Sources used in this document:

"Performance-driven budgeting is the process by which states use appropriate performance metrics to decide where and how they should spend their money to achieve desired results" (the Pew Center. N.D.). The trend in governmental policy making has been toward a comprehensive approach which utilizes informational metrics and incorporates the data "into the budget documents, but simply including information on performance in budget documents is a long way from performance budgeting" (OECD. March 2008). Of the advantages of performance budgeting is its flexibility of incorporation into budgetary considerations. In analyzing the use of performance budgeting, the Organization for Economic Co-Operation and Development emphasized three approaches which "link funds allocated to measureable results: presentational, performance informed, and direct performance" (OECD. March 2008).

In the presentational approach "information is not intended to play a role in the decision making and does not do so" (OECD. March 2008). The performance-informed approach utilizes information however, the information "does not determine the amount of resources allocated and does not have a predefined weight in the decisions" (OECD. March 2008). Lastly, direct performance "involves allocating resources based on results achieved" (OECD. March 2008). Clearly the direct performance approach provides the greatest utility for determining future funding levels yet, according to the United States Government Accountability Office (GAO), performance budgeting is used to identify potential impacts of a proposed policy change, make policy decisions that reduce cost 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 on workload and output measures. (OECD. March 2008)

A fundamental attribute of performance budgeting is the manner in which it is used to achieve a desired result. The GAO study which analyzed the states of: Arizona, Washington, Maryland, Virginia, and Texas "found that performance information has influenced legislative budget deliberations" (U.S. GAO. February 2005). The extent to which policy is impacted by performance information is correlated with the desire of legislators to achieve substantive change. As an example it is important to consider the effect and efficacy of performance budgeting on funding levels. As the OECD policy brief articulates "it is a very tall order to expect agencies to provide objective information if it will be used to cut back their programs" (OECD. March 2008). The performance budget provides an opportunity to streamline operations and promote efficiency yet, the obverse pitfall is that