Performance Budgeting: States' Experiences Can Inform Federal
Efforts (28-FEB-05, GAO-05-215).
With a number of challenges facing the nation--including a
long-term fiscal imbalance--agencies need to maximize their
performance and leverage available resources and authorities to
achieve maximum value while managing risk. Examining state
efforts to increase the focus on performance and their
experiences in responding to recent fiscal stress can offer
insights into practices that may assist federal decision makers
in addressing the challenges ahead. GAO described for five
selected states--Arizona, Maryland, Texas, Virginia, and
Washington--legislators' use of performance information in budget
deliberations, how performance information helped to inform
choices during fiscal stress, challenges these states face in
implementing and sustaining their efforts, and the potential for
state experiences to inform initiatives to improve the use of
performance information at the federal level. Among other
factors, these states were selected because they have established
histories of performance budgeting efforts and represent a
variety of approaches to implementing those efforts.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-215
ACCNO: A18436
TITLE: Performance Budgeting: States' Experiences Can Inform
Federal Efforts
DATE: 02/28/2005
SUBJECT: Budget administration
Budgeting
Government information
Legislative procedures
Performance measures
State budgets
State legislation
Productivity in government
Federal/state relations
Performance-based budgeting
Arizona
Maryland
OMB Program Assessment Rating Tool
Texas
Virginia
Washington
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GAO-05-215
United States Government Accountability Office
Report to the Chairman, Subcommittee onGAO Oversight of Government
Management, the
Federal Workforce, and the District of Columbia, Committee on Homeland
Security and Governmental Affairs, U.S. Senate
February 2005
PERFORMANCE BUDGETING
States' Experiences Can Inform Federal Efforts
a
GAO-05-215
February 2005
PERFORMANCE BUDGETING
States' Experiences Can Inform Federal Efforts
[IMG]
What GAO Found
Performance measures and the reporting of program performance are
regularly included in the budget processes of the five states GAO visited.
Legislators' expectations that this information will be collected and
reported are supported through both statutory requirements and executive
initiatives. GAO found that the continuing efforts to improve data
collection and to relate this information to structures and processes used
to make resource decisions were reinforced by the increasing capacity of
staff to analyze, synthesize, and incorporate performance information in
ways that make this information more accessible and useful to decision
makers.
State officials described ways in which performance information, including
outcome measures and performance evaluations, was used in budget
deliberations to identify potential impacts of a proposed policy change,
make policy decisions that reduced costs while maintaining effectiveness,
and make changes to improve program effectiveness. However, when
determining funding levels and defining desired levels of service relative
to funding, legislators currently rely most on workload and output
measures.
In addition to using some traditional tools or approaches to address
budgetary shortfalls, such as across-the-board cuts or tax increases, most
states GAO visited also developed new initiatives that considered existing
performance information among other factors to respond to revenue
shortfalls. For example, three states created prioritization initiatives
that framed trade-offs according to how programs contributed to achieving
statewide goals. Three of the states also established efficiency
commissions to identify opportunities for cost savings by improving the
structure and function of state government.
Although the states GAO visited all demonstrated ways in which performance
information was used in budget deliberations, officials in every state
described challenges in developing and presenting performance information
that is both credible and useful. Despite these challenges, these states
have demonstrated a commitment to performance budgeting efforts by
continuing to refine their approaches in response to those challenges.
Success in performance budgeting requires time, agreement on the selection
of measures reported, and understanding of different perspectives. The
states are working toward this success.
GAO convened a panel to discuss the implications of our state findings for
the federal government. Panelists were encouraged that performance
information has influenced legislative budget decisions in the states, but
advised that demand for performance information in Congress may take
longer because of the complexity of its processes and committee
structures. Most also agreed that the federal government will need to
transcend agency borders and take a more crosscutting view of performance
to address fiscal challenges, but did not reach consensus on a model or
method for doing so.
United States Government Accountability Office
Contents
Letter
Results in Brief
Background
Performance Information Has Influenced Legislative Budget
Deliberations in the States Examined
During Periods of Fiscal Stress, States Supplemented Existing Tools with
Priority-Setting and Efficiency Initiatives to Respond to Revenue
Shortfalls
States Face Challenges but Continue to Demonstrate a Commitment to
Performance Budgeting Efforts Implications of State Performance Budgeting
Experiences for the Federal Government Observations
1 3 5
9
12
16
19 22
Appendixes
Appendix I:
Appendix II:
Appendix III:
Appendix IV:
Appendix V:
Appendix VI:
Appendix VII:
Objectives, Scope, and Methodology 26
Overview of Arizona's Budget Process and
Performance-Related Requirements, Processes, and
Initiatives 29
Overview of Maryland's Budget Process and
Performance-Related Requirements, Processes, and
Initiatives 38
Overview of Texas's Budget Process and
Performance-Related Requirements, Processes, and
Initiatives 45
Overview of Virginia's Budget Process and
Performance-Related Requirements, Processes, and
Initiatives 51
Overview of Washington State's Budget Process and
Performance-Related Requirements, Processes, and
Initiatives 57
GAO Contacts and Staff Acknowledgments 64
Contents
Tables Table 1: Table 2: Table 3: Table 4: Table 5:
Table 6: Table 7: Table 8: Table 9: Summary of State Performance Budgeting
Processes Summary of Arizona's Budget Process Summary of Arizona's
Performance Budgeting Process Summary of Maryland's Budget Process Summary
of Maryland's Performance Budgeting Process Summary of Texas's Budget
Process Summary of Texas's Performance Budgeting Process Summary of
Virginia's Budget Process Summary of Virginia's Performance Budgeting
Process
8 29 32 38
39 45 48 51 54 57
58 Table 10: Summary of Washington's Budget Process
Table 11: Summary of Washington's Performance Budgeting Process
Figures Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure
7:
Example of Performance Information Presented in
Arizona's Executive Budget 34
Example of Performance Information Presented in
Arizona's General Appropriation Act 35
Example of Performance Information Presented in
Maryland's Executive Budget 41
Example of Texas's General Appropriation Act
Structure 47
History of Texas Sunset Advisory Commission Action,
1979-2003 50
Summary of Key Components of Virginia's Government
Performance and Results Act 53
Example of Washington's Priorities of Government
Framework 62
Contents
Abbreviations
BRAC Base Realignment and Closure
CPS Child Protective Services
DBM Department of Budget and Management
DLS Department of Legislative Services
DPB Department of Planning and Budget
GASB Government Accounting Standards Board
GOBPP Governor's Office of Budget, Planning, and Policy
GPRA Government Performance and Results Act of 1993
JLAC Joint Legislative Audit Committee
JLARC Joint Legislative Audit and Review Committee
JLBC Joint Legislative Budget Committee
LBB Legislative Budget Board
MFR Managing for Results
NASBO National Association of State Budget Officers
NCSL National Conference of State Legislatures
OAG Office of the Auditor General
OFM Office of Financial Management
OLA Office of Legislative Audits
OMB Office of Management and Budget
OSPB Office of Strategic Planning and Budget
PAR program area review
PART Program Assessment Rating Tool
POG Priorities of Government
SAC Sunset Advisory Commission
SAO State Auditor's Office
SPAR strategic program area review
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
A
United States Government Accountability Office Washington, D.C. 20548
February 28, 2005
The Honorable George V. Voinovich
Chairman, Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia Committee on Homeland Security and
Governmental Affairs United States Senate
Dear Mr. Chairman:
With a number of challenges facing the nation-including a growing
long-term fiscal imbalance-it is critical to reexamine the relevancy of
federal programs and their fit with national goals, while maximizing
program performance within current and expected resource levels.1 The
implementation of performance budgeting efforts is an important step in
doing so.2 Although federal performance and accountability reforms have
given much attention to increasing the supply of performance information
over the past several decades, the promise of any performance budgeting
initiative lies in its potential to infuse that information into budget
deliberations. As attention in the federal government shifts to increasing
the demand for and use of performance information in budget deliberations,
we look to the states-which have also put in place structures for the
collection and use of performance information-to identify practices that
may be useful if applied at the federal level. Because states have
recently faced fiscal stress,3 insights into their use of performance
information in budget deliberations may also offer lessons for the federal
government as it addresses its fiscal challenges.
To better understand the progress states have made in using performance
information in the budget process, you asked us to examine some
performance budgeting tools and initiatives employed by state governments
with the goal of understanding what lessons can be learned at
1 For more information on reexamination of federal programs, see GAO, 21st
Century Challenges: Reexamining the Base of the Federal Government,
GAO-05-325SP (Washington, D.C.: February 2005).
2 In this report, the term performance budgeting refers to any linkage
between budgeting and expected or actual evidence-based performance
information.
3 According to the National Association of State Budget Officers' Fiscal
Survey of the States (April 2004), since 2001, states have had to respond
to decreasing revenues and rising mandatory costs.
the federal level. As discussed with your staff, the objectives of this
report were to describe for selected states (1) whether and, if so, how
legislators are using performance information in budget deliberations; (2)
whether performance information helped to inform budgetary choices during
fiscal stress and, if so, how; (3) challenges states face in implementing
and sustaining performance budgeting efforts; and (4) the potential for
state experiences to inform initiatives to improve the use of performance
information in budget deliberations at the federal level.
To address these objectives, we selected Arizona, Maryland, Texas,
Virginia, and Washington for site visits based on the results of a
literature search, review of state documents, consultation with experts on
state government, and initial phone interviews with state officials. There
were a number of factors that we considered in our selection of states,
but most important we sought to choose states that had established
histories of performance budgeting efforts and that represented a variety
of approaches to implementing those efforts.
In the selected states, we interviewed central budget and planning staff,
their legislative counterparts, senior officials from the governors'
offices, and-in some instances-members of the general assembly to get
their perspectives. We also interviewed staff members from executive and
legislative oversight entities, such as audit and sunset review staff,
that analyze and provide performance information to decision makers.
Because the states selected are not a representative sample, our findings
and conclusions are not generalizable to the experiences of other states.
As part of our effort to identify how state experiences could inform
initiatives to improve the use of performance information in budget
deliberations at the federal level, we convened a panel of federal
officials and academics familiar with the federal budget process and
performance budgeting concepts to review a summary of our findings and
conclusions and to identify the potential relevance of what we found for
federal performance budgeting efforts. Each state was given an opportunity
to review and confirm statements made and examples used about its
experiences. Any technical or clarifying comments that were provided as
part of that review have been incorporated where appropriate. We conducted
our work from February 2004 through January 2005 in accordance with
generally accepted government auditing standards. See appendix I for more
details on our scope and methodology.
Results in Brief We found that performance information has influenced
legislative budget deliberations in the states examined. Although a number
of factors, including political choice, influence budget decisions, when
legislators do use performance information they find specific types of
performance information useful in performing different functions. They use
outcome measures and performance evaluations in budget deliberations to
identify potential impacts of a proposed policy change, make policy
decisions that reduce costs while maintaining effectiveness, and make
changes to improve program effectiveness. However, when determining
funding levels and defining desired levels of service relative to funding,
legislators currently rely most on workload and output measures.4
Since 2001, states have faced severely constrained budget conditions due
to declining revenues and rising costs. In the past when revenues
declined, states relied heavily on several tools or approaches to address
shortfalls, such as across-the-board cuts, tapping rainy day funds,
delaying expenditures, and in some cases increasing taxes and fees.
However, during recent periods of fiscal stress, most of the states we
examined did not rely solely on these tools. In addition to using some of
the traditional tools, states also developed new initiatives that
considered performance information among other factors to make additional
spending adjustments. For example, Maryland, Virginia, and Washington
developed prioritization efforts that frame trade-offs according to how
programs contribute to achieving statewide goals. However, their impact or
long-term viability cannot be assessed because they are either too new-as
is the case in Washington-or not yet fully implemented. Arizona, Maryland,
and Virginia also formed efficiency commissions that were tasked with
identifying opportunities for cost savings by improving the structure and
function of state government. Although each of these commissions did
result in some improvements, the extent to which the commissions' efforts
assisted in addressing budget shortfalls was somewhat limited because most
recommendations were not implemented.
4 Output measures refer to the products and services that a program
delivers, while outcome measures reflect the results of delivering a
program's products and services. In measuring the performance of a
job-training program, for example, an output measure could be the number
or percentage of program participants who completed the training. An
outcome measure, on the other hand, could be the number or percentage of
program participants employed 1 year after the training.
