A New Approach to A New Approach to Performance Budgeting: Performance Budgeting:

Agency Strategic Planning and Agency Strategic Planning and Service-Based BudgetingService-Based Budgeting

Richard D. Brown

Director,

Virginia Department of Planning and Budget

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The BasicsMany Factors and Perspectives Influence State Government Budget Development

• Changes in regulations and laws

• Demand for services

• Increase in number of clients

• Automation

• Increases/decreases in federal funds

• Traditional practices

• Public sentiment

• Priorities of the Governor and General Assembly

3

The BasicsMost States View Budget Development as a

Zero-Sum Game Whereby Competing Demands Must Be Balanced

• Fiscal Conditions (increases/decreases in available revenues)

• Fixed Costs (mandatory demands vs. discretionary actions)

• Economy (efficiency and cost savings, i.e. price per unit of service)

• Effectiveness (continuing need for existing programs and agencies)

• Priorities (agency budget requests vs. Governor’s agenda)

• Overall performance (quality of operations, focus on outcomes and return on investment).

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The IssuesAgency Strategic Planning vs.

State Budget Development• Agency strategic plans may not be based on fiscal

realities (visionary vs. practical)

• Agency goals and objectives may not address statewide priorities (agency budget requests vs. statewide priorities)

• Agency performance measures may not adequately address overall performance (hard to measure desired outcomes and degree of state influence to achieve results may be limited)

• Agency strategic plans almost never address potential enterprise-wide or efficiency improvements (planning silos)

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The IssuesAll Spending Decisions

Are Not Focused on Results

Types of Spending Decisions:

• Maintenance or fixed costs requirements (rent, insurance, gas, retirement/social security, etc.)

• Case load or unit cost thresholds (school enrollment, cost per unit, $xx per capita, etc.)

• Political considerations (budgeting is a compromise process)

• Results oriented actions (true investments, deal or no deal!)

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Bringing It TogetherGuidelines For Improving Performance Budgeting

• Tie agency planning efforts to state goals (be really strategic in approach)

• Some things are more important to measure than others (concentrate efforts on what moves the needle; decisions that are true investments and results-oriented)

• Don’t just record performance, evaluate it (have a thrust for what works and why it works)

• Look outside agency silos (create new enterprises for desired results)

• Recognize results and reward performance (promote consistency and desired behavior)

The Virginia Experience

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1980:Program

Budgeting and

Evaluation

1995-96:Agency strategic

planning and Performance

Measures

2005:Service

Planning & Performance

-Based Budgeting

Virginia’s Budgeting System is Evolving

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Previous Budget Structure

Program structure Level of control 

FunctionSubfunction

Program 

  

Subprogram

ElementCost centerObject of expenditure

Central budget control

(by fund, by positions)

Agency budget control

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Previous Performance Budgeting Process

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Previous Dual Structure Orientation

Programs/Subprograms =Budgeting

Accounting System

Activities =Strategic Planning

Virginia Results

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The Task At HandCHALLENGES Management Scorecard RESULTS

Executive AgreementsVariation - expectations, Leadership Communique' Performance managementplanning language, metrics, activties are primarily:plan formats… DPB Planning & Budget

IT Planning - administrative in natureWorkforce Planning

Outcomes not precisely Capital Planning - targeted to stand-alonedefined reporting requirements

Various Improvement(Efficiency) Efforts - not integrated to support

Multiple planning/reporting enhanced performancerequirements and calendars Outsourcing l Legislation

Competition CouncilTransfer

Little or no formal assistance or training for Virginia Resultseffective performance Virginia Excelsmanagement Budget Document & Bill

NEW REQUIREMENTSStrategic PlanningPerformance-based

BudgetingRevised Service Structure

Establishing a Vision and Goals for the Commonwealth

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Making a ChangeEstablishing a Statewide VisionThe Council for Virginia’s Future

Created in 2003 (Code of Virginia 2.2-2684) to advise the Governor and the General Assembly on the implementation of a Roadmap for Virginia's Future. Responsibilities include:

• developing a set of guiding principles that are reflective of public sentiment and relevant to critical decision-making;

• establishing a long-term vision for the Commonwealth;

• conducting a situation analysis of core state service categories;

• setting long-term objectives for state services;

• aligning state services to the long-term objectives;

• instituting a planning and performance management system consisting of strategic planning, performance measurement, program evaluation, and performance budgeting; and

• performing plan adjustments based on public input and evaluation of the results of the Roadmap.

