CA Fwd Policy Consultant John Maltbie testifies on performance-based budgeting

150 150 John Maltbie

Performance-based budgeting: Does it really work? Yes. Performance metrics are the only way to know government programs are working and how to adjust programs not producing desired results.

We started using performance metrics in San Mateo County in 1999, and we have not looked back. At the time, Outcome-Based Management (OBM) was implemented to track the performance of all county programs, which were required to work toward five outcomes:

  1. A Healthier Community
  2. A More Prosperous Community
  3. A More Livable Community
  4. An Environmentally Conscious Community
  5. A Collaborative Community

Progress on performance is reported quarterly to the Board of Supervisors.  The biennial budget includes analysis of long-term results as part of a ten-year plan.  Each year about one-fifth of all county departments undergo a thorough outcomes and performance operational review.

It took the County six years to fully implement OBM. In the beginning this effort was viewed by departments as time consuming, but now it is an integral part of operations.

As part of OBM, departments keep 50% of any year-end savings, provided performance targets are met.  These savings can be used only for one-time projects that enhance productivity, improve worker safety or save money.

Lessons we learned implementing OBM include:

  1. Rightsizing:
    Some organizations work better when reduced in size, but others are crippled. Finding the right size shouldn’t begin with layoffs, rather by asking whether organizations are doing the right work, aimed at producing the right results, and in the most effective way. Then it is essential to make sure the organization has the right staff with the right skill mix and right tools.
  1. From compliance to accountability:
    From New Zealand and the United Kingdom to Texas, Florida and Oregon examples abound of “performance-based organizations” that have willingly accepted greater accountability in exchange for freedom from rules and regulations that impede performance.
  1. Smarter Work Processes:
    To do more with less, organizations must ultimately change the way they work. Some of this involves wholesale substitution of new methods and strategies. But much of it requires that existing processes -from street repair to tax collection-be streamlined. This is most effectively done when we’re focused on outcomes.

The bottom-line for San Mateo County–In 1995, County General Fund reserves were approximately 3%; in 2008 they were nearly 20%, the County’s Retired Employee Health Plan was 100% funded, and its retirement system was 90% funded.  The implementation of OBM played a significant role in these results.

Citizen disillusionment with government at all levels comes from the feeling that they don’t get a good value for their tax dollars and government doesn’t deliver what it promises.

A Native Americans saying fits California’s current situation well: “When you’re riding a dead horse, the best strategy is to dismount.” You don’t change riders. You don’t reorganize the herd. You don’t put together a blue-ribbon commission of veterinarians. And you don’t spend more money on feed. You get off and find yourself a new horse.

The way we budget in California hasn’t changed very much in half-a-century. Perhaps it’s time to find a new horse!

John Maltbie is policy consultant for CA Fwd


John Maltbie

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