A government budget is one of the most powerful levers of change. Yet most perceive budget processes as notoriously impervious to change. Not necessarily.
At least 20 jurisdictions, including cities, counties, school and park districts, states, and a Canadian province have adopted new budgets built on prioritized outcomes. At PSG, we call this process Budgeting for Outcomes. We pioneered it in 2002 with Governor Locke in Washington.
With more and more jurisdictions tackling budget reform by creating their own version of a priority or outcome-based process, we thought it would be valuable to get some of them together to talk about what works and what doesn’t. Last month, representatives of six jurisdictions in various stages of implementing their new process participated in a conference call.
The discussion showed that this model can successfully challenge the status quo, breathe life into performance measures, make government more results-oriented, bust silos, and prioritize and align spending with the public’s priorities. For all of these reasons, tackling budget reform can be a high-value, high-leverage strategy for government transformation.
One participant talked about how ranking priorities and utilizing data as evidence set up a different and more constructive budget conversation. Others have also emphasized that point. When I led accountability and results for the State of Iowa, we implemented an outcome-based budgeting process and I interviewed leaders after the first cycle for their feedback. One deputy director reflected, “It made me think about things differently. We do these things, to get this result, for this price. I really had to ask myself whether what we were getting was worth that price. I’d never asked that before.”
Isn’t it amazing – and troubling – how traditional budgeting does not prompt that question? Many have also noted how well a priority-based budget communicates to the public, elected officials, the media, and stakeholders. It’s “common sense” communications.
The call participants also discussed challenges they’ve encountered: sustaining the new budget process through changing administrations, figuring out how to handle internal support services, and holding departments accountable for the outcomes they commit to deliver.
On this last question, participants on the call advised relentless follow-up. Outcomes and data need to matter year-round, not just at budget time. One organization is holding a quarterly performance forum with their chief executive and another keeps their teams for outcome prioritization (made up of employees and citizens) in place year-round so the departments can regularly report to them on how well they are achieving their performance goals. The Finance Director noted that “peer-to-peer accountability is very effective.”
At PSG, we’ve found that Budgeting for Outcomes can also launch performance management in organizations that haven’t already gone down that road because it establishes a reasonable number of measures that demand attention. When it works well, departments can attract funding for great new ideas. Of course they also risk their funding in the subsequent budget cycle if they don’t show results in the current one. We’ve also found that it’s easier to implement Budgeting for Outcomes in jurisdictions that already have good performance management in place.
Has your organization reinvented its budget process to better align it with organizational priorities? What worked? What challenges did you face?
If you’re interested in participating in future calls with others who are reinventing their budget processes, please contact me at email@example.com or (651) 227-9774.