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Composition of Council on Virginia’s Future

The Council shall be composed of 18 members that include eight legislative members and ten nonlegislative members as follows:

1. The Governor,

2. The Speaker of the House,

3. The majority and minority leaders of the House of Delegates,

4. The Chairman of the House Committee on Appropriations,

5. The President Pro Tempore of the Senate,

6. The majority and minority leaders of the Senate,

7. The Chairman of the Senate Finance Committee,

8. One nonlegislative citizen member appointed by the Speaker of the House,

9. One nonlegislative citizen member appointed by the Senate Committee on Rules,

10. Two Cabinet Secretaries appointed by the Governor, and

11. Five nonlegislative Citizen members appointed by the Governor.

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Organizational Framework

Council Steering Committee

EXECUTIVE BRANCH

Innovation & Improvement Advisory Sub-Committee

Planning, Budgeting & Assessment Advisory

Sub-Committee CEO Advisory

Group

COUNCIL ON VIRGINIA’S FUTURE

LEGISLATIVE BRANCH

Private Sector Reengineering Advisory

Group

Planning Group

Performance Leadership Steering Group

Governor’s Performance Leadership Group

MAP

Private Sector Reengineering Support

Teams

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The Council on Virginia’s Future Has Articulated Seven Long-Term

Objectives For Virginia1. Be recognized as the best managed state in the nation.

2. Be a national leader in the preservation and enhancement of our economy.

3. Elevate the levels of educational preparedness and attainment of our citizens.

4. Inspire and support Virginians toward healthy lives and strong and resilient families.

5. Protect, conserve, and wisely develop our natural, historical, and cultural resources.

6. Protect the public’s safety and security, ensuring a fair and effective system of justice and providing a prepared response to emergencies and disasters of all kinds.

7. Ensure that Virginia has a transportation system that is safe, enables easy movement of people and goods, enhances the economy, and improves the quality of life.

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Scorecard at a Glance

Linking Strategic Planning and Performance Budgeting at

State Agency Level

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A Mandate for Change at Agency Level

HB2097(03) (affecting § 2.2-2681 - 2.2-2687)

“…each agency shall develop and maintain a strategic plan for its operations” defined in the legislation as “the systematic clarification and documentation of what a state agency wishes to achieve and how to achieve it. The objective of strategic planning is a set of goals, actions steps, and measurements constructed to guide performance.” 

HB1838(03) (affecting § 2.2-1508)

“The Executive Budget document is to include a statement of “major goals, objectives, and specific outcomes related to expenditures for programs” in each agency.”

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Process Design – Strategic Plan

Service area structure is key:

• Generally, “service areas” are what agencies do for the citizen or for other agencies

• They consist of allocations of resources toward a specific objective

• Each service area forms the basic unit of both budgeting and of planning

Principal objectives of these plans are:

• To provide agencies with a tool to assist them in self-management

• To give decision makers uniform and dependable data for budgeting and accountability

• To link state resources to results

• To eliminate current fragmented processes of strategic planning, budget development, workforce planning, capital planning, and technology planning

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Current Structure

Programs/Subprograms =

Future Structure

Service Areas =

Budgeting

Accounting System

Budgeting

Accounting

Strategic Planning

Performance Measurement

Activities =

Strategic Planning

Virginia Results

Service Area Structure

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Service Area Structure

Current Programs/Subprograms

Recommended Service Structure

Proposed Services = “*” Current Activity

Planning, Budgeting, and Evaluation Services (71500)

Planning, Budgeting, and Evaluation Services (71500)

Budget Development and Execution Services (715 02)

Budget Development and * Budget Execution Services*

Budget Development and Budget Execution

Legislation and Executive Order Review Service *

Legislative Review Service

Performance Management Service

Forecasting and Regulatory Review Services*

Regulatory Review Service

Program Evaluation Service *

Program Evaluation Service

Federal Budget Service

Executive Orders Service

Administrative Services (71598) Administrative Services * Support Service

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Budget Bill Display

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Process Design

Council OnVirginia’s

Future

Governor&

CabinetGeneral

Assembly

Mandates

Citizens&

Community

BoardsLocal

Government

AGENCYSTRATEGIC PLAN

INPUTS

SERVICEAREAPLAN

SERVICEAREAPLAN

SERVICE AREA STRUCTURE

BUDGETService Area Plans Align To

Service Area Structure and Budget

.