The states examined face challenges in developing and presenting credible
and useful performance information. For example, state officials said data
reliability concerns and a lack of consensus by stakeholders on the
selection of measures that are reported detract from the credibility of
performance information. Several states have taken steps to address these
issues, including having state auditors or legislative oversight entities
audit selected measures and attempting to more actively involve
stakeholders in shaping performance budgeting efforts. In addition, some
state officials said that the large quantity of performance information
that is reported limits its use in budget deliberations because it is
difficult for decision makers to quickly identify the most relevant
information; although we were told that budget and planning staff have
grown increasingly important in distilling the most useful information and
presenting it to decision makers. Officials from several states also said
that their states are taking steps to be more selective in the measures
that are reported. States were less optimistic about their efforts to
address difficulties in aligning budget and planning structures because
such efforts represent more than structural or technical changes. They
also involve important trade-offs among different and valid perspectives,
including the needs of legislators and different levels of executive
branch management. Only one of the states examined has fully implemented
such a structural alignment, but officials in that state reported that
challenges remain in satisfying the needs of various stakeholders. Despite
facing challenges, the states we examined have also demonstrated a
commitment to performance budgeting efforts by continuing to refine their
approaches in response to those challenges.
We convened an expert panel to discuss the implications of state
performance budgeting experiences for the federal government. Many members
of our panel were encouraged that performance information has influenced
legislative budget decisions in the states we examined. Some saw this as a
promising bellwether of things to come at the federal level but advised
that developing demand for performance information in Congress will take
more time than it has in the states because of the complexity of
congressional processes and committee structures. The panelists pointed to
a number of long-standing challenges-many of which were similar to those
in the states-that, if addressed, could promote legislative use of
performance information. Perhaps most important, several panelists said
that legislators need an incentive to use performance information and that
as budget constraints become more difficult, the federal government-like
the states-may well find ways to use performance information in
considering budgetary trade-offs. To make performance information useful
in addressing federal fiscal challenges, most of the panelists agreed that
the
states' experiences demonstrate that the federal government will need to
transcend agency boundaries and take a more crosscutting view of
performance. However, there was no consensus on a model or method for
doing so. While several panelists felt that rather than develop a new
process for prioritizing government activities, the federal government
should work within existing systems and prioritization processes, others
thought that extraordinary measures would be necessary to effectively use
performance information in addressing fiscal stress.
Background For many years, reform efforts in federal, state, and local
governments have attempted to change the emphasis of budgeting from its
traditional focus on incremental changes in inputs to the allocation of
resources based on program goals and measured results. Many refer to this
linkage between resources and results as performance budgeting. Although
that term can be used narrowly to describe mechanistic linkages between
formal performance metrics and resource allocations, in this report we use
performance budgeting to refer generally to any linkage between budgeting
and expected or actual evidence-based performance information, including
information from stand-alone performance audits and evaluations as well as
formal performance metrics. Thus, we use the term performance budgeting to
describe a process that encourages the routine collection, reporting, and
consideration of performance information from a variety of sources in
resource decision making, and not to any particular approach.
Federal interest in performance information and its potential relationship
to budgeting practices has existed to varying degrees for over 50 years.5
More recently, this interest culminated in the passage of the Government
Performance and Results Act of 1993 (GPRA).6 This legislation mandates
5 For a detailed examination of previous federal performance budgeting
initiatives, see GAO, Performance Budgeting: Past Initiatives Offer
Insights for GPRA Implementation, GAO/AIMD-97-46 (Washington, D.C.: Mar.
27, 1997).
6 Pub. L. No. 103-62 (1993).
that federal agencies develop performance information describing the
relative effectiveness and efficiency of federal programs as a means of
improving the congressional decision-making process. Among other statutory
obligations, GPRA requires federal agencies to publish strategic and
annual plans describing specific program activities with the intention of
establishing a more tangible link between performance information for
these programs and agency budget requests.7 Furthermore, the current
administration has made budget and performance integration one of its top
five management priorities. As part of this initiative, beginning in
fiscal year 2005 the Office of Management and Budget (OMB) required
agencies to submit what it describes as performance budgets linking each
agency's strategic goals with related long-term and annual performance
goals and include the costs of specific activities that contribute to the
achievement of these goals.8 Also central to the budget and performance
integration initiative is OMB's Program Assessment Rating Tool (PART),
which rates programs on their purpose/design, strategic planning,
management, and results using a diagnostic tool comprised of a series of
questions.9 These assessments are done in conjunction with OMB's review of
agency budget requests and the results are reported in the President's
budget submission to Congress. Using PART as a diagnostic tool, the
administration expects to assess all federal programs by 2007 when the
president transmits his fiscal year 2008 budget proposal to Congress.
The landscape of performance budgeting at the state level has also changed
over the last decade. We last reviewed state performance budgeting efforts
in 1993.10 In that study we found that states that were considered to be
7 For more information on federal efforts to implement GPRA, see GAO,
Results-Oriented Government: GPRA Has Established a Solid Foundation for
Achieving Greater Results, GAO-04-38 (Washington, D.C.: Mar. 10, 2004).
8 For a detailed examination of this effort, see GAO, Performance
Budgeting: Efforts to Restructure Budgets to Better Align Resources with
Performance, GAO-05-117SP (Washington, D.C.: February 2005).
9 For a detailed examination of the use of PART, see GAO, Performance
Budgeting: Observations on the Use of OMB's Program Assessment Rating Tool
for the Fiscal Year 2004 Budget, GAO-04-174 (Washington, D.C.: Jan. 30,
2004).
10 GAO, Performance Budgeting: State Experiences and Implications for the
Federal Government, GAO/AFMD-93-41 (Washington, D.C.: Feb. 17, 1993). The
states examined were Connecticut, Hawaii, Iowa, Louisiana, and North
Carolina.
among the leaders in performance budgeting had begun to create a supply of
performance information that program managers were using as a management
tool. However, at that time performance measures and statewide performance
budgeting efforts had not attained sufficient credibility to influence
resource allocation decisions. Since then states have had more time to
establish performance budgeting requirements, to develop or refine
performance measures, and to evaluate and report on program results.
According to a recent study,11 the use of performance measurement is
pervasive across the states-with all 50 states now having performance
budgeting requirements that include both strategic planning and the
regular collection and reporting of performance information. That study
also found that performance measurement systems in the states have evolved
rather than withered in the last decade.
The five states we visited-Arizona, Maryland, Texas, Virginia, and
Washington-have had performance budgeting requirements, systems, and
processes in place for 7 or more years. Table 1 summarizes these
processes. For more details, see appendixes II through VI.
11 Julia Melkers and Katherine Willoughby, Staying the Course: The Use of
Performance Measurements in State Governments (Washington, D.C.: IBM
Center for the Business of Government, 2004).
Table 1: Summary of State Performance Budgeting Processes
Alignment
between Required
as
Performance planning Level that Method part of Primary
and used agency method of
budgeting budget measures to submit budget publicly
are reporting
State legislation? structures? submitted measures request? measures
Arizona Yes No Annual Yes Appropriation
Program program act
operating
plans
Yes No Annual Yes Executive
Maryland Agency and budget budget
program requests document
Texas Yes Yes Strategic Yes Appropriation
Strategies plans act
(by and
agency) electronic
quarterly
updates
Yes No Internet No Virginia
Virginia Agency Results
Web site
Yes No Biennial Yes Executive
Washington Agency and budget budget
program requests document
Source: GAO.
Note: Based on analysis of testimonial evidence, documentation collected,
or both.
As of 2004, all of the states we examined had enacted legislation that at
a minimum requires agencies to define their missions and strategic goals
and integrate performance measures that can be used to determine whether a
program has achieved its goals. See section II of appendixes II through VI
for additional information on each state's statutory requirements.
Although several of the states we examined have undertaken efforts to
better align their budget and planning structures, only Texas has fully
implemented this effort. In Texas, funds are appropriated by agency goals
and strategies, which are defined in the agency's strategic plan.
Strategies set forth actions to be taken by an agency to achieve its
goals. There may be multiple strategies under one goal. Funding is
provided at the strategy level. For more information about the states'
budget structures, see section I of appendixes II through VI.
Although there are some commonalities in each state's approaches to
collecting, reporting, and reviewing performance information, such as
requiring agencies to develop performance measures as part of a strategic
planning process, no two states have taken an identical approach. For
example, among the states examined legislative and executive budget and
planning staff are involved to varying degrees in agency efforts to select
and define measures for reporting. Most of the states allow agencies to
independently choose the measures they report, but in Texas agencies work
with legislative and executive budget staff throughout the strategic
planning and budgeting processes to determine the measures they will
report in the next biennial budget. States also have different methods for
publicly reporting the performance information that they collect. Most of
the states report performance information in executive budget documents,
as well as strategic and annual performance plans. Some also have this
information available on Web sites. Of the states we examined, Texas and
Arizona are the only two that present performance measures in their
general appropriation acts. See section III of appendixes II through VI
for additional information on the states' systems and processes.
External parties-including the federal government, bond rating companies,
and national organizations-have influenced the development and
sustainability of state performance budgeting efforts. Many federal grant
programs, for example, require states to report on program performance in
order to receive funding. Bond rating companies, whose ratings affect a
state's ability to finance government projects, include the public
reporting of performance information as a criterion for assessment in the
rating process. In addition, efforts by organizations such as the
Government Performance Project, National Association of State Budget
Officers, Governmental Accounting Standards Board, and National Conference
of State Legislatures, which track and compare the progress of state
governments in developing and using performance information, have advanced
state performance budgeting efforts by setting the expectation that states
have performance budgeting efforts in place and creating interstate
competition to drive those efforts forward.
Performance
Information
Has Influenced
Legislative Budget
Deliberations in the
States Examined
States' performance budgeting efforts have evolved over the last decade by
increasing the supply of performance information and its infusion into
executive budget formulation. We found that performance information has
also influenced legislative budget deliberations in the states examined.
Although a number of factors, including political choice, influence budget
decisions, when legislators do use performance information they find
specific types of performance information useful in performing different
functions. They use outcome measures and performance evaluations in budget
deliberations to identify potential impacts of a proposed policy change,
make policy decisions that reduce costs while maintaining effectiveness,
and make changes to improve program effectiveness. However, when
determining funding levels and defining desired levels of service relative
to funding, legislators rely most on workload and output
measures. None of this information, however, led to automatic budget
decisions. Instead, it helped to inform budget deliberations by
highlighting problems, supporting claims, or enriching the debate.
Legislators Sometimes Draw on Outcome Measures and Performance Evaluations
in Budget Decision Making
Officials from most of the states examined were able to describe instances
in which outcome measures and performance evaluations were useful in
budget deliberations. Information about programmatic outcomes can help
legislators discern the potential impacts of proposed policy changes. When
presented convincingly, this information can even lead legislators to
change previously established positions on policy proposals. In Arizona,
for example, one executive branch official said that performance
information was used in the fiscal year 2004-05 budget debate to prevent
the elimination of a nearly $10.8 million drug treatment program that
supplies psychotropic drugs to the seriously mentally ill. The chairmen of
both the House and Senate Appropriation Committees had supported
elimination of this program. However, the program's director was able to
retain legislative support by describing how the 9,000 participants were
benefiting from the program and the potential social and economic impacts
of its termination. For example, without the program, many of its
participants are at risk of becoming involved in illegal activities and
entering hospitals or jails- costing the state as much as $450 a day.
Legislators have also used outcome measures to change policy when the
results showed that a program could be just as effective at lower cost.
For example, a legislative official in Virginia said that legislators
regularly use performance information published by the Virginia Criminal
Sentencing Commission, a judicial branch agency, in making funding
decisions for prisons, jails, and community-based alternatives to
incarceration. This official provided a specific example in which
performance information was key to a policy decision that affected the
politically sensitive area of criminal sentencing guidelines. During the
2003 session, the General Assembly used the commission's analysis of
recidivism rates to increase the number of low-risk, nonviolent offenders
who are recommended for diversion from jail under the sentencing
guidelines, based on the commission's finding that this step would not
substantially affect the overall rate of recidivism. This policy change
may lead to cost savings by reducing the need for future prison
construction.
