Governor Vilsack’s plan to change the budgeting process this year has some merit and I believe it should be explored. “Purchasing Results” as he has coined it, is essentially a form of zero-based budgeting. Traditionally, the budgeting method used by state agencies is to have the first 75 percent of their budget on autopilot from year to year. Annual budgeting decisions by the Governor and the Legislature then focused on the remaining 25 percent and any proposed budget increases. The new system would put everything on the table each year and make decisions based on pre-determined priorities.
According to David Osborne of the Public Strategies Group, the following steps constitute the core of Purchasing Results, also known as Budgeting for Outcomes:
Set the price of government. Establish how much citizens are willing to pay for the results they want from government. In Iowa, that would be what they are now paying or less than that amount.
Set the priorities of government. Define the outcomes that matter most to citizens (i.e. good schools, safe communities, affordable health care) and establish indicators to measure progress towards outcomes. This is obviously the most subjective part of the process and will cause the most debate.
Set the price of each priority. Divide the total revenue pie among the priority areas. In Iowa, that would mean taking the entire $4.9 billion general budget and assigning a determined percentage to each priority.
Develop a purchasing plan for each priority. Create a buying team to act as a purchasing agent for the citizens. In Iowa’s case, the buyer would be the Governor, his staff, and the Legislature if they choose to participate in the process. The selling teams are the executive branch agencies. The buying teams decide what to buy based upon which items will accomplish the outcomes for each priority.
Solicit offers from providers to deliver the desired result. This step is the most radical departure from the old budget process. Instead of asking agencies to add or subtract from last year’s budget, the buying teams submit a “Request for Results” (RFR) which incorporates result, price and a purchasing strategy. The RFR allows different agencies to “bid” on providing the same service. Because of this competitive bidding, duplicative programs are eliminated.
Buy the best, leave the rest. After the offers are in, the buying teams rank each offer in terms of results delivered per dollar, buying according to priority until available funds have been exhausted. A line is then drawn and all of the proposals above the line are included in the budget; those below the line are not funded. It attempts to change the focus from what is being cut to what is being funded.
Negotiate performance agreements with the chosen providers. Performance agreements will spell out the expected outputs and outcomes, how they will be measured, the consequences for lack of performance, and flexibilities granted to help the provider maximize performance. As a result accountability for spending is built into the budget.
This is a big change in the status quo—the obvious question being is it attainable or purely academic? The Governor is preparing this year’s budget using this new process. Once the Governor’s budget is released the appropriation sub-committees will begin work on the budget and examine the Governor’s proposals using this plan.
While I believe the Governor is sincere in his attempt to find a more efficient way to fund our shared priorities, it seems to me his proposal last week to spend $213 million in a supplemental appropriation for the current 2005 budget year departs from this objective. The supplemental spending bill a) represents new spending, b) violates Generally Accepted Accounting Principles (GAAP), and c) violates the spirit of the 99 percent expenditure limitation law. While I support new budgeting processes such as “Purchasing Results” to further government efficiency, let’s not abandon good government principles set in place by previous legislatures. These principles have served us well, especially over the past three years.
Please feel free to contact me with your thoughts at:
E-mail: carmine.boal@legis.state.ia.us
Home Address: 3301 SW Timber Green Road, Ankeny
Home Phone: 964-3335 · Capitol Phone: 281-3238
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