually Capital Outlay Request Tracking System (CORTS) CAPITAL OUTLAY BUDGET DEVELOPMENT & APPROPRIATION PROGRAM MANAGEMENT

BUDGET MANAGEMENT

FACILITY MANAGEMENT

HUMAN RESOURCE MGT.

CONTRACT MANAGEMENT

PERFORMANCE ACCOUNTABILITYLa. Performance Accountability System (LaPAS)Performance Progress ReportsProgram and Contract EvaluationsAnnual Management and Program Analysis ReportsPerformance AuditsSunset Review

FINANCIAL ACCOUNTABILITYComprehensive Annual Financial Report (CAFR)Financial & Compliance AuditsInspector General Audits

MONITORING IMPLEMENTATIONAFS ReportsFiscal Status ReportsInternal Performance MonitoringContract Monitoring

STATE 5-YR BASELINE BUDGET PROJECTION REVENUE ESTIMATING CONFERENCE CONSENSUS ESTIMATING CONFERENCEPLA

N

BUDGET

IMPLEMENT

EVALUATE


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Strategic Planning

Statewide Strategic Plans & Initiatives

Louisiana: Vision 2020, 20-Year Economic Development Master Plan

Master Plan for Higher Education

Louisiana Workforce Development

Louisiana Children’s Cabinet

Human Resource Policies that benefit women and families

Louisiana Recovery Authority

Hurricane preparedness plans

Civil Service workforce planning

Office of Information Technology

Gubernatorial special task forces and commissions


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Strategic Planning

Agency 5-Year Strategic Plans Initial plans submitted July 1, 1998

Revisions and updates, at a minimum, every 3 years

Must be carried to program level


CPTP

training in

strategic

planning.


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RESOURCE ALLOCATION

STRATEGIES

OBJECTIVES

GOALS

ACTION PLANS

MISSION & PHILOSOPHY (VALUES)

VISION

ACCOUNTABILITY

INTERNAL/EXTERNAL ASSESSMENT

SITUATION INVENTORY ENVIRONMENTAL SCAN

FORESIGHT

INTERNAL/EXTERNAL ASSESSMENT

SITUATION INVENTORY ENVIRONMENTAL SCAN

FORESIGHT

Components of the Strategic Planning Process


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Performance-based Budgeting (PBB)

Performance-based budgets focus on “return on investment”—that is, what do we get for our investment of state resources?

Basic service level (or continuation of basic services)?

Increased services (more services to same recipients or expansion of same services to more recipients)?

Better (higher quality) services?

More efficient services (cost savings in service delivery)?

Mitigation or resolution of a problem?


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PBB is budgeting for result—with an eye on the price tag.

PBB emphasizes program effectiveness and bases decision making (whether for continuation or enhancement of a program) on outcomes.

However, the costs of achieving those outcomes must be scrutinized to ensure efficient service delivery and maximize allocation of scarce resources.


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Annual Operational Plans

Concise Executive Budget

Detailed Executive Budget Supporting Document

General and Ancillary Appropriation Bills including:

Program Descriptions

General Performance Information

Key Objectives

Key Performance Indicators

General and Ancillary Appropriation Acts with Performance Standards


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Program Structure

Strategic plans, operational plans, and performance-based budgets are geared to program structures.

Funds are appropriated to budget units, BY program.

A program is a grouping of activities directed toward the accomplishment of a clearly defined objective or set of objectives.

Program structure is an orderly, logical array of programs and activities that indicates the relationship between each.


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PROGRAM STRUCTURELouisiana’s Management Processes

BUDGET SCHEDULE orDEPARTMENT

Budget Unit or Agency

Program Program Program Program

ActivityActivityActivityActivity

Activity ActivityActivityActivity

ActivityActivity

Budget Unit or Agency


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Performance Accountability

Quarterly Performance Progress Reports (PPRs) via Louisiana Performance Accountability System (LaPAS)

Reviewed, analyzed, and reported to Joint Legislative Committee on the Budget by Legislative Fiscal Office

Compliance is audited by Office of Legislative Auditor

Performance Audits by Office of the Legislative Auditor

Performance issues and actuals

Validity, reliability, and accuracy of performance indicators



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Performance Accountability Performance-based Rewards and Penalties


The Joint Legislative Committee on the Budget (or a subcommittee thereof) may authorize a reward or impose a penalty based on performance.

A variance greater than 5% between performance standards and actual performance triggers eligibility for reward or penalty.

Act 82 of the First Extraordinary Session of 2000 makes compliance with performance-based budgeting processes an eligibility factor.

