California's Budget Process: Improving Quality, Cost Efficiency, Effectiveness and Accountability in State Government


Summary of Findings and Recommendations

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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.


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.

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California's Budget Process: Improving Quality, Cost-Efficiency, Effectiveness and Accountability in State Government

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