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Strategic Planning and Performance Budgeting: A New Approach to Managing Maine State Government

ASLCS Home Page

In 1996, the Maine Legislature enacted a bill, An Act to Implement Performance Budgeting in State Government, which requires Maine State Government to phase in a system of performance budgeting by the 2000-2001 biennium. Central to the development of performance budgets is the development of a strategic plan for each agency that links budgetary requests and appropriations to specific agency goals and objectives. This approach has been embraced by the current Governor, and agencies are actively working to meet the various deadlines for implementation.

This model of strategic planning and performance budgeting, if fully adopted, has the potential to significantly affect state policy-making, the role of the Legislature and the operations of state government, particularly how agencies are funded and held accountable for the results produced with the use of state funds.

Performance budgeting is a new approach to managing state government in Maine. It will give greatly increased flexibility to executive branch agencies to carry out their responsibilities but also will place a higher burden on them to actually deliver the results. Finally, performance budgeting places a high burden on the Legislature to not only set long range state goals and objectives but also to assure that agencies use that increased flexibility to meet those goals and objectives in ways that are appropriate, efficient and responsive to the public.

In the Second Regular Session of the 117th Maine Legislature, the Legislature enacted An Act to Implement Performance Budgeting in State Government.1 The bill, enacted into law as Public Law 1995, chapter 705, requires State Government to phase in a new system of performance budgeting within a 3-year period. The law requires each agency to develop a strategic plan that links the daily operations and activities of an agency's divisions and programs to an overall plan that identifies specific goals and objectives to be accomplished and priorities. The goals and objectives may be inter-departmental as well as intra-departmental. This strategic plan forms the basis of agency budgeting which will be dramatically changed under the new law. Line item budgeting, long a budgeting tradition in Maine (and in most other states), will be replaced by performance-based budgeting.2 Performance budgeting is intended to link budget requests and appropriations to specific agency goals and objectives, with the focus being on agency outcomes, not merely past expenditures of funds or even the level of agency effort.

The law establishes an ambitious timeline for implementation of each of the major elements of performance budgeting. The law also is broad in its reach of agencies. With few exceptions, any agency or entity that receives a direct appropriation of funds or allocation from the Legislature (or is required to comply with certain other specific budgeting provisions) must develop a strategic plan and, ultimately, a performance budget that will be incorporated into the state's unified budget.

Included are virtually all state executive agencies since they receive some level of appropriations from the General Fund. Also included are agencies and other entities who receive only allocations (authorizations to spend) for federal or dedicated revenues (e.g., license fees) for their programs. As a result, virtually all aspects of state government are encompassed by this law, including state executive branch agencies, the judiciary, the Legislature itself, the University of Maine System, independent agencies such as the Finance Authority of Maine and Maine State Housing Authority, independent licensing boards and the Maine Technical College System. Because performance budgeting links funding to goals and objectives that cross agency lines, rather than to specific agencies or programs, it becomes essential that most agencies be included within the scope of the law if it is to be effective.

The agencies encompassed within the performance budgeting law must complete certain specific tasks relating to strategic planning and performance budgeting. At each stage of the process agencies must consult with and receive comments from the joint standing committee3 of the legislature having jurisdiction over the agency and its programs (legislative "policy" committee).

For the short term, the statute set forth these deadlines for state agencies to complete the following tasks in the strategic planning and performance budget process.

• August 1, 1996: Draft strategic plan. Each state agency must have developed and submitted a draft strategic plan to the State Planning Office, the State Budget Office, the legislative Office of Fiscal and Program Review and the policy committee.
• September 1, 1996: Performance budget proposal. Each state agency must have identified one program or subprogram to serve as a pilot and must have developed performance budget proposals for that pilot program that are tied to measurable objectives. Each agency must have consulted with the legislative policy committee and certain state officials in this process.
• February 1, 1997: Final strategic plan and pilot program review. Each state agency must have submitted to the appropriate legislative policy committee for review, a final agency strategic plan and a performance budget proposal for the pilot program.