In addition, legislators used performance information to identify
opportunities to improve program effectiveness. According to one state
official, performance evaluations can be particularly useful to
legislators in
assessing program effectiveness because they can provide greater insight
into the impact of programs than performance measures alone, which are
often inconclusive. This official also said performance evaluations
provide context for performance measures and can help create viable
recommendations for legislators to consider. In all of the states
examined, oversight entities, such as state or legislative auditors,
produce performance evaluation reports that serve as a source of
performance information for legislators. Although the recommendations in
these reports typically focus on nonfinancial operational improvements
that can be made at the agency level, implementation of some of these
recommendations can have a budgetary impact. In Maryland, for example,
after several audits revealed performance issues, including instances of
abuse and poor conditions within at least two juvenile corrections
facilities, the General Assembly introduced legislation requiring the
Department of Juvenile Services to develop a master facilities plan. This
plan is to be based on a set of principles established in the legislation
and should include outcome measures that are to be used to assess service
delivery. This legislation also included a provision requiring the state
to take control of one of the facilities from a third-party vendor, even
though, according to the Maryland Department of Legislative Services, the
costs associated with taking control were likely to be higher than they
had been with the vendor.
Legislators Currently Use
Workload and Output
Measures More Often
Than Other Types of
Performance Information in
Making Budget Decisions
Although most states were able to point to instances in which outcome
measures and evaluations were useful in budget deliberations, state
officials said that workload and output measures are currently more
directly linked to budget decisions than other types of performance
information. Workload and output measures lend themselves to the budget
process because workload measures, in combination with cost per unit
information, can be used to help develop appropriation levels and
legislators can more easily relate output information to a funding level
to help define or support a desired level of service.
In most of the states examined, we were told that legislators expect
agencies to produce and present information about workload and output
measures in their budget submissions and during budget hearings.
Legislators sometimes use performance measures to determine how agencies'
service levels would change in response to increases or decreases in
funding. Legislators can also relate these measures to funding levels in a
straightforward way. For example, legislative officials in Virginia said
that information about the number of students in the education system is
used
in combination with information about costs per pupil to help determine
education appropriations.
Legislators also sometimes used performance information more directly to
link appropriations to expected results by setting performance targets for
service delivery. For example, during its 2003 special session, the
Arizona legislature established a set of performance targets for the Child
Protective Services (CPS) and tied portions of the CPS appropriation to
those targets. The legislature appropriated nearly $2 million in staffing
salaries "to meet national staffing standards for child protective service
caseloads," and another approximately $1.7 million in an effort "to fund a
one hundred per cent investigation rate."
Legislative involvement in target setting can be important in motivating
agencies to perform better. For example, when legislators set targets that
are higher than what agencies would establish on their own, it can push
agencies to more closely scrutinize their operations and funding
allocations in an effort to achieve those targets. Legislative officials
told us that absent legislative scrutiny of performance targets, agencies
may deflate them to look as if they are exceeding expectations.
During Periods of Fiscal Stress, States Supplemented Existing Tools with
Priority-Setting and Efficiency Initiatives to Respond to Revenue
Shortfalls
Since 2001, states have faced severely constrained budget conditions due
to declining revenues and rising costs. In the past when revenues
declined, states relied heavily on several tools or approaches to address
shortfalls, such as across-the-board cuts, tapping rainy day funds,
delaying expenditures, and in some cases increasing taxes and fees.
However, one of the arguments for focusing on results is that in times of
fiscal stress, performance information can help decision makers make more
informed budgetary trade-offs, even if it cannot be expected to provide a
single budgetary answer or replace considered judgment and political
choice. In fact, one official reported that in periods of fiscal stress
even agencies that perform well may receive significant cuts. During
recent periods of fiscal stress in the states we visited, neither past
tools and approaches nor information from performance measurement systems
alone was sufficient to address actual or expected downturns in their
fiscal conditions. In addition to using more traditional approaches,
several of the states developed prioritization initiatives that consider
performance information among other factors to frame trade-offs according
to how programs contribute to achieving statewide goals. Some states also
formed efficiency commissions that were tasked with identifying
opportunities for cost savings by improving the structure and function of
state government.
Several States Developed Statewide Prioritization Initiatives during
Periods of Fiscal Stress
Although all of the states we visited continued to rely on available tools
and approaches to address budgetary shortfalls, Maryland and Washington
also developed new prioritization initiatives that consider performance
among other factors to help make trade-offs between service provision and
resource constraints. Virginia also developed an effort to align decision
making and agency operations with long-term statewide priorities, but this
effort was not developed specifically to address the state's fiscal
stress. However, the impact or long-term viability of these states'
initiatives cannot be assessed because they are either too new-as is the
case in Washington-or not yet fully implemented. Washington's next budget
cycle will provide an opportunity to assess whether their prioritization
approach can be routinized and better adapted to its normal budget
process. Maryland and Virginia have yet to fully implement their efforts.
See section IV of appendixes III, V, and VI for more information on each
state's prioritization initiative.
The prioritization approaches used by these states vary in language,
formality, and structure, but the general premise is the same-identify
several statewide goals and prioritize programs according to how critical
they are to achieving these goals. For example, Washington's Priorities of
Government (POG) initiative-which was designed to prioritize state
government services and develop a budget reduction strategy when the state
faced a potential budgetary shortfall of approximately $2.4 billion for
the 2003-05 biennial budget-categorizes all state programs and services
into 11 results areas. A guidance team and 11 results teams that
correspond with each of the results areas were developed to implement the
POG process. The results teams were led by Office of Financial Management
(OFM) budget or policy staff and consisted of six to eight subject-matter
experts from executive branch agencies with knowledge and background in
the particular results area. Each of the results teams was tasked with
evaluating and "mapping" the factors that influence or drive the result
that it wanted to achieve. Based on this map, they were asked to transcend
agency silos to identify ways to better and more efficiently achieve the
desired outcomes in their respective areas and recommend high-level
purchase strategies to agencies to inform the development of their budget
proposals. To develop their strategies, the teams used whatever
information was available, including existing research and internal
analyses, not just information from the existing performance measurement
system. Ultimately, POG helped OFM to develop the 2003-05 executive budget
proposal. Budget activities were ranked by contribution to the results,
and a line was drawn at the dollar amount allocated to the result.
Activities below the line were listed in order to identify how changes in
revenue might affect service provision.
According to Washington's OFM, the POG framework is meant to provide
several benefits, including (1) helping to keep the focus on contribution
to results-getting out of agency silos; (2) making performance information
more relevant to budget choices; (3) facilitating thinking about
trade-offs above and below the line and across results areas; and (4)
helping to frame broad questions like, "Why does the line have to be drawn
here?" One Washington legislator said that POG provided decision makers
with proposed priorities in a clear and easily understood format that
encouraged constructive debate. POG allowed the governor to reframe the
budget discussion by highlighting priorities and what would be funded in
the governor's budget proposal rather than just showing what would be cut.
Legislative officials said that the greatest contribution of POG was that
it provides a strong, clear means of communicating budgetary trade-offs to
both decision makers and the public.
One of the principal criticisms that officials in Washington expressed
about POG was its lack of alignment and integration with formal planning,
performance, and budgeting systems. Officials said that this limited the
usefulness of POG because, in the end, the budget process was conducted in
much the same way as it had been in past years. However, POG was created
late in the budget process for the 2003-05 biennium, and Washington is
attempting to address this issue in the next budget cycle. In developing
their budget requests for the 2005-07 biennium, agencies will submit both
performance measures and budget requests at the activity level to more
clearly link expected performance to the budget. In addition, agencies are
expected to submit performance measures that link budget activities to the
POG results areas. According to the Joint Legislative Audit and Review
Committee, these and other efforts to better integrate POG into the
2005-07 budget development process will make it easier for decision makers
to use performance measures in budget deliberations.
The other states' initiatives are not yet fully implemented and thus
cannot currently provide detailed lessons learned. Maryland's
initiative-called Strategic Budgeting-will be used to develop the fiscal
year 2006 budget, for which the state has projected a significant
shortfall. To implement Strategic Budgeting, Maryland's Department of
Budget and Management has asked agencies to prioritize their fiscal year
2006 funding requests according to how they address key outcomes related
to the administration's five pillars-Education, Health and the
Environment,
Public Safety, Commerce, and Fiscal Responsibility-as well as agency and
program missions. This initiative is expected to help decision makers
understand the trade-offs of funding one program over another within and
across multiple agencies and the impact those trade-offs can have on
achieving goals. Virginia's prioritization initiative-the Council on
Virginia's Future-is a long-term restructuring effort that is expected to
better integrate long-term goals and performance information into the
budget decision-making process. Specifically, the council is charged by
legislation with developing a road map for Virginia's future that includes
long-term goals and objectives as well as key progress indicators to help
direct decision making and guide agency operations in delivering services.
It is intended to identify priority issues for the long term, create an
environment for improved policy and budget decision making, and improve
citizen knowledge and understanding. According to one legislative
official, the council has the potential to significantly improve the
state's budget process by shifting funding priorities toward those efforts
that support the achievement of broader strategies. This official said
that effective and consistent leadership would be key to sustaining this
effort because of the council's broad mandate and extensive time line for
implementation.
Several of the States Examined also Developed Efficiency Commissions
during Fiscal Stress to Supplement Existing Tools
During the recent period of fiscal stress that began in 2001, the
governors of Arizona, Maryland, and Virginia formed commissions tasked
with improving the efficiency and effectiveness of state government. There
was variation in each commission's approach, but all of them were intended
to help improve state services. Maryland's and Virginia's commissions were
short term, existing a year or less, and both developed a broad range of
recommendations. Arizona's Efficiency Review is a long-term effort that
attempts to identify crosscutting strategic issues affecting many agencies
and developing enterprisewide approaches for delivering services.
Arizona's review also solicits, prioritizes, and helps implement
agencyspecific efficiency ideas generated from state employees.
All three commissions examined a wide range of issues to identify
redundant and ineffective services. Officials in each of these states said
that the commissions' efforts did result in some improvements, most of
which were managerial or operational. For example, Arizona's Efficiency
Review found that multiple departments in the state were offering their
employees many of the same or similar types of training courses. In
response, some of the duplicative courses have been consolidated, thus
reducing the overall training costs in the state. Virginia's commission
recommended that the state establish an enterprisewide approach to
acquiring technology services. This recommendation was implemented by
establishing the Virginia Information Technologies Agency.
According to state officials, the extent to which the commissions' efforts
assisted these states in addressing budget shortfalls was somewhat limited
because most recommendations were not implemented. In Maryland, for
example, state officials said the commission generated 54 recommendations,
but only a few of these have been implemented. An official in this state
attributed the low rate of implementation to the fact that the efforts
lacked credibility with decision makers and presented few recommendations
that were politically feasible to enact. In Virginia, an official said
that decision makers had little trust and support for that state's
commission because of a lack of transparency in the commission's
methodology for developing recommendations.
States Face Challenges but Continue to Demonstrate a Commitment to
Performance Budgeting Efforts
The states we examined face a range of challenges in developing and
presenting credible and useful performance information. However, the
states have demonstrated a commitment to performance budgeting efforts by
continuing to refine their approaches in response to those challenges.
Officials in some states said that concerns regarding the reliability of
agency-reported performance measures detract from the credibility of such
performance information, causing decision makers to distrust and sometimes
discount it. Although audits of agency-reported performance information
can help address this issue, the amount of time and effort needed to
exhaustively review the measures reported by all state agencies may be
prohibitive. However, state auditors or legislative oversight entities in
all of the states we visited periodically review selected agency
performance measures. The Texas State Auditor's Office, for example,
conducts periodic reviews to determine whether selected agencies have
adequate control systems for the collection of performance measures and
whether these measures are accurately reported.12
State officials also reported that a lack of consensus by stakeholders on
the selection of measures that are reported detracts from the credibility
of performance information. To address this issue, several states are
taking
12 In its last review of performance measures, which was done in 2002, the
Texas State Auditor's Office found serious deficiencies in the collection,
calculation, and reporting of key measures in 12 of the 14 entities that
were audited.
steps to more actively involve budget and planning staff in assisting
agencies with identifying and selecting those performance measures that
will be most helpful to decision makers. This involvement can help improve
the credibility of performance information by ensuring agencies present a
balanced picture of performance and do not simply choose measures that
highlight good performance. In addition, at least one state has attempted
to broaden buy-in. The Council on Virginia's Future involves stakeholders
from both the executive and legislative branches as well as the public.
