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Report to the Chairman, Subcommittee on 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: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-215]: 

GAO Highlights: 

Highlights of GAO-05-215, a report to the Chairman, Subcommittee on 
Oversight of Government Management, the Federal Workforce, and the 
District of Columbia, Committee on Homeland Security and Governmental 
Affairs, U.S. Senate

Why GAO Did This Study: 

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. 

What GAO Found: 

mance 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. 

www.gao.gov/cgi-bin/getrpt?GAO-05-215. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Paul L. Posner at (202) 
512-9573 or posnerp@gao.gov. 

[End of section]

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: 

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Overview of Arizona's Budget Process and Performance- 
Related Requirements, Processes, and Initiatives: 

Appendix III: Overview of Maryland's Budget Process and Performance- 
Related Requirements, Processes, and Initiatives: 

Appendix IV: Overview of Texas's Budget Process and Performance-Related 
Requirements, Processes, and Initiatives: 

Appendix V: Overview of Virginia's Budget Process and Performance- 
Related Requirements, Processes, and Initiatives: 

Appendix VI: Overview of Washington State's Budget Process and 
Performance-Related Requirements, Processes, and Initiatives: 

Appendix VII: GAO Contacts and Staff Acknowledgments: 

Tables: 

Table 1: Summary of State Performance Budgeting Processes: 

Table 2: Summary of Arizona's Budget Process: 

Table 3: Summary of Arizona's Performance Budgeting Process: 

Table 4: Summary of Maryland's Budget Process: 

Table 5: Summary of Maryland's Performance Budgeting Process: 

Table 6: Summary of Texas's Budget Process: 

Table 7: Summary of Texas's Performance Budgeting Process: 

Table 8: Summary of Virginia's Budget Process: 

Table 9: Summary of Virginia's Performance Budgeting Process: 

Table 10: Summary of Washington's Budget Process: 

Table 11: Summary of Washington's Performance Budgeting Process: 

Figures: 

Figure 1: Example of Performance Information Presented in Arizona's 
Executive Budget: 

Figure 2: Example of Performance Information Presented in Arizona's 
General Appropriation Act: 

Figure 3: Example of Performance Information Presented in Maryland's 
Executive Budget: 

Figure 4: Example of Texas's General Appropriation Act Structure: 

Figure 5: History of Texas Sunset Advisory Commission Action, 1979-
2003: 

Figure 6: Summary of Key Components of Virginia's Government 
Performance and Results Act: 

Figure 7: Example of Washington's Priorities of Government Framework: 

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: 

Letter 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.[Footnote 1] The implementation of performance budgeting efforts 
is an important step in doing so.[Footnote 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,[Footnote 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 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.[Footnote 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. 

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.[Footnote 5] More recently, this interest culminated in 
the passage of the Government Performance and Results Act of 1993 
(GPRA).[Footnote 6] This legislation mandates 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.[Footnote 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.[Footnote 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.[Footnote 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.[Footnote 10] In that study we found that 
states that were considered to be 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,[Footnote 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. 

Table 1: Summary of State Performance Budgeting Processes: 

State: Arizona; 
Performance budgeting legislation? Yes; 
Alignment between planning and budget structures? No; 
Level that measures are submitted: Program; 
Method used to submit measures: Annual program operating plans; 
Required as part of agency budget request? Yes; 
Primary method of publicly reporting measures: Appropriation act. 

State: Maryland; 
Performance budgeting legislation? Yes; 
Alignment between planning and budget structures? No; 
Level that measures are submitted: Agency and program; 
Method used to submit measures: Annual budget requests; 
Required as part of agency budget request? Yes; 
Primary method of publicly reporting measures: Executive budget 
document. 

State: Texas; 
Performance budgeting legislation? Yes; 
Alignment between planning and budget structures? Yes; 
Level that measures are submitted: Strategies (by agency); 
Method used to submit measures: Strategic plans and electronic 
quarterly updates; 
Required as part of agency budget request? Yes; 
Primary method of publicly reporting measures: Appropriation act. 

State: Virginia; 
Performance budgeting legislation? Yes; 
Alignment between planning and budget structures? No; 
Level that measures are submitted: Agency; 
Method used to submit measures: Internet; 
Required as part of agency budget request? No; 
Primary method of publicly reporting measures: Virginia Results Web 
site. 

State: Washington; 
Performance budgeting legislation? Yes; 
Alignment between planning and budget structures? No; 
Level that measures are submitted: Agency and program; 
Method used to submit measures: Biennial budget requests; 
Required as part of agency budget request? Yes; 
Primary method of publicly reporting measures: Executive budget 
document. 

Source: GAO. 

Note: Based on analysis of testimonial evidence, documentation 
collected, or both. 

[End of table]

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 agency-specific 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.[Footnote 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 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.[Footnote 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. 

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.[Footnote 
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.[Footnote 
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 decision making, 
not the least of which is political choice.[Footnote 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.[Footnote 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,[Footnote 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.[Footnote 19] 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.[Footnote 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.[Footnote 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.[Footnote 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 
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.[Footnote 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.[Footnote 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 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 results-oriented agency planning, measurement, 
and reporting and increasingly has become a part of agencies' 
cultures.[Footnote 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 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.[Footnote 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.[Footnote 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.[Footnote 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. 