For the longer term, the statute sets a number of deadlines for full implementation of performance budgeting.

• September 1, 1997: Identify program in similar policy area. Each agency must have identified at least one program within a policy area that has the same or similar goals and objectives as one or more other state agencies and they jointly must have developed measurable objectives and coordinated strategies for achieving objectives.
• December 31, 1997: Group state agencies into common policy areas. The State Budget Office and the Legislative Council must consult with state agencies and develop a plan to group all agencies into policy areas formed around common goals and measurable objectives.
• June 30, 1998: Joint strategic plan. State agencies within each policy area must develop and submit to the State Planning Office joint strategic plans that identify common goals, measurable objectives and strategies for all programs. Copies must be provided to the legislative policy committees.
• September 1, 1998: Joint performance budget proposal. State agencies within each policy area must develop budget proposals for all programs that are tied to their joint measurable objectives and strategic plan.

The law, as finally enacted, involves the Legislature (through its policy committees) at key points in the development process for strategic planning and performance budgeting. The final legislation differs in significant ways from the legislation that was initially introduced by the executive branch, reflecting the Legislature's emphasis on certain aspects of the process. When it considered the bill during the Second Regular Session, the Legislature modified it in the following ways. It:

• institutionalized strategic planning and performance budgeting as the new planning and budgeting process for state government by changing it from a pilot project (a pilot budget for one program area in an agency) to one requiring agencies to fully implement it for all programs;
• expanded the number of agencies affected by the law;
• required that a draft strategic plan be developed in order to give legislators a formal opportunity to react to the plan before a final one was developed and submitted;
• created formal opportunities for review and comment by legislative committees in order to allow legislative influence in setting agency goals, objectives and strategies in the final strategic plan;
• modified implementation dates to make them more workable and allow a more realistic phase-in of this new process; and finally
• reserved for itself a key role in determining the groupings of agencies into broad policy areas.

The thrust of all the changes was to assure that: 1) the planning and budgeting process is comprehensive and workable, and 2) the Legislature would be a full participant in the process from both an oversight and policy-making perspective.

Strategic planning is not a new concept to managing organizations. It has been used extensively in the private and nonprofit sectors for years and to a limited extent in state and municipal government. Even in Maine State Government it has been used, although generally not on a comprehensive agency-wide basis. For example, the Department of Inland Fisheries and Wildlife has prepared and implemented a strategic plan for its warden and fisheries & wildlife divisions since the early 1970's. Performance budgeting has been a management tool of the public sector since at least the 1950's but really only now is being fully embraced by a number of state governments. In Maine State Government it is essentially a new concept.

In Maine, the renewed interest in strategic planning and the new interest in performance budgeting have their genesis in the work of the Special Commission on Governmental Restructuring that issued its final report in 1991. In its study, the Commission had found that agency activities suffer from a lack of strategic planning and performance measurement. It also found that the current budgeting system relies too heavily on an incremental, non-comprehensive approach to government. The current system of budgeting at the state level in Maine and in most municipalities is line item, incremental budgeting. This budgeting approach allocates resources based on categories of spending such as Personal Services, All Other and Capital Equipment. It establishes the previous year's budget as the starting point for a new budget, adjusting for inflation and proposed expansion or reduction in programs. As a consequence, this approach to budgeting assumes a continuation of past priorities and programs, focusing only on the incremental changes to the budget.

Alternatively, performance budgeting allocates resources based on desired, measurable outcomes, which in turn are related to an agency's mission and goals. The focus is on results, or outcomes, rather than the level of effort or past expenditures of funds.

The Special Commission's report was issued in 1991, but it was not until 1995 when the Legislature created the Commission on Performance Budgeting that a concerted effort was made to consider a shift from the current state budgeting process to one that is performance-based. The Commission on Performance Budgeting continues to guide the implementation of performance budgeting by state agencies.

