Performance Management Final Report
Chapter One

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Chapter One - Background

Purpose of the Study

  The purpose of the study was to identify ways to strengthen and systematize the availability and use of performance measurement information for the Connecticut General Assembly.

  Definition of Performance Measurement

               Performance measurement as used in this study means the systematic measuring of agency or program activities, outputs, and outcomes, and their relationship to the objectives of the agency or program.

  Uses of Performance Measurement Information  

Performance measurement data serve many different purposes for a variety of users.  They can be useful to agency managers and executive and legislative branch policy-makers for:  

§       managing agency operations -- data can be used to identify and change inefficient processes and activities;

 

§       developing policy -- data can be used to evaluate the effectiveness of existing policies and change those not working or create new approaches; and

 

§       budgeting -- data can be used to identify ineffective programs and allocate resources.  

The structures of performance measurement systems vary based on whether their primary use is managing agency operations, developing policy, budgeting, or a combination of the three.  

Figure I-1 shows the relationship between the data collected under a performance measurement system and uses of the information.  The diagram is adapted from one produced by the Florida legislature's Office of Program Policy Analysis and Government Accountability (OPPAGA) and depicts a comprehensive system in which performance measures are reduced in number and broadened in scope as uses of the data change from decisions affecting agency operations to those dealing with the state budget.

  Figure I-1 illustrates that at the highest level of a comprehensive performance measurement system -- budget allocation -- the data used to make decisions involve a few broad measures of efficiency (e.g., cost per unit of output) and effectiveness (e.g., cost per outcome).  At the policy or middle level, the focus is on a limited number of key output (e.g., unemployed individuals receiving job training, miles of road paved, or criminals incarcerated) and outcome (e.g., percent of job training graduates employed in field of training, highway roughness index rating, or crime rate.) measures.  At the agency level, represented by the bottom tier of the pyramid, managers analyze a wide array of input, output, and outcome indicators to fine-tune operations and reallocate resources.

  

Basic Elements of a Performance Measurement System  

There is no single structure for a performance measurement system that meets every organization's needs.  However, there are basic elements that should be present in any good system.  These include:  

§       a plan identifying a set of objectives to be achieved and the activities and resources needed to accomplish those objectives;  

§       a process for collecting and analyzing information on how well the plan's objectives are being met; and  

§       a process for making decisions concerning activities undertaken in pursuit of stated objectives and the corresponding allocation of resources.  

Figure I-2 shows a model performance measurement system as a process in which the elements identified above are connected in a sequence of steps.  The process begins with a plan, moves through a data collection and analysis phase, and ends with decisions being made based on an assessment of quantitative data. 

  

  Performance Measurement Models  

There are two basic performance measurement models.  One will be referred to in this study as the special review model.  Under this model, data on government operations are gathered from all available sources and analyzed by a staff reporting to a central authority -- typically a special commission empowered to make recommendations to the executive and legislative branches.  The second, commonly referred to as performance based budgeting model, involves the systematic identification and collection of performance data, which are then incorporated into the regular budget process.  

It should be noted neither model is rigidly structured.  Both offer opportunities for variation, particularly the performance based budget model.  

Other States  

The special review model has been in existence for many years.  It is frequently used in periods of budgetary crisis.  Indeed, as will be discussed in the next chapter, Connecticut has used this model on several occasions.  Information on the model’s use in other states is limited, however, due to its highly localized focus and temporary nature.  At least one state, Texas, did attempt to institutionalize this approach.  

Texas Performance Review.  In 1991, Texas enacted legislation requiring the examination of the organization, management, and programs of the entire state government.  The process was called the Texas Performance Review (TPR).  The authority to carry out the review was given to the nonpartisan Legislative Budget Board.  The board designated the state comptroller as the project leader.  

During the initial round, the comptroller employed a staff of 100 auditors, research analysts, and other specialists from state agencies and the private sector.  The methodology followed included traditional staff work such as documents review, interviews, and surveys.  It also included a variety of other means such as soliciting information from state employees and the general public using toll-free hotlines, public hearings, and press releases. 

According to the comptroller, the initial project produced over 200 recommendations and a projected savings of $4 billion.  The Texas legislature adopted about two-thirds of the recommendations, accounting for $2.4 billion in savings.  At the completion of the initial project, the legislature authorized the comptroller to continue TPR on a permanent basis.  

In subsequent years the comptroller continued to issue reports with hundreds of recommendations and billions of dollars in projected savings or revenue increases.  The comptroller reported between 85 and 90 percent of the recommendations and associated savings were adopted.  

Recently, after the sitting comptroller left office, the TPR project was modified. The comptroller’s review of all state government operations has been replaced with a focus on auditing education districts.  A citizen’s council has been formed to address other aspects of the government.  

Performance based budgeting.  As Table I-1 shows, many states are moving toward a performance based budget model.  The table identifies 31 states that in 1996 indicated an intention to implement some form of a performance measurement system.  The table names 28 states that included such performance data in their budgets, 12 of which are already using the data to some degree as a policy tool.  Connecticut was one of only four states reporting it did not have performance measures.

               As Table I-1 shows, most of the states involved in the performance budgeting process are early in the implementation phase.  Presented below is more detailed information on three states recognized as leaders in performance based budgeting.  

Texas. In addition to undertaking activities relevant to the special review model, Texas also has pursued the performance based budget model.  Texas requires each agency to have a strategic plan that includes goals, objectives, and performance measures.   State agencies are required to report performance data to the nonpartisan Legislative Budget Board on a quarterly basis.  The state auditor reviews the data for validity and reliability.  The board’s staff analyzes each agency’s performance based on the data.  The staff's analysis is added to the information used in the budget decision-making process.  

Florida.  In Florida, performance budgeting is being phased in over seven years, which beginning in 1994.  As summarized at the National Legislative Program Evaluation Section's 1999 annual meeting, the Florida process consists of four steps:  

  1.     agencies propose programs and measures;

    2.     governor's office includes this information in the budget recommendation;

    3.     legislature incorporates the information into the budget recommendation; and

     4.     after one year, the legislature's Office of Policy Analysis and Governmental Accountability conducts a study to evaluate the agency or program performance.  

Minnesota.  In Minnesota, state agencies biennially submit performance reports showing progress on specific goals.  The measures contained in the reports are developed with the help of the state's budget and administrative departments.  The measures are reviewed by the Office of the Legislative Auditors (OLA) for reliability, validity, and usefulness.  The auditors are required by law to comment on the reports.  The performance reports are not directly linked to the budget process, but are intended to provide the legislature with information to facilitate policy and budget discussions.