According to one legislative official, any performance management
initiative has to have a certain level of transparency and agreement among
all interested parties, including the legislature, the executive branch,
citizens, and community leaders. According to this official, a past
performance measurement initiative failed because it was executive driven,
with all measures selected by the state's executive budget and planning
office with little buy-in from other stakeholders.
Another challenge that officials in every state we visited described was
effectively using the large quantities of performance information
generated by state agencies. According to some of these officials,
decision makers are overwhelmed with the quantity of information available
to them, and they find it difficult to locate what would be most useful in
addressing their particular needs. However, as they have become more
familiar with performance information over the years, state officials said
that legislative and executive budget and planning staff have become more
effective at analyzing performance information, distilling the most useful
information, and presenting it to decision makers. To help inform budget
deliberations in Maryland, for example, staff from the Department of
Legislative Services develop and provide legislators with program
summaries that outline recent budget and performance trends. Several
states we visited also described efforts to reduce the number of
performance measures that are collected and reported. These states are
attempting to get agencies to focus on reporting only a key set of
measures that will be most relevant and useful to decision makers when
making budget decisions. Texas, for example, continually attempts to
reduce the number of measures that are reported in its budget document.
Texas has been collecting performance information for over 10 years and,
over time, has been able to reduce the total number of measures reported
by state agencies. According to a state official, Texas used to report
over 3,000 key measures in its biennial budget document, and an additional
8,000 nonkey measures were maintained in the state's performance
information system. Currently, it has reduced these numbers to 2,100 key
measures and 4,000 nonkey measures. Texas officials said that they still
have too many measures but that they continue to try to
find ways to reduce the quantity of measures that are reported to make the
system more manageable and useful.
One of the biggest challenges state officials described is aligning and
integrating planning and budget structures in a way that meets the needs
of all the stakeholders involved in the process. Efforts to align and
integrate budget structures involve more than structural or technical
changes. They also involve important trade-offs among different
perspectives, including those of legislators, and different entities and
levels of executive branch management.13 Three of the states we examined
have undertaken efforts to better align and integrate their budget and
planning structures, but only Texas has already fully implemented this
effort. However, Texas's experience illustrates that structural alignment
and integration is not a panacea. In Texas, funds are appropriated by
agency goals and strategies, which are defined in an agency's strategic
plan. Strategies set forth actions to be taken by an agency to achieve its
goals. There may be multiple strategies under one goal. Strategies in
larger agencies can be as large as $500 million and contain multiple
programs, whereas strategies in very small agencies can be as small as a
few thousand dollars. Officials in Texas expressed frustration with the
existing structure because they have found it difficult to identify
specific cost-accounting line items, particularly when the state needed to
make spending cuts. When the state faced a budgetary shortfall of $1.8
billion in fiscal year 2003, prior to the development of the 2004-06
biennial budget, the Legislative Budget Board created greater transparency
in agency budget requests by asking agencies to identify and rank
essential services-referred to as building blocks-up to an identified
spending limit. An executive branch official said the building blocks
approach was useful because it provided a level of program and funding
visibility that is lacking in its current budget format, which lays out
appropriations according to strategies within agencies as opposed to
programs or line items. Although officials said the building blocks
approach would likely be helpful in developing future budgets, they said
that the state does not plan to make immediate wholesale changes to the
way the budget is currently presented in the General Appropriation Act.
However, they also said that the legislative and executive branches
continue to work together to adjust the budget structure to better meet
stakeholder needs.
13 For more information about federal efforts to align and integrate
budget and performance information, see GAO-05-117SP.
Implications of State Performance Budgeting Experiences for the Federal
Government
Many members of our panel were encouraged that performance information has
influenced legislative budget decisions in the states we examined. Some
saw this as a promising bellwether of things to come at the federal level
but advised that developing demand for performance information in Congress
will take more time than it has in the states because of the complexity of
congressional processes and committee structures. We have previously
reported that challenges confronting federal agencies in developing
performance information that is useful to congressional decision makers
will take time to resolve.14 Several panelists noted that unlike many
states, the federal government separates its appropriations and
authorization functions, which they viewed as a significant difference in
governance. Based on the states' experiences, several panelists thought
that structural reform of congressional committees may contribute to
increased legislative use of performance information at the federal level.
Panelists also noted that at the federal level, research institutions,
trade associations, and "good government" organizations have a significant
role in influencing policy. Several panelists suggested that such
organizations should be involved in promoting legislative use of
performance information.
Despite their general optimism about the potential for performance
information to inform decision making at the federal level, the panelists
cautioned against having unrealistic expectations for legislative use.
There was general agreement that it is a mistake to measure success in
performance budgeting only by appropriators' use of performance
information. In 1997, we noted that success or failure should not be
judged on whether contentious budget and other policy issues are fully
resolved; rather, it will likely turn on the extent to which the
information produced helps Congress and the executive branch make informed
policy decisions and improve program management.15 Moreover, panelists
said that this information was just as important for authorization,
budget, and government oversight committees and that authorization
committees may actually be the best place to begin cultivating demand.
Most of the panelists agreed that even in the best case, budgeting will be
performance-informed not performance-based because a number of factors
affect
14 GAO, The Government Performance and Results Act: 1997 Governmentwide
Implementation Will Be Uneven, GAO/GGD-97-109 (Washington, D.C.: June
1997), pp. 74-5.
15 GAO/GGD-97-109, p. 90.
decision making, not the least of which is political choice.16 One
panelist noted that the greatest impact of our state findings could be the
implications they may have for intergovernmental relations. As states
continue to increase their use of performance information in making budget
decisions, he believes the federal government could arguably consider
giving states more authority to make decisions about how to spend federal
dollars.
The panelists pointed to a number of long-standing challenges that, if
addressed, could promote legislative use of performance information. A
number of these challenges have been identified in our work over the past
decade.17 Many were also similar to those we found in the states. One
panelist attributed the current lack of legislative demand to perceptions
that performance information (1) is not timely and reliable, (2) displaces
information that appropriators and their staff value, and (3) is viewed as
representing "the administration's" perspective. Pointing to the important
roles that legislative and audit staff have played in legislators' use of
performance information in the states, several panelists suggested that
greater involvement by federal legislative branch entities in analyzing
and presenting performance information could lead to increased trust and
use of the information. Consistent with a challenge we have cited since
1992, another panelist suggested that legislators are not using
performance information because agencies have not provided them with
reliable cost data. To help address this, he said, and we have also
suggested,18 that in accordance with the CFO Act and subsequent related
legislation, agencies should develop financial management systems that
integrate budget, performance, and cost information.19 Perhaps most
important, several
16 Dr. Philip Joyce, Associate Professor of Public Policy and Public
Administration at George Washington University, coined the term
"performance-informed budgeting" to better characterize the role of
performance information in the budget process.
17 We have previously highlighted a number of these challenges and
provided guidance on approaches for addressing them. See, for example,
GAO-04-38; Results-Oriented Budget Practices in Federal Agencies,
GAO-01-1084SP (Washington, D.C.: August 2001); GAO/GGD-97-109; and
Executive Guide: Effectively Implementing the Government Performance and
Results Act, GAO/GGD-96-118 (Washington, D.C.: June 1996).
18 See GAO/GGD-97-109, p. 93.
19 For information about federal agencies' efforts to link performance,
budget, and financial information, see GAO, Managing for Results: Agency
Progress in Linking Performance Plans With Budgets and Financial
Statements, GAO-02-236 (Washington, D.C.: Jan. 4, 2002).
panelists said that legislators need an incentive to use performance
information and that as budget constraints become more difficult, the
federal government-like the states-may well find ways to use performance
information in considering budgetary trade-offs.
To make performance information useful in addressing federal fiscal
challenges, most of the panelists agreed that the states' experiences
demonstrate that the federal government will need to transcend agency
boundaries and take a more crosscutting view of performance. However,
there was no consensus on a model or method for doing so.20 Several
panelists felt that rather than develop a new process for prioritizing
government activities, the federal government should work within existing
systems and prioritization processes. Some expressed concern that
developing an effort similar to the state prioritization initiatives would
detract from efforts to further implement existing initiatives, such as
GPRA.21 Another panelist thought continued attention to existing
initiatives that examine performance at a micro level might eventually
lead to macro reforms, such as prioritization. Panelists also said that
decision makers already have means to lay out their priorities through the
President's Budget and the Congressional Budget Resolution.22 However,
several panelists noted that the budget resolution process has not been
effective for several years. One panelist said that Congress should use
the authorizations and appropriations processes to prioritize, but others
said that the authorizations process does not receive sufficient
attention- about 40 percent of current programs are not authorized-and the
appropriations committees are not structured to make crosscutting
trade-offs.
In contrast to those who thought the federal government should work within
existing processes to prioritize programs and make budgetary trade-offs,
some thought that extraordinary measures would be necessary
20 We have identified several tools and approaches that may assist the
federal government in making crosscutting trade-offs to address fiscal
challenges. For information, see GAO-05-325SP, pp. 77-90.
21 For more information on federal efforts to implement GPRA, see
GAO-04-38.
22 In the past, we have also suggested that Congress could develop a
performance resolution tied to the budget resolution to establish its
oversight priorities. For more details see GAO-05-325SP, pp. 86-7 and
Budget Issues: Effective Oversight and Budget Discipline Are
Essential-Even in a Time of Surplus, GAO/T-AIMD-00-73 (Washington, D.C.:
Feb. 1, 2000).
to effectively use performance information in addressing fiscal stress.
One panelist advocated an initiative-much like the Council on Virginia's
Future-that establishes governmentwide priorities, relates indicators of
progress to the priorities, and requires agencies to tie their individual
plans and performance measures to those priorities and indicators.23
Others agreed that there may be benefits to this approach, but thought
that unlike the council, a federal initiative should be housed in either
the executive or legislative branch (or both, but not as one effort) and
that it should not involve participants from outside the government.
Another panelist suggested that the federal government could develop a
process-similar to the federal Base Realignment and Closure (BRAC)
process-that would establish a commission to develop governmentwide
priorities, analyze performance information, and develop a set of funding
recommendations to be considered in its entirety by Congress.24 Several
panelists thought that such a model would help to make politically
sensitive funding trade-offs more palatable.
Observations Performance language and tools have become part of the
culture of governance. Ten years ago, we concluded that performance
information had not reached the point where it was regarded as credible
for resource decision making in states that were considered leaders at the
time. Ten years later, performance measurement and reporting of
information in state budget presentations has become the expectation
rather than the exception in the states we visited. Unlike 10 years ago,
when it looked as if statewide performance budgeting initiatives would
change with each administration, the states we visited have not only
sustained but also institutionalized their systems and most are now taking
steps to refine
23 Our work examining indicators systems developed by individuals and
institutions at the local, state, and regional levels across the United
States-as well as in some other nations and the European Union-revealed
that indicators systems have shown evidence of positive effects, such as
improving decision making, enhancing collaborations on issues, and
increasing the availability of knowledge. For more information on these
indicator systems, see GAO, Informing Our Nation: Improving How to
Understand and Assess the USA's Position and Progress, GAO-05-1
(Washington, D.C.: Nov. 10, 2004). For more information on efforts to
develop a national key indicators system in the United States, See GAO,
Forum on Key National Indicators: Assessing the Nation's Position and
Progress, GAO-03-672SP (Washington, D.C.: May 2003).
24 The BRAC process uses a nine-member commission appointed by the
President and confirmed by the Senate to develop a package of
recommendations that is considered, in its entirety, by the President and
Congress.
them in response to ongoing challenges. There is a similar trend at the
federal level. Our recent retrospective of GPRA and its effect on federal
programs revealed that GPRA has laid a solid foundation for
resultsoriented agency planning, measurement, and reporting and
increasingly has become a part of agencies' cultures.25 In addition, OMB,
through its development and use of PART, has more explicitly infused
performance information into the budget formulation process and increased
the attention paid to evaluation and performance information.
Over the intervening years, as data collections and processes have become
more robust in states' executive branches, greater attention has been
given to increasing legislative demand. An important element to building
demand has been the role that states' legislative staff have played in
analyzing performance information and infusing it into the structures and
processes used by legislators. States have also taken steps to increase
communication both within and across branches of government to broaden
buy-in on what is measured and how. To some degree, these efforts have
paid off. In the states we visited, we found that legislators are
interested in and use performance information to meet their needs,
primarily to define or diagnose a problem or to support a position or
decision. Similarly, congressional committees have used information
generated by GPRA for reauthorization hearings and increasingly public
laws and committee reports show references to GPRA and PART provisions,
but our expert panel participants indicated that more could be done to
cultivate higher demand for and use of performance information, including
in congressional budget deliberations. As the federal government moves
forward with implementation of new or existing initiatives, the states'
experiences suggest that increased use of performance in decision making
is facilitated when the goals and measures are supported by a diverse
group of stakeholders.