The commission is composed of 14 members, each appointed for 2 year terms. Six members represent the Legislative Branch; 7 members the Executive Branch; and 1 member the Judicial Branch. The commission is advisory only. Its charge is to monitor and guide performance budgeting in state government and to periodically report to the Legislature and the Governor on recommendations for improvements in performance budgeting. It has responsibilities to provide guidance on the methods for collection and evaluation of performance budgeting information relating to programs and services; review performance budgeting information; evaluate the system of performance budgeting being developed; and research and report on trends in other states regarding performance budgeting.

Strategic planning is the process of developing a long-term policy-oriented plan that links the present with a vision for the future. Strategic planning sets out an agency's mission, goals, measurable objectives and strategies in order to provide direction and focus for its operations. It includes an assessment of an agency's performance and accomplishments using a multi-year outlook. It also provides a solid basis for making priority-based resource allocations and decisions using a decision-making process that relies on careful consideration of an agency's capabilities and environment. In developing a strategic plan, an agency identifies policy and other issues that the agency faces or will face over the course of four or more years.

Performance budgeting is an approach to developing a budget that ties the appropriation or allocation of state funding to clearly stated purposes and measurable outcomes, with the goal of providing greater accountability for the use of funds by agencies of state government.4 The Legislature is presented with a budget that links state appropriations and allocations to specific outcomes that benefit the public. Because the focus of a performance budget is on outcomes or results, performance budgeting is intended to enable the public to more readily evaluate the effectiveness of agencies and in measurable ways.

Strategic planning is the foundation of performance budgeting. Once a strategic plan is in place, an agency can develop a budget that moves the agency toward achieving its objectives. For example, an appropriation to the Department of Environmental Protection might be tied to a performance objective such as, "By 1999, the level of sulfur dioxide (an air pollutant) in the ambient air will be reduced in Cumberland County to levels that meet federal air quality standards." An appropriation tied to an objective represents the dollars necessary to implement one or more strategies to achieve that objective.

From a legislator's standpoint, performance budgeting, if fully implemented, will present a new way of reviewing state agency budgets. The current budgeting method reflects activities performed by state agencies and the levels of effort expended by employees. The current budgeting method, however, does not describe the desired results to be achieved by the use of budgeted funds. Performance budgeting will provide legislators with information to evaluate a budget according to specific policies and intended outcomes. It is intended to connect results to spending, so that taxes and other state revenues are directed toward results rather than efforts. It also presents opportunities during budget discussions to re-evaluate and re-debate, if necessary, earlier policy decisions.

The ultimate goal of strategic planning and performance budgeting is to focus on the quality of service provided, the results of these services and the best use of state resources to achieve those results. For state government, strategic planning and performance budgeting are designed to:

• establish statewide direction for agencies in key policy areas;
• make state government more responsive to needs of Maine citizens by emphasizing results and benefits rather than service efforts and outputs;
• provide the basis for aligning resources in a rational manner to address critical issues facing the state now and in the future;
• communicate accomplishments and results to Maine citizens;
• link the budget process and other legislative processes with priority issues;
• improve accountability for the use of state resources;
• coordinate the policy concerns of public officials with implementation efforts through interagency, intergovernmental and public sector/private sector relationships; and
• bring focused policy issues to policymakers and lawmakers for review and debate.

Strategic plans have distinct elements that are developed at different levels of state government. The Governor and the Maine Quality Management Council have proposed statewide goals to serve as foundations for the agency strategic planning process. The Legislature will consider these draft goals and ultimately determine the most appropriate statewide mission, vision and goals for state government.

Agencies initiate the remaining elements as they prepare their individual strategic plans. Each element is linked to the others and each element builds on the previous one. Agency strategic plans should be developed in a manner that is consistent with the statewide vision and mission. As illustrated in the "Strategic Planning Model," the elements of an agency's strategic plan are: vision statement, mission statement, external/internal assessment, agency goals, objectives and outcome measures, strategies and action plans.

The following is a brief description of each strategic plan element.

Vision Statement - Some agencies include a vision statement in the strategic plan, others do not. A vision statement presents an ideal future for the people of Maine and the contributions that state government or a particular agency can make toward realizing that future.