Exceptional Performance and Efficiency Incentive Program (Act 1091 of Regular Session of 2001 and Act 111 of First Extraordinary Session of 2002)


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Performance Accountability Sunset Review

Periodic review by legislature of state government entities

Results in termination, re-creation as is, or re-creation with modification)



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Performance-based Contracting

Mandated by Acts 739 and 1424 of 1997

Professional, personal, consulting, or social services contracts over $5,000 must include purpose, goals, objectives, performance indicators, monitoring plan


See the Office of Contractual Review website for more information on contracts and cooperative endeavor agreements.

http://www.doa.louisiana.gov/ocr/index.htm


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As the OPB worked with Louisiana departments and agencies to implement performance-based budgeting, managers raised numerous arguments against the usefulness or possibility of constructing meaningful performance measures. Some were founded on genuine issues; many reflected needed changes in corporate culture. We had to address these concerns.

Humph, only when

Here are the top ten reasons cited by managers who contended that: “This won’t work in my agency!”

INSTITUTIONALIZING PERFORMANCE MEASUREMENT: Louisiana’s Experience


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TOP TEN REASONS WHY PERFORMANCE-BASEDBUDGETING WON’T WORK IN MY AGENCY

10. It doesn’t matter what we do because we have federal funding.

9. We just reorganized and we don’t know what we’re doing yet.

8. Everything is just fine as it is; we’ve always done it this way.

7. We’re too busy getting REAL work done to bother with this.

6. We need more staff, more money, more time, more ( fill in the blank ) to do this.

5. We can’t target outcomes; they’re too specific.

4. We can’t measure what we do.

3. You’ll misinterpret any information we give you.

2. We can’t be accountable because we have no control over anything.

1. We’re different. That act shouldn’t apply to us. We need an exemption.


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OFTEN FOLLOWED BY:

All right, just give me a form and tell me what you want me to say.

TOP TEN REASONS WHY PERFORMANCE-BASEDBUDGETING WON’T WORK IN MY AGENCY

If I give them something, then they’ll go away. (Maybe this

whole thing will just go away.)

NOTE: This genie won’t go back into the lamp. But, we’re still trying to covert compliers into true believers.


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Make performance an integral part of agency management processes.

Use metrics to understand and measure how a process works and the results it generates.

Develop an internal performance accountability process.

Integrate performance into policy and budget decision making and everyday program management.


CPTP

training on

process

improvement.CPTP

training on

internal

accountability.


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POINTER: When you break down a policy, program, or process into its component parts, you use "systems logic" to develop a model of how it should work.

INPUT OUTPUT & OUTCOMEPROCESS

EFFICIENCY

QUALITY

Managers should use metrics to gauge and assess program and processes, diagnose problems, and formulate solutions.


CPTP

training on

process

improvement.


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Metrics (performance indicators) measure process and product.

Inputs Outputs & OutcomesProcess

Efficiency:

OutputsInputs

Outputs or OutcomesCost

Outputs or OutcomesTime

Quality: Effectiveness in meeting the expectations of customers, other stakeholders; and expectation groups.

(Products)(Services)

(Results)

(Expenditures compared to productivity;caseload per staff member.)

(Cost per item produced, serviceprovided, or client served; cost perresult achieved.)

(Production or turnaround time; timeliness of results.)

(Demand)(Need)

(Size of Problem)(Resources)



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The volume of performance information that must be managed can be staggering.

Watch out for the “shotgun” or “kitchen sink” approach--reporting just about every type of measurement or statistic that is already gathered or can be counted easily. This leads to a heavy emphasis on transactional data--inputs and outputs--rather than results.



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As you hone your planning and performance accountability skills, you learn to focus on the quality of performance indicators rather than the quantity.

Further, you learn which performance information needs to remain at internal agency levels for management purposes and which should be reported externally for performance-based budgeting.



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Concentrate on the development of balanced sets of performance indicators in order to provide a clear picture of performance without overwhelming users with needless detail.

Louisiana uses five types of performance indicators: Input Output Outcome Efficiency Quality

A balanced set may include more than one of any indicator indicator type and none at all of some but must have at least one measure of outcome, efficiency, or quality.



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Present performance information at different levels in order to surface key data while maintaining the availability of support and explanatory material.

Louisiana uses:

Key Performance Indicators

Supporting Performance Indicators

General Performance Information

Explanatory Notes

Get consensus among data users on indicator types and levels before indicators are reported.



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A key performance indicator is a performance indicator that is included in the Executive Budget Supporting Document and the General or Ancillary Appropriation Act.

Factors in determining key level include: Most direct measure of outcome? Critical success factor? Big ticket item? Hot button item? History and who values?

Key indicators have performance standards and are reported each quarter in LaPAS.



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A supporting performance indicator is a performance indicator that is included in the Executive Budget Supporting Document, but not the General or Ancillary Appropriation Act.

Supporting indicators have performance standards and are reported at mid-year and yearend in LaPAS.



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General performance information (GPI) is included in the Executive Budget Supporting Document and may be included in the General or Ancillary Appropriation Act. However, values for general performance indicators are reported for prior year actual only.

GPI may include: Multi-year histories or trends External comparisons (national or regional) Disaggregated data

GPI do not have performance standards but are reported in LaPAS at mid-year (prior year actual figure) and yearend (yearend actual figure).