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 [Hyperlink, http://www.gao.gov]. 

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-9573 or posnerp@gao.gov or Denise Fantone at 
(202) 512-4997 or [Hyperlink, fantoned@gao.gov]. Additional key 
contributors to this report are listed in appendix VII. 

Sincerely yours,
 
Signed by: 

Paul L. Posner: 
Managing Director: 
Federal Budget Issues, Strategic Issues: 

[End of section]

Appendixes: 

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--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 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. 

[End of section]

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: 

Frequency of budget cycle: Annual/biennial; 
Frequency of legislative cycle: Annual; 
Budget guidelines sent to agencies: June; 
Agency requests submitted to governor: September; 
Agency hearings held: January-February; 
Governor submits budget to legislature: January; 
Legislature adopts budget: January-April; 
Fiscal year begins: July. 

Source: GAO. 

Note: Based on analysis of testimonial evidence, documentation 
collected, or both. 

[End of table]

In 1997, Arizona enacted legislation that established a biennial 
budgeting process.[Footnote 29] However, more recent 
legislation,[Footnote 30] 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 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.[Footnote 31] 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.[Footnote 32] 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 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.[Footnote 33] 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.[Footnote 34] 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. 

Section III: Overview of Performance Measurement System and Processes: 

Table 3: Summary of Arizona's Performance Budgeting Process: 

Performance budgeting legislation? Yes; 
Level that measures are submitted: Program; 
Method used to submit measures: Annual program operating plans; 
Required as part of agency budget request? Yes; 
Primary method of publicly reporting measures: Appropriation act. 

Source: GAO. 

Note: Based on analysis of testimonial evidence, documentation 
collected, or both. 

[End of table]

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. 

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. 

Figure 1: Example of Performance Information Presented in Arizona's 
Executive Budget: 

[See PDF for image] 

Note: Information from Arizona's fiscal year 2003-05 executive budget. 

[End of figure] 

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: 

[See PDF for image]

Note: Information from Arizona's fiscal year 2004-05 General 
Appropriation Act. 

[End of figure]

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 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.[Footnote 35] 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 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. 

[End of section]

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: 

Frequency of budget cycle: Annual; 
Frequency of legislative cycle: Annual; 
Budget guidelines sent to agencies: June; 
Agency requests submitted to governor: August; 
Agency hearings held: October-November; 
Governor submits budget to legislature: January; 
Legislature adopts budget: April; 
Fiscal year begins: July. 

Source: GAO. 

Note: Based on analysis of testimonial evidence, documentation 
collected, or both. 

[End of table]

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,[Footnote 36] 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. 

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.[Footnote 37] 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 budgeting legislation? Yes; 
Level that measures are submitted: Agency and program; 
Method used to submit measures: Annual budget requests; 
Required as part of agency budget request? Yes; 
Primary method of publicly reporting measures: Executive budget 
document. 

Source: GAO. 

Note: Based on analysis of testimonial evidence, documentation 
collected, or both. 

[End of table]

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. 

Figure 3: Example of Performance Information Presented in Maryland's 
Executive Budget: 

[See PDF for image]

Note: Information from Maryland's fiscal year 2005 Executive Budget. 

[End of figure]

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.[Footnote 38] 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 Budgeting: 

According to state estimates, Maryland faces a significant structural 
budget shortfall for fiscal year 2006. To address this potential 
shortfall, DBM 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 
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. 

[End of section]

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: 

Frequency of budget cycle: Biennial; 
Frequency of legislative cycle: Biennial; 
Budget guidelines sent to agencies: April; 
Agency requests submitted to governor/legislature: July-September; 
Agency hearings held: July-September; 
Governor/LBB submit budgets to legislature: January; 
Legislature adopts budget: May; 
Fiscal year begins: September. 

Source: GAO. 

Note: Based on analysis of testimonial evidence, documentation 
collected, or both. 

[End of table]

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).[Footnote 39] 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. 

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.[Footnote 40] 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 odd- 
numbered 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. 

Figure 4: Example of Texas's General Appropriation Act Structure: 

[See PDF for image]

[End of figure]

Section II: Performance and Accountability Requirements: 

In 1991, the Texas General Assembly passed a law to establish the 
Strategic Planning and Budgeting system.[Footnote 41] In 1993, the law 
was amended to consolidate planning requirements and change the minimum 
planning time line from 6 to 5 years.[Footnote 42] 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 budgeting legislation? Yes; 
Level that measures are submitted: Strategies (by agency); 
Method used to submit measures: Strategic plans and electronic 
quarterly updates; 
Required as part of agency budget request? Yes; 
Primary method of publicly reporting measures: Appropriation act. 

Source: GAO. 

Note: Based on analysis of testimonial evidence, documentation 
collected, or both. 

[End of table]

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 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.[Footnote 43] 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 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: 

[See PDF for image] 

Note: Information from the Texas Sunset Advisory Commission, Sunset 
Process Report Card (Austin, Tex.: December 2002, revised February 
2003), 2. 

