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Introduction
California's Budget Process: Improving Quality,
Cost Efficiency, Effectiveness and Accountability in State Government
Introduction
Summary of Findings
and Recommendations
How To Order Entire Report
Introduction
Recent trends in public-sector budget reform have borrowed heavily from
the experiences and innovations of the private sector. The private-sector
has shifted budgeting from emphasizing tracking and reporting of financial
information to supporting management decision-making.
The culture of government, while evolving, continues to be dominated
by budgeting, accounting, civil service and management-control processes.
But within this environment a climate of change is shifting accountability
from a focus on control and oversight to a measurement of outcomes and
results. Decision-making authority is being moved out of centralized headquarters
and onto the front lines as the public-sector looks increasingly to private-sector
successes in revamping the way things get done. Bureaucracies are being
flattened and reporting requirements reduced as communication moves from
a "report and control" function to an "analysis and respond"
tool. This shift in organizational culture considers budgeting, accounting,
civil service and other administrative and decision-making systems as means
to ends, rather than as ends in themselves.
The rethinking of public systems is designed to clarify the goals and
organizational strategies of government and to make them more understandable
and relevant to the lives of constituents. This means making public service
more responsive to changing environments and changing needs, increasing
accountability for providing services and delivering them in more effective
and efficient ways. The critical element of public service responsibility
includes the duty to report regularly to the public, the Legislature and
the Governor on the quality of state activities.
The analogy between how the private and public sectors operate is not
complete. The private-sector is far more free to allocate resources strictly
according to quality of service or performance standards. Poorly performing
business units can face elimination. Government is less likely to shut
down or cut back funding for essential or non-essential services when administrators
and their staffs perform poorly. Constituents expect a government that
will not fail. Historically they have been willing to accommodate lower
efficiency in return for obtaining essential services. In other words,
the goals of government continue to exist even if service delivery is flawed.
Private-sector enterprises generally cannot operate that way.
The members of this bipartisan Commission, reflecting experience and
expertise in management, education, labor, finance, and government, are
aware of the significant differences between public and private business.
They believe, however, that a significant common ground exists to apply
the lessons learned in private business to achieve genuine improvements
in public budgeting and related performance improvements in public services.
In fact, local, state and federal governments have successfully applied
private sector innovations to improve government operations. These applications
demonstrate that government can benefit from private sector experiences
that offer lessons in improving the quality, cost-efficiency, effectiveness
and accountability of government programs.
Summary of Findings
and Recommendations
The Commission’s 10 findings are highlighted here in bold, followed
by a summary of recommendations. Findings and recommendations are described
in detail in Section 3.
Goal Setting and Planning
1. Budget planning is not driven by an integrated statewide vision
and strategy that sets priorities for the state and departments.
1. The Governor and Legislature should jointly establish a Task
Force to develop and periodically update a vision that identifies priorities
for California government that can guide strategic planning activities.
2. Lack of a shared statewide vision and integrated strategic planning
process makes it impossible to review department budgets against a clear
set of goals, agendas, and justifications for the dollars spent.
2a. The Legislature should establish informational hearings as
forums for clarifying and validating strategic plans and identifying ways
to integrate those plans into the budget-review process.
2b. Program Authorization Reviews, modeled upon an Arizona program,
should be established to require departments to evaluate their performances
and propose efficiency and effectiveness reforms.
3. The Governor’s and Legislature’s ability to control fiscal policy
is constrained by prior commitments.
3. The Legislature should reduce the use of spending guarantees
and increase the use of performance commitments in the budget process with
due regard to both cost and quality of service.
Information Use
4. The budget process is informed only to a limited degree by quality-of-service,
cost, or program effectiveness information, making it difficult to monitor
state services and guide administrative decisions.
4a. The Legislature should require the Governor to implement
electronic information systems that allow costs to be tracked by department,
program, element and task.
4b. The Legislature should thoroughly evaluate the Performance-Based
Budgeting pilot project.
4c. The Legislature should require the administration to collect
accurate, relevant and timely performance information and integrate it
into decision-making processes, particularly the budget process.
4d. The Legislature should provide continuous oversight and attention
to existing data-collection efforts to ensure valid and reliable information
for budget purposes and create incentives for maintaining and reporting
accurate information.
Management Responsibility
5. The budget planning and review process provides little opportunity
to promote innovation for service improvements in state programs.
5. The Legislature should establish an "innovation fund"
to receive proposals to help move departments toward becoming customer-centered
organizations dedicated to cost efficiency.
6. Budget planning is not driven by cost-efficiency concerns.
6a. The Legislature should require the Governor to establish
benchmarking practices for measuring program cost, quality and effectiveness
across all state agencies.
6b. The Legislature should require the Governor to establish
a training program that focuses on building state capacity to develop and
use strategic planning, benchmarks and performance measure information
to improve the cost-effectiveness, performance and quality of state programs.
7. The budget-planning process provides departments with little incentive
to cost-effectively invest in efficiency-improving technologies.
7a. The Legislature should establish a technology loan fund to
finance technology investments that promote efficiencies.
7b. The Legislature should require the Department of Information
Technology to establish a technology master plan and encourage departments
to apply cost-efficient technology where appropriate, and standardize systems
across the state.
Accountability
8. The budget review process is not oriented toward promoting
public scrutiny of spending decisions or program performance.
8. The Legislature should develop a simple, easy-to-read, and
understandable budget document for public dissemination.
9. The Legislature lacks accessible, long-term information necessary
for identifying historical, inter-departmental, and inter-governmental
inconsistencies.
9a. California should provide more comprehensive background information
for each budget item based on a master list of state programs modeled after
a successful program in Arizona.
9b. The Legislature should require all departments to develop
and maintain Internet sites that include relevant program information in
searchable form.
10. The state’s incremental, fragmented approach to budgeting fails
to create accountability.
10. The Legislature should hold informational hearings on departmental
activities prior to the introduction of the Governor’s proposed budget.
How to Order Entire Report
California's Budget Process: Improving Quality, Cost-Efficiency,
Effectiveness and Accountability in State Government
Report Number 985-S
An entire copy of this report may be purchased for $4.50 per copy (includes
shipping and handling), plus current California sales tax. Make checks
payable to the SENATE RULES COMMITTEE. Please include Stock Number 985-S
when ordering.
Senate Publications
1020 N Street, B-53
Sacramento, CA 95814
(916) 327-2155
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