Mission Statement - The mission statement serves as the foundation for a strategic plan. It lays out the broad, philosophical or legal purpose of an agency. It answers the question, "Why does the agency exist?" It is a statement of what the agency does, why it does it, and for whom. The statute creating an agency and specifying its powers and duties should form the basis for a mission statement.

Internal/External Assessment - An internal/external assessment is an evaluation of issues, trends and forces, both inside and outside an agency, that will affect how an agency accomplishes its mission. External factors include: demographic trends, public attitudes, economic changes, socio-political barriers or statutory requirements. Internal factors include: organizational structure, labor-management issues, fiscal conditions, and technology and equipment.

Goals - Goals chart the future direction of an agency. They are broad statements of policy that are ambitious but may not be readily achievable. They should identify the major aspects of an agency's purpose from which priorities will be developed.

Measurable Objectives - Measurable objectives indicate what an agency wants to achieve. They are specific, measurable outcomes that can be achieved within a foreseeable amount of time. They define the actual effect on the public being served rather than the level of effort expended by an agency. Measurable objectives are tools to assess the effectiveness of an agency's performance and the public benefit derived. They form the basis of an appropriation of funds to an agency. In most cases agencies will have to develop extensive baseline information which will become the basis for measuring future performance.

Outcome Measures - Outcome measures are quantitative indicators or measures used to assess the results, or effects, of government action or policy. They measure the change or difference the agency's action will have on the particular target group or issue area indicated in the goal and/or objective. These are indicators of how successful an agency is at achieving its objective or making progress toward an objective.

Strategies - Strategies are the specific approaches, methods and programs - a work plan - by which an agency intends to achieve goals and objectives. They are the basis for an agency's budget and may be a continuation of an existing program, a revision of an existing program, or a new program.

Action Plans - Action plans detail specific agency actions to implement strategies. They include assignments, time frames and resources needed. These plans are developed and implemented by an individual agency. Although they technically are not part of the strategic plan, action plans are important steps in actually carrying out the elements of the strategic plan.

A review of other state initiatives in performance budgeting conducted in May 1996 by the Maine Legislature's Office of Policy and Legal Analysis revealed that Maine at that time was one of only eight states that had enacted statutes which specifically addressed the development and implementation of strategic planning initiatives, either on a statewide level or for particular broad areas of interest, e.g., economic development strategies. According to an April 1997 report by Florida's Office of Program Policy Analysis and Governmental Accountability, 46 states now apply or intend to apply performance measures to the activities of state agencies and programs.5 Only 16 states have performance budgeting efforts underway and intend to use program performance information as a basis for budget decisions. Nine of the 16 states are in a pilot stage of the program. Maine and Florida are in the select group of states that have specifically attempted a strategic plan and performance budget for the legislative branch of government. Most other states are directing strategic planning initiatives toward executive agencies under the overall direction of the Governor or other executive branch official.

Strategic planning and performance budgeting have been used in the private and nonprofit sectors, and to a lesser extent in some sectors of government. However, public sector strategic planning differs significantly from such planning in the private sector and, therefore, successful approaches to strategic planning in the private sector cannot necessarily be adopted or easily applied in the public sector. This is because performance measurement, a key element to strategic planning, requires different approaches from the private sector and often is more challenging.

Performance measurement in the public sector has two distinct aspects:

• It is often difficult to tangibly measure public sector accomplishments; and
• there is a lack of consistent measurement units.

In the private sector, measuring success is relatively straightforward. Virtually all performance measures ultimately relate to the bottom line of a business, profitability, and they generally use common indicators: for example, net profit, gross sales, sales growth or market share. Furthermore, businesses generally use the same unit of measurement: dollars. Therefore, managers can compare operating divisions within a company or compare Corporation A to Corporation B since all companies have a common basis of evaluation.

