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State Performance-Based Budgeting in Boom and Bust Years: An Analytical Framework and Survey of the States

Authors


Yilin Hou is the Stanley W. Shelton Professor of Public Finance in the Department of Public Administration and Policy, School of Public and International Affairs, University of Georgia. His areas of research interest include fi scal and budgetary institutions, state and local taxation, the intellectual development of public budgeting, and intergovernmental fi scal relations.
E-mail:yihou@uga.edu

Robin S. Lunsford is a native of Athens, Georgia. She holds an undergraduate degree from the University of Georgia. She was an MPA student specializing in public budgeting and fi nancial management when surveying PBB practices in the states for this study.

Katy C. Sides is a native of Greenville, South Carolina. She holds an undergraduate degree from the University of South Carolina and was an MPA student specializing in public budgeting and fi nancial management when surveying PBB practices in the states for this study.

Kelsey A. Jones, an Atlanta native, was in the joint Honors undergraduate program and MPA program at the University of Georgia when surveying PBB practices in the states for this study.

Abstract

The authors examine the track record of applying performance-based budgeting (PBB) across three time periods within a sample of U.S. state governments: (1) throughout the 1990s, (2) in the early 2000s, and (3) during the Great Recession. State-level PBB is analyzed according to four elements: (1) the development of performance measures, (2) its applicability to budgeting and management processes, (3) its utility across the business cycle, and (4) its usefulness for budget players. An analytical framework is devised that highlights the “publicness” of American government, draws on the principal–agent model, and considers incentive mechanisms theory. Findings confirm that a good performance measurement system takes time to develop and operate well and that PBB functions more effectively for executive management than legislative purposes. PBB is used more by the states during strong economic times as opposed to during economic downturns. More importantly, PBB is only selectively applied by legislators in most states, whereas top executive policy makers, middle managers, and staff embrace and utilize PBB systems more extensively.

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