Under the crucible of fiscal stress, several states went beyond existing
performance and budgeting frameworks. Faced with the need to reexamine
existing programs to address daunting fiscal shortfalls, states did not
rely solely on traditional budget-cutting strategies, such as
across-the-board reductions. They recast the decision-making framework
itself by creating new outcome-oriented frameworks to help set priorities
and look across agencies and programs in making budgetary trade-offs.
Performance information helped states understand the relationship among
programs and
25 GAO-04-38, pp. 6-7.
their relative contributions to outcome priorities. These state
experiences illustrate how performance information can potentially help
refocus the nature of the trade-offs and discussions in the
decision-making process itself.
The federal government is also facing large fiscal shortfalls-both in the
near and the long term. As we have recently reported, the size of the
fiscal gaps will prompt the need to reexamine what the federal government
should do, how it does business, and how it should be financed.26 Like the
states, a more outcome-oriented approach may assist the federal government
in rethinking how its existing base of programs addresses these national
goals. We previously have suggested that fully developing the
governmentwide performance plan provided for under GPRA would help us
better focus on the relative contribution of portfolios of programs
cutting across agencies to broader outcomes or goals.27 Congress could
also consider focusing its oversight and review on these important
overarching goals and missions by considering adopting a performance
agenda of its own. One approach we have suggested is a performance
resolution that could be included as part of the annual budget resolution
to help target congressional activity on key program areas or performance
problems.28 Regardless of the specific combination of reexamination
approaches adopted, the ultimate success of this process will depend on
several important overarching conditions, including sustained leadership
to champion changes and reforms through the many stages of the policy
process, broad-based input by a wide range of stakeholders, reliable data
and credible analysis from a broad range of sources, and clear and
transparent processes for engaging the broader public in the debate over
the recommended changes.
26 See GAO-05-325SP.
27 See GAO-05-325SP; Results-Oriented Government: Using GPRA to Address
21st Century
Challenges, GAO-03-1166T (Washington, D.C.: Sept. 18, 2003);
Results-Oriented
Government: Shaping the Government for the 21st Century, GAO-03-1168T
(Washington, D.C.: Sept. 17, 2003); Performance Budgeting: Opportunities
and Challenges,
GAO-02-1106T (Washington, D.C.: Sept. 19, 2002); and Office of Management
and Budget:
Future Challenges to Management, GAO/T-GGD/AIMD-00-141 (Washington, D.C.:
Apr. 7, 2000).
28 See GAO-05-325SP and GAO/T-AIMD-00-73.
As agreed with your staff, unless you publicly announce the contents of
this report earlier, we plan no further distribution of it until 30 days
from the date of this letter. At that time, we will provide copies to
other interested parties and make additional copies available upon
request. This report will also be available at no charge on the GAO Web
site at http://www.gao.gov.
If you or your staff have any questions concerning this report, please
contact me at (202) 512-9573 or [email protected] or Denise Fantone at (202)
512-4997 or [email protected]. Additional key contributors to this report
are listed in appendix VII.
Sincerely yours,
Paul L. Posner Managing Director Federal Budget Issues, Strategic Issues
Appendix I
Objectives, Scope, and Methodology
The objectives of this report were to describe for selected states
1. whether and, if so, how legislators are using performance information
in budget deliberations;
2. whether performance information helped to inform choices during fiscal
stress and, if so, how;
3. challenges states face in implementing and sustaining performance
budgeting efforts; and
4. the potential for state experiences to inform initiatives to improve
the use of performance information in budget deliberations at the federal
level.
In order to address the first three objectives, we sought to study states
that had established histories with performance budgeting, including
executive or legislative requirements, and represented a variety of
approaches to implementing those efforts. We also sought states that had
demonstrated legislative interest in performance budgeting by involving
legislative staff or offices in analyzing and using performance
information, as well as states that in addition to having formal
performance measurement systems, had other means of generating and
analyzing performance information, such as systematic reviews or program
analyses or special commissions, like those for efficiency reviews.
To identify states with these characteristics, we asked knowledgeable
academics from the performance management and budgeting fields, as well as
relevant officials at the National Conference of State Legislatures
(NCSL), the National Association of State Budget Officers (NASBO), the
Government Accounting Standards Board (GASB), and the Urban Institute for
recommendations on states to consider including in our study. We also
identified and reviewed relevant literature, including studies, reports,
and state government Web sites. Based on our research and analysis, as
well as the input from academics, NCSL, NASBO, GASB, and the Urban
Institute, we selected a preliminary group of nine states for more
in-depth consideration. In each of these states, we conducted a series of
teleconference interviews with senior budget officials, budget and policy
analysts, or both in the legislative and executive branches. From the
information gathered in these interviews, we determined that five states-
Appendix I
Objectives, Scope, and Methodology
Arizona, Maryland, Texas, Virginia, and Washington-met our selection
criteria and selected all five of these states for site visits.
In each of the states we visited, we conducted semistructured interviews
of central budget and planning staff; their legislative counterparts;
senior officials from the governors' offices; staff members from executive
and legislative oversight entities that analyze and provide performance
information to decision makers, such as audit and sunset review staff;
and-in some instances-members of the general assembly to obtain a range of
perspectives on the relationship between performance information and the
budgeting process. In these interviews, we asked about the role of that
office in the budget process and decision making, the availability and use
of performance information, perceptions of the quality and usefulness of
the information, and use of performance information during fiscal stress.
We also collected documentary evidence from these officials to supplement
testimonial evidence, where available. We analyzed and summarized the
information collected from the selected states in an effort to identify
common themes and practices in performance budgeting at the state
government level.
Because the states selected are not a representative sample, our findings
and conclusions are not generalizable to the experiences of other states
that have engaged in performance budgeting efforts. Because it was not
directly relevant to our objectives, we did not independently evaluate the
relevancy, reliability, or timeliness of states' performance information,
but instead relied upon state auditor reviews for such information, as
well as state officials' perspectives on these issues. Similarly, we did
not independently verify the quality assurance processes used by states to
monitor the establishment and review of performance measures, but instead
relied upon testimonial evidence and state-authored documentation of these
processes.
To examine ways in which these state experiences could potentially be used
to improve the use of performance information in budget deliberations at
the federal level, we hosted an expert roundtable discussion where
participants discussed the potential relevancy and applicability to the
federal government of the reported state experiences with performance
budgeting. To identify potential participants with recognized expertise in
performance-related budgeting practices at the federal level, we relied on
sources we had used in state selection, as well as our experience in this
area, to compile a list of individuals with diverse backgrounds in the
field. From this pool of potential participants, we
Appendix I
Objectives, Scope, and Methodology
selected six individuals who represented a cross section of knowledge and
experiences from academia and government-five of whom accepted our
invitation to participate on the panel.
Each state was given an opportunity to review and confirm statements made
and examples used about its experiences. Any technical or clarifying
comments that states provided have been incorporated where appropriate. We
conducted our work from February 2004 through January 2005 in accordance
with generally accepted government auditing standards.
Appendix II
Overview of Arizona's Budget Process and Performance-Related Requirements,
Processes, and Initiatives
Section I: Overview of Budget Process and Structure
Table 2: Summary of Arizona's Budget Process
Budget Agency Governor
Frequency guidelines Agency submits Fiscal
of requests
Frequency of legislative sent to submitted hearings budget to Legislature
to year
budget cycle cycle agencies governor held legislature adopts budget begins
Annual/biennial Annual June September January- January January-April July
February
Source: GAO.
Note: Based on analysis of testimonial evidence, documentation collected,
or both.
In 1997, Arizona enacted legislation that established a biennial budgeting
process.1 However, more recent legislation,2 passed in 2002, requires 16
of the state's larger agencies to submit annual budgets and allows the
governor to request budget estimates more often than every 2 years from
all state agencies. Despite the bifurcated budget cycle, the budget
process time line is the same for all agencies, regardless of whether they
function on an annual or biennial cycle. However, biennial agencies have
fewer reporting requirements midbiennium.
Arizona's budget process begins on or before June 1, when the Office of
Strategic Planning and Budget (OSPB), an executive branch agency, issues
instructions to guide agencies in preparing their budget requests. Agency
requests are submitted to OSPB and its legislative counterpart, the Joint
Legislative Budget Committee (JLBC), by September 1, unless an agency was
granted an extension from OSPB. From September through January, OSPB
reviews agency budget requests and prepares the governor's Executive
Budget Recommendation, which must be submitted to the legislature in early
January. JLBC staff also review agency requests and the governor's budget
recommendation to prepare an alternative budget for the legislature.
Legislative review and deliberation of the two budgets begins
1 1997 Ariz. Sess. Laws ch. 210, S:7. 2 2002 Ariz. Sess. Laws ch. 210, S:2.
Appendix II Overview of Arizona's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
shortly after the regular session convenes. Both the Senate and House
appropriation committees hold public hearings. The committees may adopt
the executive budget, the JLBC staff budget, a budget containing elements
of both budgets, or an entirely new budget. Once adopted, the bill is then
presented to the governor for approval. The governor holds the right to
both a full veto and line-item veto. The legislature may override any veto
with a two-thirds vote.
Arizona is transitioning to a program budgeting structure. In 1997, the
state passed legislation that established program budgeting to allow the
format of the General Appropriation Act to be converted from line items of
expenditure to a list of programs representing the most important
activities of each agency.3 The legislation allowed for a phased approach
to implementation. By fiscal year 2006, all agencies will be required to
submit their requests using their program list structure. When Arizona
completes the transition to program-based budgeting, it expects to align
the planning and budgeting functions so that performance and budget
information can be reported in the same system.
Section II: Overview of Performance and Accountability Requirements
According to JLBC, Arizona passed legislation in 1993 to establish a
program review process for state government. This law required each agency
to develop a strategic plan that included a mission statement, goals,
objectives, and performance measures. It also required OSPB to develop a
master list of state agency programs and created a 4-year pilot program to
complete 75 program area reviews (PAR). Under these reviews, agencies
completed self-assessments of designated programs. OSPB and JLBC staff
analyzed the self-assessments to develop findings on the efficiency and
effectiveness of the programs' operations and then made recommendations on
whether to retain, eliminate, or modify the programs.
In 1995, Arizona amended the PAR process by updating the list of PAR
programs.4 This legislation also requires agencies to submit 3-year
strategic plans for each program and subprogram and performance measures
in both agency and program operating plans. OSPB publishes this
information in the Master List of State Government Programs. The 1997
legislation
3 1997 Ariz. Sess. Laws ch. 210, S:14. 4 1995 Ariz. Sess. Laws ch. 283.
Appendix II Overview of Arizona's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
further amended the PAR process to make it permanent and to require that
PARs be conducted in even-numbered years (the second year of the 2-year
legislative term) to avoid legislator and staff time conflicts with the
budget. The legislation also required the speaker of the House of
Representatives and the president of the Senate to appoint sufficient
joint PAR committees to evaluate the OSPB and JLBC staff findings. Each
committee was required to have three appointed private citizens, in
addition to legislative members representing both parties, and to hold at
least one public hearing. In 1999, the PAR process was replaced with the
strategic program area review (SPAR) process.5 SPAR is similar to PAR in
that it is based on OSPB and JLBC findings derived, in part, from
agency-authored self-assessments and culminates in the decision to retain,
eliminate, or modify a program area. However, SPARs focus on program areas
addressed by multiple agencies.
Legislation passed in 2002 further changed the planning process by
distinguishing between long-range planning (strategic) and short-range
planning (operational) tied to budget cycles and performance measures.6
This legislation requires each of the 16 annual budget agencies to develop
and post on its Web site a 5-year strategic plan for the entire agency and
to update this plan annually as necessary. In addition, this legislation
modified the requirements for agency-level operating plans to require
agencies to submit mission statements, descriptions, and strategic issues
in lieu of goals and measures, which are no longer required at the agency
level.
