1. Budget Classifications and Reform

2. Point of View A CYNIC knows the price of everything and the value of nothing A SENTIMENTALIST sees value in everything and doesn’t know the price of anything

3. What Budgets Do Allocate public resources, control agency operations, manage service delivery State plans, priorities, performance, and costs Have been used more for control than for resource allocation Have focused on inputs rather than outcomes

4. Budget Strategy Map Inputs (what you bought) Outputs (tasks, activities, what you did) Outcomes (results, what you got)

5. Budget Classification Your budget can be based on: –Organizations –Items Purchased –Activities or tasks –Function, purpose, or program

6. Budget Formats LINE ITEM (INPUT) BUDGET –Based on items purchased (e.g., cars, salaries, gallons fuel) –Control PERFORMANCE BUDGET –Tasks, activities, or direct outputs (e.g., miles of street swept, police patrol hours) –Management PROGRAM BUDGET –Based on a program or purpose or final product Defense, homeland security –Planning

7. Budgeting Flaws Administrative-department basis –Big aggregate, not outcome-focused Budget conventions –Easy to conceal true costs Single-Year Basis –No profile or indication of progress over time Input orientation –Do you get more if you spend more? The question of value –Is the program worth the cost?

8. Line-Item or Input Budgets Classifies according to what is bought Simple Easy to understand Easy to compare to previous years Good for small organizations

9. Problems with Line-Item or Input Budgets Doesn’t tell you what is being done or why Doesn’t tell the cost of an activity Not really result oriented

10. Performance Budgets Classifies according to activities –(miles paved, hours taught, gallons treated) Activities are measured by cost and efficiency –($150k/mile, $.02/gallon) Performance is monitored (planned v actual) Outputs can be tied to producing a result Additional elements include: –Demand –Workload –Productivity –Effectiveness

11. Problems With Performance Budgets Exposes managers to scrutiny, holds them accountable Lawmakers not used to this format Doesn’t question whether the activity is appropriate or worth the cost Expensive to develop

12. Program Budgets Expenditure according to consumer output or public objectives –Product/service lines –Missions –Outcomes

13. Problems With Program Budgets Program may have more than one public objective –Is a military academy higher-education or defense? Cost estimates can’t be used to manage –Shared costs throughout a program Programs aren’t accountable…departments are Little impact on decisions

14. New Performance Budgeting 1.Objectives / Strategic Plan (mission, vision) 2.Performance Measures (goals, measures) 3.Flexible execution (accountable but empowered) 4.Reporting (annual results published) Challenges: Agree on what must be accomplished How to deal with cross-agency issues Costs must be tracked Responsibility without control Trust with no micromanagement Refocused audit Information overload Outcome measurement

15. Program Assessment Rating Tool (PART) Green/Amber/Red Basic questions: –Do you have a plan? –Do you have strategic goals? –What are your measures? –Are you improving/declining? DHS Seven Strategic Goals –Awareness –Prevention –Protection –Response –Recovery –Service –Organizational Excellence

16. Alternative Budget Formats Planning, Programming, and Budgeting System (PPBS) Zero-based Budgeting (ZBB) Target-Based Budgeting

17. Conclusion All models are wrong...some are useful (George Box) …This applies to budget formats also Budgets can help to allocate, control, plan, or manage Budgeting is becoming more sophisticated