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206 Taiwan Development Perspectives 2009 I. Introduction Back in 1940 Dr. V. O. Key asked: “On what basis shall it be decided to allocate X dollars to Activity A instead of allocating them to Activity B, or instead of allowing the taxpayer to use the money for his individual purposes?” Dr. Key called attention to the lack of a budgetary theory which would assist in arriving at an answer to this question. Pointing out that budgeting is essentially a form of applied economics, since it requires the allocation of scarce resources, Professor Key urged that the question be explored from the viewpoint of economic theory. This emphasis on budget efficiency has implications for budget reform. In response to the report of the First Hoover Commission (1949), a proposal was advanced to integrate more data into the budget process. This proposal, which is referred to as “performance budgeting,” was designed primarily to allow managers to develop measures of workload and cost effectiveness. Performance budgeting has a clear efficiency orientation. The purpose of performance budgeting was to determine the least costly method of achieving the objectives of a program. The emphasis was not on making government-wide budgetary tradeoffs. Its significance stemmed primarily from its emphasis on the integration of program information and budgeting. This emphasis was to be continued in future reform efforts. Budgeting eventually evolved to a planning orientation, coincident with the development of the so-called “rational” budget reforms, such as program budgeting and zero-based budgeting. Each of these reforms was driven by the perceived limitations of the previous control and management focus. Program budgeting placed its focus on results and on multiyear planning. Zero-based budgeting was focused on the base, rather than assuming that existing programs should continue without being subject to detailed annual review. Did these reforms offer anything new to the budget process? Certainly the changes in orientation that have been discussed by Schick—from control, to management, to planning – represented changes in the emphasis in federal budgeting. If successful, they could have fundamentally changed the process of allocating federal resources. Many observers argue that the reforms did not enjoy this kind of success for two reasons. First, the process envisioned under these reforms was inconsistent with the political nature of the budget process. Purely “rational” solutions were threatening to those that had an interest in maintaining the status quo. Second, the workload and paperwork requirements of these processes were overwhelming. Nevertheless, the significance of performance budgeting has been the key tone of budget reforms for 50 years. Since the 1980s, performance-based budgeting (PBB) has been adopted by many countries to improve accountability and effectiveness of public programs. The U.S. Congress passed the Chief Financial Officer Act of 1990 and the Government Performance and Results Act (GPRA) of 1993, which together laid down the legislative foundation for PBB reforms. PBB has also advanced rapidly in other member countries in the Organization for Economic Cooperation and Development (OECD) over the past decade as a way to make government more competitive and cost-efficient and as a response to cynical taxpayers who demand more accountable government spending. Many have expanded the practice of PBB and introduced new legislations that require performance measurement and benchmarking (Helgason 1997; OECD 2002; Willoughby and Melkers 2005). In the countries that have been using performance measurement for a number of years, many have also begun to shift their focus to reporting outcome and to building a stronger link between performance and budgeting (OECD 2002; Perrin 2003). Though studies have been conducted to examine PBB’s immediate impact on management practices and decision-making (Jordan and Hackbart 1999; Joyce 1993; Willoughby and Melkers 2005), few have explored how it may affect spending behaviors of the government. After all, the PBB’s promise of careful
Budget Efficiency and Performance-Based Budgeting: Implementation in the United States and Taiwan 207 scrutiny for the performance of public programs should affect how these programs behave in resource allocation decision-making as well as in curbing unnecessary or wasteful public spending during a time when public debts and budget deficits have grown rapidly in the world since the 1980s, and both the Western and Asian countries have been struggling to find the effective way of reducing budget deficits and government debts. This exploratory study attempts to understand how the practices of PBB may influence spending behaviors of the government with an ultimate purpose of enriching the conversation about how to assess the impact of PBB. A comparative setting with multiple countries (regions) allows an enhanced experience for the exploratory nature of this study to discover possible variations of momentums and impediments for PBB, improving the validity of findings and broadening the horizon of the conversation. II. A Comparative Method This study employs the comparative method, as defined by Lijphart (1971), which offers a strong basis for evaluating hypotheses. The method allows a systematic comparison in assessing alternative explanations (Collier, 1991). The comparative method can fill important knowledge gaps about alternative approaches adopted in different countries for similar policy issues, as well as effects of these alternative policies in solving common problems such as those in budgetary reforms. Moreover, the comparative method helps specify the conditions under which one country can learn from another. By utilizing the comparative method, researchers not only can find new policy options in other countries, but may also discover latent policy constraints and opportunities within their own system. As Nagel (1961) and Lijphart (1971) point out, the logic of the comparative method is the same as that of the experimental method. The experimental method is the most nearly ideal method for scientific explanation, but unfortunately it can rarely be used in policy and management research because of practical and ethical impediments. An alternative to the experimental method is the statistical method that entails the conceptual and mathematical manipulation of empirically observed data in order to discover controlled relationships among variables. This paper will investigate two cases, the United States and Taiwan, as comparative setting. A framework to present the practices of PBB comes next. How PBB influences spending is then discussed. A section to present the key findings follows. The paper concludes with lessons learnt to further the conversation of assessing PBB implementation. III. PBB Implementation in the United States and Taiwan The United States The Government Performance and Results Act (GPRA) became law in the United States in 1993, establishing a strategic planning and performance budgeting framework for the federal government. The Clinton administration established the National Performance Review (NPR) Committee in September 1993 to implement the management reform with a policy of budget deficit reduction. On October 26, 1993, the White House released a legislative proposal, the Government Reform and Savings Act, HR 3400, to implement NPR’s cost-cutting recommendations. Section 3C, “Delivering a Government that Works Better and Costs Less,” of the Clinton administration’s Fiscal Year 1995 budget makes it clear that this reform was intended for a budgetary outcome. The GPRA was designed to strengthen the financial management enhancement efforts of the Chief Financial Officers Act (CFO) of 1990 through requiring specification of objectives, standards, and goals for federal programs. The GPRA requires submission of performance reports to the Office of Management and Budget (OMB), the publishing of annual performance reports, and the integration of performance goals for major expenditures into the federal budget. Consistent
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CONTENTS Preface Overview ix xi Foc
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Agriculture and Fisheries Impact of
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CHUANG, Yih-chyi( 莊奕琦 ) Pro
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TAN, Ching-yu( 譚瑾瑜 ) Associ
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enth effort on the part of the Foun
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ills pertinent to parliamentary ref
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