5 1999 Ariz. Sess. Laws ch. 210. 6 2002 Ariz. Sess. Laws ch. 210 S:10.
Appendix II Overview of Arizona's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Section III: Overview of Performance Measurement System and Processes
Table 3: Summary of Arizona's Performance Budgeting Process
Performance Primary method of
budgeting Level that Method used to Required as publicly
measures are submit part of reporting
agency
legislation? submitted measures budget measures
request?
Yes Annual program Yes
Program operating Appropriation act
plans
Source: GAO.
Note: Based on analysis of testimonial evidence, documentation collected,
or both.
In Arizona, agencies submit performance information to OSPB at the program
level through program operating plans that contain mission statements,
descriptions, goals, performance measures, and budgetary data. Agencies
also develop and annually submit to OSPB and JLBC agencywide operating
plans, which are to contain mission statements, descriptions, and
strategic issues. In addition, annual budget agencies are required to
annually submit 5-year strategic plans that must contain strategic issues,
mission statements, descriptions, goals, strategies, and resource
assumptions.
Agencies are given some latitude in how they define both programs and the
measures they use in tracking the performance of those programs. However,
once OSPB concurs with the program structures, changes cannot be made
without its consent and JLBC staff consultation. Similarly, once OSPB and
an agency agree to a set of key measures for each of these programs, the
agency cannot change them without OSPB's consent. Arizona does not have a
formal process for validating agency-reported performance information.
However, some agency performance audits conducted by the Arizona Office of
the Auditor General (OAG) include an examination of the adequacy of
agency-reported goals and performance measures. As appropriate, the
auditor general will recommend changes to the performance measures that
agencies use to improve their quality and relevance.
Appendix II Overview of Arizona's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Every 2 years, OSPB compiles the program operating plan submissions into
the Master List of State Government Programs. This master list is meant to
provide decision makers and citizens with one complete document for
tracking state program budgets and recent and expected performance. OSPB
also uses the program performance information to develop the executive
budget, which includes recommended funding levels and recent and expected
performance goals based on funding. Figure 1 provides an example of how
performance information is presented in the governor's executive budget.
Appendix II Overview of Arizona's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Figure 1: Example of Performance Information Presented in Arizona's
Executive Budget
Source: State of Arizona.
Note: Information from Arizona's fiscal year 2003-05 executive budget.
Appendix II Overview of Arizona's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
In addition to publicly reporting program performance measures through the
Master List of State Government Programs and the executive budget
proposal, Arizona reports performance information in the General
Appropriation Act, which contains funding recommendations along with
performance targets for selected measures. Figure 2 provides an example of
how performance information is presented in the Arizona General
Appropriation Act.
Figure 2: Example of Performance Information Presented in Arizona's
General Appropriation Act
Note: Information from Arizona's fiscal year 2004-05 General Appropriation
Act.
Another aspect of Arizona's performance measurement process is the SPAR
process. Through SPARs, JLBC and OSPB assess the performance of state
government programs and determine whether they are achieving the desired
results. The SPARs are a permanent part of the biennial budget process and
result in decisions to retain, eliminate, or modify particular programs.
The SPAR process undertakes crosscutting performance reviews of government
services that span several programs and agencies. In 2001, the SPAR
process produced three reports examining state funding
Appendix II Overview of Arizona's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
assistance provided to counties, state special education programs, and
children's case management services. Because of resource constraints
during the recent period of fiscal stress, the SPAR process has been
suspended since 2002. However, officials from both OSPB and JLBC expect to
reinitiate SPARs as part of future budget processes.
Arizona also has a sunset review process through which existing state
agencies are reviewed for potential elimination.7 Sunset processes work by
setting a date on which an agency will be abolished unless legislation is
passed to continue its functions. The OAG, which is responsible for
coordinating, and in many cases conducting, the state's sunset reviews,
provides the Joint Legislative Audit Committee (JLAC) with a list of
agencies scheduled for termination in the upcoming biennium. JLAC decides
which agencies will undergo sunset reviews by the auditor general and
which agencies will be reviewed by the committees with jurisdiction in the
legislature. At least one public hearing is held to discuss the agency or
program under review. When the reviews are complete, the OAG makes
recommendations in a public report and presents its findings and
recommendations to the committees in the legislature, which then consider
a number of factors in deciding whether to recommend to the full
legislature that an agency be continued, eliminated, or modified.
Section IV:
Overview of Other
Performance-Related
Initiatives
In January 2003, Governor Janet Napolitano established an Efficiency
Review program and team to improve the performance and efficiency of
Arizona state government. The review attempts to identify ways for
agencies, and the government as a whole, to reduce costs, cut bureaucracy,
eliminate duplication, and improve customer service using a two-pronged
approach: (1) identify individual agency cost saving and cost avoidance
opportunities and (2) develop crosscutting, statewide projects that will
generate additional savings.
The Efficiency Review team developed recommendations in a number of areas.
The recommendations ranged from changing agency travel and training
policies to ensuring more efficient and effective use of electronic
resources. The Efficiency Review team examined several agencies
individually to identify areas for potential savings. Specifically, it
reviewed and developed a number of recommendations for the Arizona
Departments
7 A.R.S. S:S:41-2951-41-2958.
Appendix II Overview of Arizona's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
of Health Services, Juvenile Corrections, Public Safety, Transportation,
and Game and Fish, as well as the Health Care Cost Containment System. The
Efficiency Review team also developed recommendations for crosscutting,
statewide projects to generate cost savings.
Appendix III
Overview of Maryland's Budget Process and Performance-Related Requirements,
Processes, and Initiatives
Section I: Overview of Budget Process and Structure
Table 4: Summary of Maryland's Budget Process
Budget Agency Governor
Frequency guidelines submits Fiscal
of requests
Frequency legislative sent to submitted Agency budget to Legislature
of to year
budget cycle agencies governor hearings legislature adopts begins
cycle held budget
Annual Annual June August October- January April July
November
Source: GAO.
Note: Based on analysis of testimonial evidence, documentation collected,
or both.
Maryland operates on annual budget and legislative cycles. The Department
of Budget and Management (DBM) issues budget instructions to agencies in
June. Agencies then develop their budget requests and submit them to DBM
for review by August 31. The governor reviews DBM's recommended budget and
submits the executive budget to the General Assembly in January. From
January through April, the General Assembly, primarily through the Senate
Committee on Budget and Taxation and the House Committee on
Appropriations, reviews the executive budget, holds hearings, and passes
budget bills. By constitutional provision,1 the General Assembly may only
concur with or reduce the budget of the executive branch unless it
establishes a means for supporting the increased spending with additional
revenue. However, the General Assembly may reduce, concur, or increase the
appropriations for the legislative and judicial branches. The governor has
no veto authority over the enacted fiscal year budget.
Maryland's General Appropriation Act is structured by agencies and
programs. There are variations in the structure depending on the level at
which appropriations are made. Some agencies have broader spending
authority than others.
1 Md. Const. art. III, S:52.
Appendix III Overview of Maryland's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Section II: Overview of Performance and Accountability Requirements
Maryland's performance and accountability requirements were originally
established under DBM's budget and planning process in 1997 but were not
codified in law or under executive order until the 2004 legislative
session when the Managing for Results (MFR) legislation was passed
unanimously by both the House and Senate and signed by the governor.2 This
legislation requires DBM to develop a comprehensive state MFR plan with
objectives and performance measures. Additionally, it requires state
agencies, in conjunction with DBM, to select no more than six goals per
agency that are either compatible with the statewide MFR plan or are
otherwise consistent with the agency's mission if the goals identified in
the comprehensive plan do not apply to the agency. As part of the budget
process, each agency must develop and submit an agencywide MFR strategic
plan to DBM. Agencies must also maintain documentation of the internal
controls they use to ensure the accuracy of the performance information
they collect and report. Both state agency measures and the internal
controls are subject to review by the state legislative auditor. Beginning
in January 2005, DBM must provide a report to the House and Senate budget
committees in January of each year on the contents of the statewide MFR
plan and the state's progress toward the goals outlined therein.
Section III: Overview of Performance Measurement System and Processes
Table 5: Summary of Maryland's Performance Budgeting Process
Performance Primary method
of
budgeting Level that Method used to Required as publicly
measures are submit part of reporting
legislation? submitted measures agency budget measures
request?
Yes Agency and Annual budget Yes Executive
program requests budget
document
Source: GAO.
Note: Based on analysis of testimonial evidence, documentation collected,
or both.
2 2004 Md. Laws ch. 452.
Appendix III Overview of Maryland's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Maryland's MFR initiative is principally a strategic planning process that
is intended to set organizational direction, determine priorities, and
establish desired program results and outcomes. Agencies and programs are
expected to develop outcome measures that are based on customer needs and
expectations. Agencies and departments are also expected to develop
performance measures to track the progress of programs in achieving the
organizational mission, goals, and objectives. This performance
information is intended to improve agency and program planning and inform
budget decisions.
As part of their annual budget request, DBM requires agencies to submit
missions, key goals, and performance measures at both the agency and
program levels. Agencies independently select and report the performance
information that is included in their budget requests. DBM does not have a
formal role in this process. However, the Office of Budget Analysis within
DBM reviews these submissions and considers the performance information in
developing the executive budget. DBM publicly reports performance
information in the executive budget, which contains the mission, vision,
strategic goals, objectives, and performance measures for each agency.
Figure 3 provides an example of this information.
Appendix III Overview of Maryland's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Figure 3: Example of Performance Information Presented in Maryland's Executive
Budget
Source: State of Maryland.
Note: Information from Maryland's fiscal year 2005 Executive Budget.
Appendix III Overview of Maryland's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
In 2000 the Maryland Office of Legislative Audits (OLA) in the Department
of Legislative Services (DLS) began auditing agency performance measures.
OLA conducts selective reviews of agency performance measures to determine
their accuracy. OLA also determines whether adequate control systems are
in place for collecting, summarizing, and reporting the performance
measures.
Maryland also has a sunset review process.3 Nearly 70 agencies or other
state entities are subject to a sunset review because they have
termination dates in their authorizing statutes, which typically means
legislative action must be taken to reauthorize them. The sunset reviews
are intended to determine whether there is a continued need for state
regulation or involvement in an area and to ensure legislative review
takes place. These evaluations also determine the accountability,
efficiency, and effectiveness of agency operations and finances. Agencies
subject to sunset review typically undergo preliminary evaluation 2 years
before their scheduled termination dates. DLS conducts these evaluations
and makes recommendations to the Legislative Policy Committee. That
leadership body determines whether a full evaluation should be undertaken.
If an agency is chosen for a full evaluation, it is assigned to committees
of the General Assembly. DLS then undertakes a full evaluation on behalf
of these committees and issues a report. The designated committee holds a
public hearing at which DLS presents the findings and recommendations of
the evaluation. The committees report their recommendations to the full
General Assembly along with the legislation necessary to implement the
desired changes and reauthorize the entity.
Section IV:
Overview of Other
Performance-Related
Initiatives
Maryland Strategic According to state estimates, Maryland faces a
significant structural budget Budgeting shortfall for fiscal year 2006. To
address this potential shortfall, DBM
3 Maryland Program Evaluation Act, Md. Code Ann., state gov't
S:S:8-401-8-413 (2004).
Appendix III Overview of Maryland's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
introduced a new approach to developing the state's budget, called
Strategic Budgeting. Strategic Budgeting attempts to more directly link
agency and program priorities with funding priorities. The administration
has selected five pillars-Education, Health and the Environment, Public
Safety, Commerce, and Fiscal Responsibility-to frame budget priorities.
Agencies are expected to prioritize and fund programs in fiscal year 2006
according to how they address agency and program missions, as well as key
outcomes that reflect the administration's five pillars.
In the budget instructions that describe the Strategic Budgeting approach,
DBM encourages agency heads to think of their agencies not as collections
of programs but as vehicles that deliver services to customers. The
instructions say, for example, that to deliver the outcome of safer
streets and highways, agencies have to provide services through a number
of avenues-law enforcement, the prison system, and the judicial system.
The outcome is a result of several programs in several agencies. Some of
these programs also support the delivery of other outcomes. The budget for
fiscal year 2006 will be the first to focus on these outcomes, the most
effective ways the agencies can deliver the outcomes, and the processes
that maintain and build the capacity to deliver outcomes in future years.
After assessing all programs and the outcomes they deliver, agency heads
are expected to assign a ranking to each program based on both the
importance of those outcomes in comparison to other agency programs.