.

InternalInputs

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Agency Strategic Plan ContentMISSION:

Customer Base

Statutory Authority

BACKGROUND INFORMATION:

VALUES: (Optional)

VISION:

Customers:

Anticipated Changes in base

Products and Services:

Current Products and Services

Factors Impacting Products and Services

Anticipated Changes to Products and Services

Resources:

Financial Summary

Human Resource Summary

Information Technology Summary

GOALS:

Goal

A. Information Technology

APPENDICES:

B. Additional Statutory Authority Information (Optional)

C. Organizational Structure (Optional)

Capital Investments Summary

.

.

.

Goal Summary & Alignment

EXECUTIVE PROGRESS REPORT:

.Current Service PerformanceProductivityMajor Initiatives & Related ProgressVirginia Ranking & TrendsCustomer Trends & CoverageFuture Direction, Expectations & PrioritiesImpediments

AGENCY STRATEGIC PLAN STRUCTURE

Partners: (Optional)

Objectives, Measures & Strategies (Optional)

MeasureMeasure Type

BaselineTarget

Strategies

Measure FrequencyData Source & Calculation

Measurement Information

Customer Base

Statutory Authority (Roll up to Agency Strategic Plan)

BACKGROUND INFORMATION:

Customers: (Roll up to Agency Strategic Plan)

Anticipated Changes in base

Products & Services: (Roll up to Agency Strategic Plan)

Alignment to Mission

Factors Impacting Products & Services

Anticipated Changes to Products & Services

Resources: (Roll up to Agency Strategic Plan)

Financial Summary

OBJECTIVES and MEASURES:

Description

Measure

Measure Type

Baseline

Target

APPENDICES:

A. Additional Statutory Authority Information (optional)

Alignment

Measurement Information

Strategies

B. Service Area Structure (optional)

SERVICE AREA PLAN STRUCTURE

Human Resource Summary (Optional)

.

.

Current Products & Services

Measure Frequency

Data Source & Calculation

Priority

Partners (Optional) (Roll up to Agency Strategic Plan)

Service Area Description

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Looking At The EnterpriseThe Executive Progress Report

• Current Performance

• Productivity

• Major Initiatives and Related Progress

• Virginia ranking

• Customer Trends and Coverage

• Future Direction and Priorities

• Impediments

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Agency Strategic Plan ContentMISSION:

Customer Base

Statutory Authority

BACKGROUND INFORMATION:

VALUES: (Optional)

VISION:

Customers:

Anticipated Changes in base

Products and Services:

Current Products and Services

Factors Impacting Products and Services

Anticipated Changes to Products and Services

Resources:

Financial Summary

Human Resource Summary

Information Technology Summary

GOALS:

Goal

A. Information Technology

APPENDICES:

B. Additional Statutory Authority Information (Optional)

C. Organizational Structure (Optional)

Capital Investments Summary

.

.

.

Goal Summary & Alignment

EXECUTIVE PROGRESS REPORT:

.Current Service PerformanceProductivityMajor Initiatives & Related ProgressVirginia Ranking & TrendsCustomer Trends & CoverageFuture Direction, Expectations & PrioritiesImpediments

AGENCY STRATEGIC PLAN STRUCTURE

Partners: (Optional)

Objectives, Measures & Strategies (Optional)

MeasureMeasure Type

BaselineTarget

Strategies

Measure FrequencyData Source & Calculation

Measurement Information

Customer Base

Statutory Authority (Roll up to Agency Strategic Plan)

BACKGROUND INFORMATION:

Customers: (Roll up to Agency Strategic Plan)

Anticipated Changes in base

Products & Services: (Roll up to Agency Strategic Plan)

Alignment to Mission

Factors Impacting Products & Services

Anticipated Changes to Products & Services

Resources: (Roll up to Agency Strategic Plan)

Financial Summary

OBJECTIVES and MEASURES:

Description

Measure

Measure Type

Baseline

Target

APPENDICES:

A. Additional Statutory Authority Information (optional)

Alignment

Measurement Information

Strategies

B. Service Area Structure (optional)

SERVICE AREA PLAN STRUCTURE

Human Resource Summary (Optional)

.

.

