POLICY HIGHLIGHTER

Volume 15, Number 8
March 16, 2005

GAO releases second Priorities of Government (POG) study

The U.S. Government Accountability Office (GAO) recently issued a second report to Congress praising Washington's "commitment" to performance-based budgeting or priorities of government (POG). GAO's praise, however, came prior to Senate Democrats passing SB 6078 in order to more easily increase taxes and spending. That bill essentially guts the tax and spending limit provisions of the people's I-601 expenditure limit reform and signals a lack of commitment by Senate Democrats to the POG budget process.

Prior to the passage of SB 6078, GAO issued a report titled "Reexamining the Base of the Federal Government," which highlighted Washington's POG efforts. GAO followed up on that report with one titled "Performance Budgeting: States' experiences can inform federal efforts."

In the latest report, GAO stated: "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 within current and expected resource levels. The implementation of performance budgeting efforts is an important step in doing so."

Discussing Washington's 2003-05 POG efforts, the GAO report noted:

[Washington's] 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 [Office of Financial Management], 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.

Under a real POG-based budget, agency programs and activities are prioritized to determine the most cost-effective purchases the state can make in order to meet a specific priority. This process creates a "buy" list for budget writers to determine what activities to purchase. This means everything a budget writer decides to purchase is, by definition, a higher priority than those activities not purchased. For example, if in a POG-based budget, art is purchased, but not dental care for the poor, budget writers have determined by that action that art is a higher priority than dental care for the poor. A budget built on priorities of government ranks its "buy" list by what is most important.

Despite GAO's praise for Washington's POG reform, the report noted the state's budget process fails to align the budget planning process with the actual budget writing process. This criticism of Washington's budget process has also been voiced by the state's Joint Legislative Audit and Review Committee (JLARC).

In its June 2004 report, titled "Governing for results in Washington," JLARC recommended legislators:

1. Set statewide priorities and targets by publishing an annual "state-of-the-state" report.

2. Focus on outcomes by routinely requesting and using "performance information in policy and budget decisions."

3. Take a more active and direct role in agency activities and decisions.

4. Base legislative committee decisions on performance outcomes by structuring committees around the state's governing priorities.

GAO pointed to Texas as an example of what a fully implemented performance-based budget system looks like:

Although several of the states we examined have undertaken efforts to better align their budgets 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.

Along with this integrated budget system, Texas also puts the expected outcome measures for agency programs directly into its budget.

Despite GAO's continued praise, advocates for POG and performance-based budgets need to increase their efforts for true prioritization of the state's programs within forecasted revenue. Given Senate Democrats' efforts to eliminate the taxpayer protections of I-601, real budget prioritization is even more crucial.

A legislature truly committed to POG will focus the budget on increasing the value delivered to citizens within the dollars that are available. By focusing on program results (outputs) rather than attempting to raise taxes (inputs), legislators will be able to prioritize purchases within a performance-based framework and avoid raising taxes or altering I-601.

If the House and Governor Christine Gregoire side with Senate Democrats and turn their backs on the will of the people who adopted I-601, they will all but guarantee that the son of I-601 will appear as a people's initiative to restore the tax and spending provisions gutted by the legislature.

Should Washington officials resort back to their pre-POG tax-and-spend habits, GAO will have to look elsewhere for an example of a state "committed" to performance-based budgeting.

Additional Information
Senate passes amendment to I-601, making it easier to raise taxes (AP 3/16/05)
Potential agencies and programs to eliminate

Prepared by: Jason Mercier | Budget Research Analyst | 360.956.3482

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org