[End of figure] 

[End of section]

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: 

Frequency of budget cycle: Biennial; 
Frequency of legislative cycle: Annual; 
Budget guidelines sent to agencies: April-August; 
Agency requests submitted to governor: June-October; 
Agency hearings held: September-October; 
Governor submits budget to legislature: December; 
Legislature adopts budget: March-April; 
Fiscal year begins: July. 

Source: GAO. 

Note: Based on analysis of testimonial evidence, documentation 
collected, or both. 

[End of table]

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. 

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 Performance and Accountability Requirements: 

Virginia established its performance measurement system in 
1995.[Footnote 44] The governor required agencies to develop strategic 
plans and report on performance. Legislation enacted in 2001 required 
DPB to submit to legislators an annual report comparing expected 
results and expenditures for state agencies during the previous fiscal 
cycle to actual performance during the previous fiscal year.[Footnote 
45] 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,[Footnote 46] 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. 

Figure 6: Summary of Key Components of Virginia's Government 
Performance and Results Act: 

[See PDF for image] 

Note: Information from the Council on Virginia's Future, Interim Report 
(Richmond, Va.: January 2004). 

[End of figure] 

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 budgeting legislation? Yes; 
Level that measures are submitted: Agency; 
Method used to submit measures: Internet; 
Required as part of agency budget request? No; 
Primary method of publicly reporting measures: Virginia Results Web 
site. 

Source: GAO. 

Note: Based on analysis of testimonial evidence, documentation 
collected, or both. 

[End of table]

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. 

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.[Footnote 47] 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. 

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. 

[End of section]

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: 

Frequency of budget cycle: Biennial; 
Frequency of legislative cycle: Annual; 
Budget guidelines sent to agencies: April; 
Agency requests submitted to governor: September; 
Agency hearings held: --; 
Governor submits budget to legislature: December; 
Legislature adopts budget: April-May; 
Fiscal year begins: July. 

Source: GAO. 

Note: Based on analysis of testimonial evidence, documentation 
collected, or both. 

[End of table]

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 
even-numbered 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.[Footnote 48] 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. 

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,[Footnote 49] 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 budgeting legislation? Yes; 
Level that measures are submitted: Agency and program; 
Method used to submit measures: Biennial budget requests; 
Required as part of agency budget request? Yes; 
Primary method of publicly reporting measures: Executive budget 
document. 

Source: GAO. 

Note: Based on analysis of testimonial evidence, documentation 
collected, or both. 

[End of table]

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 
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.[Footnote 50] 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. 

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: 

* Improve student achievement in elementary, middle, and high schools: 

* Improve quality and productivity of our workforce: 

* Improve value of a state college or university education: 

* Improve health of Washington citizens: 

* Improve security of Washington's vulnerable children and adults: 

* Improve economic vitality of business and individuals: 

* Improve statewide mobility of people, goods, information, and energy: 

* Improve safety of people and property: 

* Improve quality of Washington's natural resources: 

* Improve cultural and recreational opportunities throughout the state: 

* 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 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 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 
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. 

Figure 7: Example of Washington's Priorities of Government Framework: 

[See PDF for image] 

[End of figure] 

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. 

[End of section]

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. 

(450189): 

FOOTNOTES

[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. 

[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. 

[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). 

[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. 

[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). 

[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. 

[13] For more information about federal efforts to align and integrate 
budget and performance information, see GAO-05-117SP. 

[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. 

[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). 

[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). 

[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. 

[25] GAO-04-38, pp. 6-7. 

[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. 

[29] 1997 Ariz. Sess. Laws ch. 210, §7. 

[30] 2002 Ariz. Sess. Laws ch. 210, §2. 

[31] 1997 Ariz. Sess. Laws ch. 210, §14. 

[32] 1995 Ariz. Sess. Laws ch. 283. 

[33] 1999 Ariz. Sess. Laws ch. 210. 

[34] 2002 Ariz. Sess. Laws ch. 210 §10. 

[35] A.R.S. §§41-2951-41-2958. 

[36] Md. Const. art. III, §52. 

[37] 2004 Md. Laws ch. 452. 

[38] Maryland Program Evaluation Act, Md. Code Ann., state gov't §§8- 
401-8-413 (2004). 

[39] See generally Tex. Gov't Code Ann. §322.001-§322.001 (Vernon 2004) 
(Provides general information regarding budget process and role of 
LBB). 

[40] Tex. Const. art. IV §14. 

[41] Acts 1991, 72nd Leg., ch. 384. 

[42] Acts 1993, 74th Leg., ch. 76, §529(b). 

[43] See generally Tex. Gov't Code Ann. §325.003 (Vernon 2004). 

[44] 1995 VA Acts ch. 51. 

[45] 2001 VA Acts ch. 43. 

[46] 2003 VA Acts ch. 900. 

[47] 2003 Va. Acts ch. 900. 

[48] Wash. Rev. Code §43.88.060 (2004). 

[49] 1996 Wash. Laws ch. 317, codified in, Wash. Rev. Code §43.88.090. 

[50] Wash. Rev. Code §44.88.010. 

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