Maryland Commission on the Structure and Efficiency of State Government
In January 2003, Maryland's governor created the Governor's Commission on
the Structure and Efficiency of State Government to examine and make
recommendations concerning state government operations and the
reorganization of independent agencies and commissions. The goal of the
commission was to improve Maryland's ability to provide necessary services
to its citizens as effectively and economically as possible. The
commission was asked to evaluate independent state programs and agencies
and to recommend to the governor the elimination, consolidation, or
streamlining of programs and agencies. The commission was also asked to
examine and analyze staffing patterns in state agencies and recommend
changes that would lead to the elimination of wasteful practices and
duplication of services.
The commission first met in August 2003 and was given approximately 4
months to complete its reviews. To do so, the commission established four
committees to examine particular areas of state government operation-the
Committee to Evaluate Independent Agencies, the
Appendix III Overview of Maryland's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Committee to Evaluate Adjudicatory Agencies, the Committee to Evaluate Law
Enforcement Agencies, and the Committee to Evaluate Environmental
Agencies. The commission generated 54 recommendations, including changing
statewide service-contracting and procurement practices, conducting more
in-depth reviews of some agencies and programs, and changing the structure
of certain programs and agencies. Examples of these recommendations
included creation of a Department of Disabilities, consolidation of the
Natural Resources Police with the State Park Rangers, and an increase in
certain fees imposed by the Office of Administrative Hearings.
Appendix IV
Overview of Texas's Budget Process and Performance-Related Requirements,
Processes, and Initiatives
Section I: Overview of Budget Process and Structure
Table 6: Summary of Texas's Budget Process
Agency
Budget requests Governor/
Frequency guidelines submitted to LBB submit
of
Frequency legislative sent to governor/ Agency budgets to Legislature Fiscal
of year
budget cycle agencies legislature hearings held legislature adopts begins
cycle budget
Biennial Biennial April July-September July-September January May September
Source: GAO.
Note: Based on analysis of testimonial evidence, documentation collected,
or both.
Texas operates on both biennial budget and legislative cycles. Unlike many
other states where the budget process begins in the executive branch,
Texas's process is driven mostly by the legislature, namely the state's
Legislative Budget Board (LBB).1 The LBB is a 10-member legislative body
that consists of the lieutenant governor, the speaker of the House, the
chairman of the House Appropriations Committee, chairman of the House Ways
and Means Committee, chairman of the Senate Finance Committee, and 5
additional appointed members from the House and Senate. The primary
purpose of the LBB is to develop recommended appropriations for all state
government agencies. The LBB also has the authority, in conjunction with
the governor, to make budget adjustments when the legislature is not in
session.
In the spring of even-numbered years, the Governor's Office and the LBB
jointly issue budget instructions, which state agencies use to develop
their budget requests. During the summer months, the LBB and Governor's
Office of Budget, Planning, and Policy (GOBPP) hold hearings with each
agency to discuss these requests. In the fall, the LBB drafts the
legislative budget estimates and the general appropriations bill and
submits them to the legislature at the beginning of the legislative
session in January.
1 See generally Tex. Gov't Code Ann. S:322.001-S:322.001 (Vernon 2004)
(Provides general information regarding budget process and role of LBB).
Appendix IV Overview of Texas's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
In addition to funding amounts, the legislative budget estimates and
general appropriations bill also include other budget-related information,
such as performance measures and targets, financing procedures, and
historical summaries of previous funding requests and approved agency
budgets. The Governor's Office also provides its budget proposal at the
beginning of the legislative session using a similar format as the LBB.
The House and Senate consider their versions of the appropriation bill
separately and hold a conference committee review to reconcile any
differences between the two versions of the bill. The revised bill is sent
to both houses for approval. After approval by both houses, the bill is
sent to the state comptroller for certification, ensuring that the
approved budget remains within the constitutionally established funding
limits. The governor has line-item veto authority.2 However, the
legislature has the ability to override the veto with a two-thirds
majority vote in both houses, as long as the veto occurs while the
legislature is in session. The signed appropriation act becomes effective
on September 1 of every oddnumbered year. Agreement by both the governor
and the LBB allow for funds to be shifted between agency programs or
between agencies during the fiscal year.
Texas's General Appropriation Act is structured by goals and strategies.
In general, an agency will have three to five substantive strategies,
sometimes referred to as "direct strategies," as well as one or more
strategies labeled "indirect administration" for functions shared among
strategies, such as accounting, human resources, information technology,
reporting, and overall administration in the higher executive offices.
Strategies within the larger agencies can be as large as $500 million and
contain multiple programs, whereas strategies in very small agencies can
be as small as a few thousand dollars. As figure 4 demonstrates, the act
shows high-level goals for each agency, and funding is appropriated
according to the strategies that are established to achieve those goals.
Texas also includes outcome, output, and efficiency targets to show what
level of performance is expected for each goal and strategy based on the
appropriation level each receives.
2 Tex. Const. art. IV S:14.
Appendix IV Overview of Texas's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Figure 4: Example of Texas's General Appropriation Act Structure
Appendix IV Overview of Texas's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Section II: Performance and Accountability Requirements
In 1991, the Texas General Assembly passed a law to establish the
Strategic Planning and Budgeting system.3 In 1993, the law was amended to
consolidate planning requirements and change the minimum planning time
line from 6 to 5 years.4 Agencies are required to complete and submit
formal plans every 2 years. These plans include agency mission, goals,
objectives, outcome measures, strategies, output measures, and efficiency
measures. The LBB and the governor have the statutory responsibility for
providing agencies with guidance in developing their strategic plans as
well as for reviewing and finalizing those plans.
Section III: Overview of Performance Measurement System and Processes
Table 7: Summary of Texas's Performance Budgeting Process
Performance Primary method
of
budgeting Level that Method used to Required as publicly
measures are submit part of reporting
agency
legislation? submitted measures budget measures
request?
Yes Strategies (by Strategic plans Yes Appropriation
agency) and act
electronic
quarterly
updates
Source: GAO.
Note: Based on analysis of testimonial evidence, documentation collected,
or both.
Texas's 5-year strategic planning process provides the framework for both
performance reporting and the budget structure. Under this aligned
planning and budgeting structure, agencies are required to develop
strategic plans that are organized by goals and objectives with outcome
measures that should be used to assess their achievement. The strategic
plans also include strategies for achieving the goals and objectives as
well as output, efficiency, and explanatory measures to quantify the
results of
3 Acts 1991, 72nd Leg., ch. 384. 4 Acts 1993, 74th Leg., ch. 76, S:529(b).
Appendix IV Overview of Texas's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
those strategies. In the budget process, these strategies also provide the
basis for the allocation of budgetary resources. Agencies work with the
governor and the LBB throughout the strategic planning process to identify
and select key measures that provide a quantifiable assessment of service
provision.
The LBB and GOBPP approve the strategic plans and the measures selected by
the agencies. After the strategic plans are approved by the GOBPP and LBB,
agencies prepare their biennial budget requests using the framework of
their approved goals, strategies, and performance measures. According to
the LBB, once the general appropriation bill has been enacted, agencies
submit reports electronically to the LBB every 3 months on their success
in achieving performance targets included in the General Appropriation Act
via the Automated Budget and Evaluation System of Texas. Agencies are
required to explain the variance between their targets and their actual
performance if that variance is greater than 5 percent.
The Texas State Auditor's Office (SAO) conducts periodic audits of
performance measures in selected agencies to determine whether they have
adequate control systems for the collection of performance information and
whether they are accurately reporting selected measures. The SAO and LBB
work together to identify and select agencies and measures for these
performance measure audits.
In Texas, performance information is publicly reported as part of the
budget process in the General Appropriation Act and in the LBB's annual
Budget and Performance Assessments report. According to the LBB,
performance measures and targets have been included in the appropriation
act since 1991.
Texas has a regular sunset review process by which legislatively
established programs and agencies are reviewed approximately every 10
years.5 Sunset processes work by setting a date on which an agency will be
abolished unless legislation is passed to continue its functions. The
Texas sunset review process is guided by the Sunset Advisory Commission
(SAC), a 12-member body of legislators and public members appointed by the
lieutenant governor and the speaker of the House of Representatives. SAC
reviews 20 to 30 agencies per cycle and typically reviews each agency on a
10-year cycle. SAC does not have a standard methodology for its
5 See generally Tex. Gov't Code Ann. S:325.003 (Vernon 2004).
Appendix IV Overview of Texas's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
reviews, but each review generally results in a decision to continue,
modify, or eliminate an agency. The decision to continue or modify an
agency requires legislative action and gubernatorial approval. Failure to
pass and sign legislation discontinues the agency. Figure 5 describes the
number of agencies that have been continued, modified, or eliminated as a
result of sunset reviews from 1979 to 2003. As the figure demonstrates,
the majority of reviewed agencies were continued following the sunset
process.
Figure 5: History of Texas Sunset Advisory Commission Action, 1979-2003
Note: Information from the Texas Sunset Advisory Commission, Sunset
Process Report Card (Austin, Tex.: December 2002, revised February 2003),
2.
Appendix V
Overview of Virginia's Budget Process and Performance-Related Requirements,
Processes, and Initiatives
Section I: Overview of Budget Process and Structure
Table 8: Summary of Virginia's Budget Process
Budget Agency Governor
Frequency guidelines submits Fiscal
of requests
Frequency legislative sent to submitted to Agency budget to Legislature
of year
budget cycle agencies governor hearings legislature adopts begins
cycle held budget
Biennial Annual April-August June-October September- December March-April July
October
Source: GAO.
Note: Based on analysis of testimonial evidence, documentation collected,
or both.
Virginia operates on a biennial budget system. The budget is enacted
during even-numbered years and amendments are made during odd
numbered years. In the early fall of odd-numbered years, state agencies
are required to develop funding requests for the upcoming fiscal cycle and
submit these requests to the Department of Planning and Budget (DPB). In
the fall, DPB reviews the agency requests and develops a proposed budget
for the governor's consideration. The governor submits the executive
budget to the state legislature by December 20. Each house refers the
proposed budget bill to a committee, which holds public hearings and
considers amendments. After being reported by the committees, the amended
bills are brought to the floor of each house for further consideration and
amendments. Upon approval in the two houses, the bills are "exchanged"
between the houses, where they are again reviewed and adjusted. A
conference committee composed of members of both houses reviews the two
budget bills, reconciles the differences, and submits the final proposed
budget to the General Assembly for final legislative approval. Following
approval from each house, the proposed budget is submitted to the
governor. The governor may sign the bill as presented, veto the entire
bill, veto certain portions of the bill via a line-item veto authority, or
recommend amendments. If any portion of the bill is vetoed or amended, the
bill is resubmitted to the General Assembly for additional review and
revision. The approved budget is enacted into law effective July 1 of
even-numbered years.
Appendix V Overview of Virginia's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Virginia's general appropriation bill is organized by function, primary
agency, and proposed appropriation according to programs. Provisions and
other amendments relating to the statutory purpose and responsibilities of
an agency or agency program may be included within the enrolled
appropriation act. There are variations in the structure depending on the
level at which appropriations are made. Some agencies have broader
spending authority than others.
Section II: Overview of Virginia established its performance measurement
system in 1995.1 The governor required agencies to develop strategic plans
and report on
Performance and performance. Legislation enacted in 2001 required DPB to
submit to
Accountability legislators an annual report comparing expected results and
expenditures
Requirements for state agencies during the previous fiscal cycle to actual
performance during the previous fiscal year.2 However, this requirement
was later rescinded.
Virginia expanded on its performance and accountability requirements with
legislation enacted in 2003, known as the Virginia Government Performance
and Results Act,3 which expanded on performance-related efforts in the
state by mandating that each state agency develop and continuously review
a strategic plan identifying long-term agency goals and objectives as well
as specific outcome measures reflecting the relative achievement of
established goals. These plans are to cover a 3-year period from the point
of submission and are reviewed on a staggered basis by the Office of the
Governor. Approximately one-third of all state agencies are to be reviewed
over the course of 1 year. The provisions of this act are scheduled to
expire in 2008. The Virginia Government Performance and Results Act also
established the Council on Virginia's Future, an advisory council in the
executive branch of state government that was charged with advising the
governor and the General Assembly on the implementation of a long-term
state planning process-known as the Roadmap for Virginia's Future. Figure
6 summarizes the key components of this legislation.
