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Focusing on Performance to Achieve Balanced Budgets

Across-the-board cuts are bad ideas

Geoffrey Segal
March 18, 2003

Given the economic climate, governors and mayors across the nation face, the tough choice between cutting services and raising taxes and fees. The latter is considered political suicide, so cutting services is almost always the first option. Often the proposals are broad and "across-the-board" rather than targeted or systemic.

These types of cuts are ill-advised�they treat and affect the highest performing and most important services equally with low performing and less important services. By focusing on performance, policymakers can target their cuts—ridding taxpayers of poor performing, non-essential, and non-core services. But to focus on performance, policymakers need to invest time and resources into measuring and managing performance.

The first step is implementing some form of performance measurement. This is necessary because you need to know what results you are getting so you can make clear decisions about whether or not there is a better way to accomplish them. Traditional government budgeting focuses on line items and object codes, rather than centering on programs and results. The budget exercise is almost entirely focused on dollars. Too often poor performers are rewarded as budget increases follow failure, and high performers are punished with budget cuts. While performance may be talked about at budget time, it is almost never systematically examined. If you're not measuring, you can't tell success from failure.

But where do you start and how do performance and results fit in? With the creation of benchmarks (service delivery levels), agencies can strive to improve upon or meet specific goals. Continual measurement over time allows them to make comparisons with previous years, similar jurisdictions, and private sector performance, enabling them to see if targets or goals were met. These comparisons will also allow policymakers to discover if applicable practices from other organizations can be transferred to their organization, and identify where outsourcing and/or privatization could improve efficiency and service delivery.

Policymakers have identified many uses and reasons for adopting performance measurement as an essential management tool. Each contributes in its own way, but is equally critical to management success.

Performance measurement inherently improves upon four guiding pillars of government reform—transparency, performance, accountability, and competition. These four are crucial to the improvement of the way our government operates and provides services. Beyond the advantages already mentioned, agencies that adopt performance measurement can expect to receive the following benefits:

On another level, performance management provides valuable insight into whether government should be responsible for providing any given service or enforcing any given regulation. By focusing their performance measurement on their "problem children", i.e., programs that historically don't work or have large cost overruns, and on commercial activities, governments can identify programs that the private sector may be able to implement more easily and cheaply. By outsourcing, governments buy the results they want, placing performance at the center of the decision-making process, and often producing immediate results. The federal government uses a baseline of savings at 30 cents on the dollar for competitive sourcing initiatives, illustrating how competition can be key to balancing budgets.

But it all begins with learning where your inefficiencies are through performance measurement. Basically, the real power of performance measurement is the power to reform through spurring those in government to rethink what they do and how they do it. It is moving people from being reactive to proactive. Governments could drastically improve services and lower costs by focusing on performance and results. With data in hand, they can make informed decisions about how programs are provided. These simple processes can dramatically improve the way our governments govern—saving money and preventing tax increases. In this way, performance measurement has become the foundation for change and improvement in the effectiveness and efficiency of local government services, making the community a better place to live and work.

Geoffrey Segal is director of privatization and government reform at Reason Foundation.



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