Current Products & Services

Measure Frequency

Data Source & Calculation

Priority

Partners (Optional) (Roll up to Agency Strategic Plan)

Service Area Description

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The Revised Budget System Will Foster Transparency By Linking Together Expected Results, Funding, and Actual Performance For State Government Service

Product Contents

Agency Strategic Plan Establishes strategic and operational plan for the agency and its service areas

Service Area Plan Articulates expected results (objectives) for each service area and defines performance criteria to measure progress toward expected results (sets baseline and target data for results).

Budget Bill Allocates funding among the various service areas of state agencies

Budget Document Brings together and begins to explain relationships between expected results and proposed funding in the budget for service areas and state agencies

Budget Execution Accounts for actual spending by service area and monitors accomplishments and results though reporting system for performance measured data.

The Service Area is the link between all of the above. It is the common unit at which strategic planning, funding (budget), and performance

information (results) is presented.

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LegislatorsLegislators

X objectives andmeasures submitted to

DPB/VaResults

X objectives andmeasures submitted to

DPB/VaResultsBUDGET

PROCESS

BUDGET

PROCESSProgramProgram

COVF Vision & Objectives Guiding Principles

COVF Vision & Objectives Guiding Principles

Agency Selects X objectives and

measures

Agency Selects X objectives and

measures

ProgramProgram

DPB

Data Repository

DPB

Data Repository

AgencyStrategic Plan

AgencyStrategic Plan

Agency Budget & Performance

Measures

Agency Budget & Performance

Measures

SER V I TC IE E DAR TE OA BS UT DR G C ET TU R E

SER V I TC IE E DAR TE OA BS UT DR G C ET TU R E

Service AreaService Area Budget Performance

Budget Performance

Service AreaService Area

Service AreaService Area

Service AreaService Area

Service AreaService Area

Budget Performance

Budget Performance

Budget Performance

Budget Performance

Budget Performance

Budget Performance

Budget Performance

Budget Performance

Old New Integrating Planning and Budgeting

Tying Agency Planning and Budgeting Efforts to

Statewide Goals

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Virginia’s Performance Leadership System for State Government

Organization & Leadership Development (2006)

Subject Area Results Teams

Analysis and Strategy Formulation to Improve Quality-of-Life Outcomes

(Transforming Virginia)

Management Results Teams

Analysis and Strategy Formulation

toImprove

Management Outcomes

(Transforming Government)

Planning & Budgeting Innovation & Improvement

(2006)

TransformingGovernment

TransformingVirginia

VISION (2003) & LONG-TERM GOALS (2004)

Government & Citizens

Economy, Education, Health & Family, Transportation Public

Safety, Natural / Historic / Cultural Resources

ENTERPRISE LEADERSHIP AGENDA

High-Level Priorities and Enterprise Quantifiable Objectives(2006)

AGENCY LEADERSHIP AGENDAS

Initial Agency Strategic & Service Area Plans & Budgets (2005)Refinement of Plans and Implementation of Strategies to Improve

Outcomes (2006)

Enterprise Indicators(2006)

Agency Management & Programmatic

Measures(2005)

Societal Indicators

(2006)

Assessment

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Virginia’s Performance Leadership SystemLevels of Results Accountability

DESIRED SOCIETAL RESULTSCouncil’s vision and long-term goals

SOCIETAL-BASED INDICATORS

Environmental Scan: How is Virginia doing?

AGENCY LEADERSHIP AGENDASAgencies’ strategic and service area plans

AGENCY PERFORMANCE MEASURES

Are agency programs that serve our customersproducing desired results?

ENTERPRISE LEADERSHIP AGENDATargeted quantifiable objectives for long-term goals

(Includes Gubernatorial, Legislative & Cabinet priorities)

MEASURES TO MONITOR PROGRESS

Are we achieving desired results?Are we improving the factors that influence the results?

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Bringing It TogetherGuidelines For Improving Performance Budgeting

• Tie agency planning efforts to state goals (be really strategic in approach)

• Some things are more important to measure than others (concentrate efforts on what moves the needle; decisions that are true investments and results-oriented)

• Don’t just record performance, evaluate it (have a thrust for what works and why it works)

• Look outside agency silos (create new enterprises for desired results)

• Recognize results and reward performance (promote consistency and desired behavior)

VISITVISIT

www.dpb.virginia.govwww.dpb.virginia.govVirginia Department of Planning and Budget

www.future.virginia.govCouncil on Virginia’s Future