1 1995 VA Acts ch. 51. 2 2001 VA Acts ch. 43. 3 2003 VA Acts ch. 900.
Appendix V Overview of Virginia's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
6: Summary of Key Components ofFi Virginia's Government Pergure formance
and Results Act
Source: State of Virginia.
Note: Information from the Council on Virginia's Future, Interim Report
(Richmond, Va.: January 2004).
Appendix V Overview of Virginia's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Most recently, in 2004, legislation was enacted that requires agencies to
develop a series of performance outcome measures for any new state
programs or services as part of the budget request. These measures are
intended to gauge program or service effectiveness and are to be
incorporated into the budgeting process.
Section III: Overview of Performance Measurement Systems and Processes
Table 9: Summary of Virginia's Performance Budgeting Process
Performance Primary method of
budgeting Level that Method used to Required as publicly reporting
measures are submit part of
legislation? submitted measures agency budget measures
request?
Yes Internet No Virginia Results
Agency Web site
Source: GAO.
Note: Based on analysis of testimonial evidence, documentation collected,
or both.
In Virginia, state agencies develop and submit strategic plans describing
the intended goals and objectives as well as corresponding performance
measures to DPB for approval prior to the start of each fiscal cycle.
State agencies are responsible for the regular collection and reporting of
performance information, a responsibility they carry out by submitting
performance information through Virginia Results-a publicly available
Internet-based system. This information is benchmarked with previous
agency performance and compared to established performance targets.
The Virginia Auditor of Public Accounts periodically assesses the accuracy
of the performance measures submitted by state agencies. The results of
these audits are reported to the General Assembly along with any
recommendations for revisions to agency collection and reporting systems.
Performance information is publicly available on the Virginia Results Web
site. However, performance information is not published in either the
executive or legislative budget documents.
Appendix V Overview of Virginia's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Section IV:
Overview of Other
Performance-Related
Initiatives
Council on Virginia's Future The Council on Virginia's Future was created
by legislation enacted during the 2003 session of the General Assembly.4
The council-which is led by the governor and includes members from the
Virginia General Assembly, executive branch agencies, and private sector
organizations-was charged with, among other things, identifying long-term
strategic issues facing the state. The council is subdivided into several
"workgroups" which focus on specific issue areas, such as public safety
and transportation. An interagency staff from both the executive and
legislative branches assists the council.
The legislation creating the council assigns specific tasks to the group.
Initial tasks include developing and refining the framework for the
state's strategic decision-making process. Long-term council objectives
include the development and regular publication of a "scorecard"
reflecting the relative performance of state services and recommendations
for performance improvement. Ultimately, the council is expected to
develop high-level goals and align the strategic planning, performance
management, and budgeting systems in an effort to improve decision making
in the state. As the council's work progresses, it is expected to develop
and propose legislation designed to achieve these objectives. Much of the
preliminary work of the council has focused on developing and identifying
appropriate indicators and other benchmarks that will provide an accurate
assessment of the progress of the state in developing its strategic
planning and decision-making processes.
4 2003 Va. Acts ch. 900.
Appendix V Overview of Virginia's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Governor's Commission on Efficiency and Effectiveness
Initiated by Executive Order in 2001, the Commission on Efficiency and
Effectiveness was charged by Governor Mark Warner with developing
strategies and initiatives that would allow Virginia to serve its citizens
more effectively and to manage its resources more efficiently. The
commission was composed of a group of both public and private sector
officials as well as academics.
According to the commission's final report, issued in December 2002, the
group recommended several initiatives that would streamline Virginia
government operations and generate substantial savings. Examples of these
recommendations include adjustments to procurement procedures, such as
researching state spending patterns, combining currently separated
information technology centers, and reducing vacancy rates in state-owned
office space.
Appendix VI
Overview of Washington State's Budget Process and Performance-Related
Requirements, Processes, and Initiatives
Section I: Overview of Budget Process and Structure
Table 10: Summary of Washington's Budget Process
Budget Agency Governor
Frequency guidelines Agency submits Fiscal
of requests
Frequency legislative sent to submitted hearings budget to Legislature
of to year
budget cycle agencies governor held legislature adopts begins
cycle budget
Biennial Annual April September - December April-May July
Source: GAO.
Note: Based on analysis of testimonial evidence, documentation collected,
or both.
Washington operates on a biennial budget cycle, with each fiscal cycle
beginning on July 1 of odd-numbered years. In the summer and fall of
evennumbered years, state agencies submit budget requests to the Office of
Financial Management (OFM). These requests are reviewed by OFM and the
governor and serve as the basis for the governor's proposed budget. State
law mandates that the governor submit a proposed biennial budget to the
legislature in December.1 In the spring, the legislature reviews the
proposed budget separately in committees within both houses. After each
house develops its version of the budget, a conference committee is called
to reconcile the differences between the two proposed budgets. The
reconciled budget is returned to both houses, where it must receive a
majority vote before it is submitted to the governor for final approval
and signature. By law, the governor may veto all or some provisions of the
budget approved by legislators. The legislature reconsiders the biennial
budget during the second year of the fiscal cycle.
Washington's general appropriation bill is structured by agency and fund.
Provisos or amendments relating to the statutory purpose and
responsibilities of an agency also may be included within the enrolled
appropriation act. There are variations in the structure depending on the
level at which appropriations are made. Some agencies have broader
spending authority than others.
1 Wash. Rev. Code S:43.88.060 (2004).
Appendix VI Overview of Washington State's Budget Process and
Performance-Related Requirements, Processes, and Initiatives
Section II: Overview of Performance and Accountability Requirements
According to the Joint Legislative Audit and Review Committee (JLARC),
legislators amended Washington's Budgeting and Accounting Act in 1996 to
require state agencies to engage in strategic planning and related
performance activities,2 including the development of an agency mission
and measurable goals, program objectives, and budget proposals that
incorporate performance measures indicating the relative success in
achieving program objectives and goals. This legislation was followed by
an Executive Order issued in 1997, which provided a similar mandate to
state agencies by requiring the use of "the tools of strategic business
planning and performance measures to establish their priorities and
measure their progress toward their stated goals." This order established
a series of "quality management" activities for state agencies, including
the establishment of a quality-improvement representative for individual
agencies, as well as quality steering committees, which were to report to
the governor on each quarter.
Section III: Overview of Performance Measurement Systems and Processes
Table 11: Summary of Washington's Performance Budgeting Process
Performance Primary method
of
budgeting Level that Method used to Required as publicly
measures are submit part of reporting
legislation? submitted measures agency budget measures
request?
Yes Agency and Biennial budget Yes Executive
program requests budget
document
Source: GAO.
Note: Based on analysis of testimonial evidence, documentation collected,
or both.
In Washington all state agencies are required to engage in strategic
planning and related performance activities. State agencies develop
strategic plans to establish their missions and purposes, as well as
2 1996 Wash. Laws ch. 317, codified in, Wash. Rev. Code S:43.88.090.
Appendix VI Overview of Washington State's Budget Process and
Performance-Related Requirements, Processes, and Initiatives
measurable goals and objectives. Agencies are not required to regularly
revise established goals and measures, but must ensure that agency
mission, goals, and measures adhere appropriately to state law. For every
major program administered by an agency, program objectives are reported
with measurable outputs and outcomes to the extent possible. Agencies can
develop their measures and data collection procedures with or without
assistance from OFM.
In addition to OFM, JLARC is directed to facilitate the implementation of
effective performance measures throughout state government. JLARC consists
of 16 legislators, equally divided by House and Senate, with not more than
4 members from each house being of the same political party. With staff
assistance, JLARC conducts policy and fiscal research, including
performance audits and program evaluations.3 In recent years, JLARC has
conducted selective performance outcome measurement reviews and developed
recommendations to improve the quality of performance information reported
by state agencies.
Performance information is publicly reported in the biennial executive
budget document. This information is reported at the agency level and
includes the agency mission, performance goals, and output or outcome
measures.
Washington has a sunset review process that is used to determine whether
certain state entities should be reauthorized, modified, or eliminated.
Washington's reviews are also intended to determine the accountability,
efficiency, and effectiveness of agency operations and finances. The
entities that are subject to sunset reviews are required to develop
performance measures and data collection plans and submit these to JLARC
for review and comment. These measures are intended to serve as part of
the framework for evaluating overall program effectiveness in conducting
sunset reviews.
3 Wash. Rev. Code S:44.88.010.
Appendix VI Overview of Washington State's Budget Process and
Performance-Related Requirements, Processes, and Initiatives
Section IV:
Overview of Other
Performance-Related
Initiatives
Washington Priorities of Government
The Priorities of Government (POG) approach was created during the
development of the budget for fiscal year 2003-05 when the state had to
address a potential budgetary shortfall of approximately $2.4 billion. The
POG initiative was designed to rank and prioritize state government
services and develop a budget strategy from the results of these
exercises. POG categorizes all state programs in services into one of the
following 11 results areas:
o Improve student achievement in elementary, middle, and high schools
o Improve quality and productivity of our workforce
o Improve value of a state college or university education
o Improve health of Washington citizens
o Improve security of Washington's vulnerable children and adults
o Improve economic vitality of business and individuals
o Improve statewide mobility of people, goods, information, and energy
o Improve safety of people and property
o Improve quality of Washington's natural resources
o Improve cultural and recreational opportunities throughout the state
o Strengthen government's ability to achieve its results efficiently and
effectively
For each results area, there are several high-level indicators to describe
the progress that the state has made. For example, the result area related
to
Appendix VI Overview of Washington State's Budget Process and
Performance-Related Requirements, Processes, and Initiatives
improving the quality of Washington's natural resources had indicators of
progress in reducing impacts on the environment, maintaining habitat to
support natural systems, and maintaining healthy fish and wildlife
populations. Measures under these indicators included trends in water
quality and carbon dioxide emissions; the conversion rate of resource
lands to urban use; and number of wildlife species classified as
endangered, threatened, or sensitive.
A guidance team and 11 results teams that corresponded with each of the
results areas were developed to implement the POG process. The guidance
team consisted of about 10 members from the public, private, and nonprofit
sectors and was principally tasked with overseeing the prioritization
process and reviewing the work of the results teams. Each results team was
led by OFM budget or policy staff and consisted of six to eight
subjectmatter experts from executive branch agencies with knowledge and
background in the particular results area. Each of the results teams was
tasked with evaluating and "mapping" the factors that influence or drive
the result that it wanted to achieve. Based on these maps, they were asked
to identify ways to better and more efficiently achieve the desired
outcomes in their respective areas and recommend high-level purchase
strategies to agencies to inform the development of their budget
proposals.
Ultimately, the POG approach also informed the governor's proposed budget
for the 2003-05 biennium. Budget activities were ranked by contribution to
the results, and a line was drawn at the dollar amount allocated to the
result. Activities below the line were listed in order to identify how
changes in funding might affect service provision. Figure 7 illustrates
the POG framework.
Appendix VI Overview of Washington State's Budget Process and
Performance-Related Requirements, Processes, and Initiatives
7: Example of WashFi ington's Priorities of Gogure vernment Framework
Source: Washington Office of Financial Management.
Appendix VI Overview of Washington State's Budget Process and
Performance-Related Requirements, Processes, and Initiatives
The POG framework was helpful in communicating the administration's
highest priorities and presenting the key activities that it thought the
state could afford to fund to address those priorities without increasing
taxes, as well as those activities that the administration considered of
lower priority and did not recommend funding. Detailing which activities
were funded and which were not was a unique approach that helped both the
legislature and Washington citizens understand what the state could and
could not afford from the administration's perspective. For example, in
its proposed budget the administration recommended not funding two
education-related voter initiatives because of fiscal constraints.
Although it is usually difficult for the legislature to coalesce support
for overturning a voter initiative, it was able to do so in this case. The
POG framework helped to communicate that there were no other alternatives.
Appendix VII
GAO Contacts and Staff Acknowledgments
GAO Contacts Paul L. Posner, (202) 512-9573 Denise M. Fantone, (202)
512-4997
Acknowledgments In addition to the above contacts, Kristeen McLain,
Tiffany Tanner, Brian James, and Ted Beck made significant contributions
to this report. Thomas Beall, Sheila Rajabiun, Carlos Diz, Amy Rosewarne,
and David Eisenstadt also made key contributions.
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