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MANAGING VOLUME AND ACCURACY

We needed a bigger boat.

That’s why we built LaPAS.

(Louisiana Performance Accountability System)


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LaPAS FUNCTIONS

LaPAS provides an electronic, paperless reporting medium for quarterly performance progress reports by state agencies.

LaPAS maintains a database of performance information for use in:

Agency management Policy and budget development and decision making Rewards and penalties based on performance

LaPAS makes performance information readily accessible to the public, with its View and Search functions available via Internet.


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The usefulness of performance indicators is dependent upon their validity, accuracy, and reliability.

MANAGING ACCURACY: Louisiana’s Experience


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Watch out for:

High balls and low balls (unrealistically high or low performance targets)

Instant replays (reporting the same performance level over and over, regardless of circumstances)

Greased pigs (indicators for which name, definition, or method of calculation change so often that you can’t get a handle on them)

Orphans (indicators for which no one claims responsibility)

Statistical illiteracy (calculations that don‘t add up)

Limp excuses (meaningless explanations of performance variances)


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Get the right start by developing meaningful, valid, accurate, and reliable performance indicators.

Agencies required by statute to provide documentation for each performance indicator identified in the strategic plan.

Strategic planning guidelines include performance indicator documentation sheet.


OPB

provides

guidelines.

CPTP

training in

strategic

planning.


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Standardize the way performance information is reported for budget development and verify the data reported.

The OPB provides guidelines and formats for reporting performance in operational plans and other budget request forms. Operational plan workshops for OP coordinators are conducted each fall.

Throughout budget development, the OPB works with agencies to improve and refine performance information. Input from legislative staff is welcomed.

LaPAS (performance database) enables verification of prior year and current year performance data.

Guidelines

& training

provided.



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Make performance reporting as easy as possible for agencies and as controlled as possible for record keepers.

The OPB provides reporting guidelines and LaPAS user guides.

The OPB populates LaPAS and controls agency access; agencies do minimal data entry during reporting periods.

LaPAS automatically calculates variances between performance standards and actuals.

LaPAS maintains an audit trail.

LaPAS allows easy viewing and paperless reporting but has a print function for user convenience.

Guidelines

& user

guides

provided.



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Review and audit performance information.

OPB and legislative staff review and analyze performance data during budget development and throughout fiscal year.

Louisiana’s Legislative Fiscal Office (LFO) reviews and analyzes agency quarterly performance progress reports (PPRs). LFO presents a summary report to the Joint Legislative Committee on the Budget.

Performance audits are conducted by the Performance Audit Division of the Office of the Legislative Auditor.



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INTEGRATING PERFORMANCE INTO BUDGET DECISION MAKING: Louisiana’s Experience

CAPITAL OUTLAY

REQUEST TRACKING

SYSTEM CAPITAL OUTLAY BUDGET

DECISIONS

OPERATIONAL PLAN

OTHER BUDGET REQUEST FORMS

& ADDENDAPERFORMANCE PROGRESS REPORTS

AUDITS & OTHER REPORTS

OPERATING BUDGET

DECISIONS

Louisiana: Vision 2020

AGENCY STRATEGIC PLAN

PERFORMANCE ACCOUNTABILITY


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Incorporate statewide goals, objectives, benchmarks, and management initiatives into budget development.

This enables us to make strategic investments in high priority areas.

Louisiana: Vision 2020 and annual Vision 2020 Action Plan (per Act 1036 of 1999).

Gubernatorial agenda

Louisiana Recovery Authority

Children’s Cabinet


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Establish the link between resources and results early and maintain that link through budget development, appropriation, and budget control processes.


Set performance standards linked to appropriation levels.

• Performance standards are the expected levels of performance associated with a performance indicator for a particular period and funding level. They link dollars and results.

• Performance standards are one way to demonstrate RETURN ON INVESTMENT--what we can expect to receive for our money.


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During budget development, performance indicator values associated with the funding level recommended in the executive budget and appropriation bills are proposed performance standards.

During the appropriation process, performance indicator values become performance standards linked to the funding amounts actually appropriated in the appropriation acts.

Performance standards may be modified only through approved processes (BA-7s or August 15th Performance Adjustments).

Performance standards are monitored and tracked through the Louisiana Performance Accountability System (LaPAS).

Establish the link between resources and results early and maintain that link through budget development, appropriation, and budget control processes.



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How are we doing?

• Louisiana’s scores In national ratings (Government Performance Project) of state Managing for Results efforts:

1995: B+

1999: B

2001: B+

2005: A-

• We are still working on:

Continuing culture change Strengthening integration of performance and budget Automating more performance-based budgeting processes Continuing training


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For more information, please visit the Office of Planning and Budget website at: http://www.doa.louisiana.gov/opb/index.htm

Look for:

• Executive Budget Documents

• LaPAS

• Performance-based Budgeting Forms and Guidelines

• MANAGEWARE: A Practical Guide to Managing for Results

• Links to performance-based enabling legislation and appropriation acts

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