Public Sector Governance and Accountability Series: Budgeting and ...

A Primer on Performance Budgeting 151
place. No one would seriously suggest shutting down an inefficient health
care system unless better alternatives were available.
In this regard, the Chilean system of performance budgeting offers a
sensible way of using performance information in budgetary decision making.
It does not seek to establish a direct association of budget allocations with
performance measures. Rather, performance information is used in the
budget cycle along with financial and other information as a starting point
for discussions with agencies. From these discussions, performance data
have been used to confirm existing allocations or—when results were
poor—various actions have been taken to push agencies to improve
performance (Blöndal and Curristine 2004).
Why Pursue Performance Budgeting?
Would performance budgeting reform induce some revolutionary changes
in the rigid budgeting business? The extensive literature on performance
budgeting reforms in the past two decades, as explained in the following
paragraphs, suggests that performance budgeting reform can enhance
communication between budget actors, improve public management in
terms of efficiency and effectiveness, facilitate more informed budgetary
decision making, and achieve high transparency of and accountability for
government activities. Current performance budgeting initiatives have been
less successful in terms of changing appropriation levels (Flowers, Kundin,
and Brower 1999; Kristensen, Groszyk, and Bühler 2002; OECD 2004;
Rivenbark and Kelly 2000; Wang 2000). Four important advantages of performance
budgeting have been gleaned from recent experiences:
Enhanced communication between budget actors and with citizens. Performance
budgeting clarifies program goals and objectives and identifies
performance targets, thereby giving agencies and employees a better sense
of the expectations for their performance. It helps public managers communicate
more effectively about their activities to the executive, the
legislature, and the public. The public’s demand for a government that
does more with less will persist, so an important thrust of current budget
reform efforts is to develop budget presentations that improve communication
between government and citizens. In contrast to the traditional
line-item budget, a performance budget—with a description of each
government program, performance measures, and budget information—
is accessible to ordinary citizens and therefore makes it easier for public