In government, success measurement is much more difficult. For example, to measure the effectiveness of educational, welfare or crime prevention programs, one must define terms in ways that are both accepted by most people and readily measured using generally accepted measures of success. Because the measures often involve "values," finding common ground on definitions and performance standards may be exceedingly difficult for public sector programs or issues. In addition, it is often very difficult due to the nature of the public sector issues and the long period that may be needed to assess effectiveness. For example, is the effectiveness of K-12 educational programs measured by counting the number of students graduating from high school, the number going on to college, scores on a scholastic exam or the number of students employed in skilled jobs? Is the effectiveness of the Legislature based on the number of bills enacted in a session, the number killed, the "quality" of its policy decisions or the length of time it is in session each year? And how does one reliably compare the relative effectiveness of the Department of Education, a state agency, with that of the Legislature, a constitutionally established branch of government?

In addition, public sector organizations do not have the same single directional pull as does the private sector. In the private sector, the board of directors, officers and managerial staff usually share similar goals and objectives, and they tend to pull a business in the same direction, toward profitability. In the public sector this is often not the case; public sector organizations typically have multiple directions in their goals and multiple stakeholders pulling in different directions. The public sector (the Legislature in particular) is often called upon to balance competing interests or policies to further the public good, or to resolve societal issues where no clear resolution is apparent, let alone agreed upon.

Agencies and the Legislature must account for these differences if performance budgeting in the public sector is to succeed and be effective over the long term. This may be done in part by measuring governmental success in terms of realistic, measurable objectives, and establishing those objectives by building a broad consensus among an agency's stakeholders about where to direct an agency's policies and resources. Developing this consensus is the key element in a public sector strategic planning process. By fostering broad (though perhaps not unanimous) support for policy directions and allocation of resources, agencies can demonstrate a sense of continuity and move forward to reach generally accepted goals and objectives.

Performance budgeting is an approach to developing a budget that links allocation of resources to measurable performance outcomes, with the goal of providing greater accountability for the use of state resources. It is not, however, merely a tool for making budget decisions. Performance budgeting in state government, because of its ties to agency goals and objectives, has important implications for operations of state agencies, accountability, and the relative roles of the legislative and executive branches of government.

If performance budgeting is to succeed, the legislative and executive branches must confront these implications directly and reach agreement on the uses of performance budgeting information for management and oversight purposes, and the relative roles of the two branches of government as they relate to performance budgeting. While the implications of implementing this new budgeting approach are numerous, they fall into four major areas:

• policy-making; setting and funding priorities
• control of budgets; degree of agency flexibility
• governmental reorganization as an outgrowth of performance budgeting
• expectations of accountability; incentives and disincentives for performance

Policy-making; setting and funding priorities
The process of developing a biennial budget begins in the executive branch, and when submitted the budget indicates the Governor's priorities for spending. Under the current line item budgeting process, these priorities generally are reflected only in the budget document itself and, therefore, are readily modified by legislative changes to the budget bill. Under performance budgeting, however, proposed spending priorities are supported by an extensive system of goal and objective setting and strategy implementation in the context of an overall strategic plan, developed with the influence of affected stakeholders. Hence, to change the budget priorities the Legislature must question or refute the fundamental elements of a strategic plan and the resulting goals, objectives and priorities. This new budgeting approach represents a clear advantage to agencies since it fully shifts the burden of proof from agencies to the legislative appropriations committee that is reviewing the budget. While budget proposals are always subject to review and change by the Legislature, the likelihood of a major change is decreased because of this foundation upon which the budget priorities rest, and because appropriations discussions will be limited in large measure to agency goals and objectives, not budget lines or even strategies for implementation.

Where the Legislature must make its impact felt is in the policy committees if it is to meaningfully influence policy debate and resource allocation. The policy committees are the committees of jurisdiction for agencies, and generally have extensive knowledge of agency programs and operations, their effectiveness and the needs of stakeholders. Under the performance budgeting law, policy committees have an ability to exert great influence over the development of agencies' strategic plans and their priority objectives and strategies. Thus, the Legislature acting through its policy committees can, with a solid basis of knowledge, shape policy discussion, strategic plans and outcomes and with performance budgeting it is the policy discussion and decisions that drive the allocation of resources, not the reverse.

Control of budgets; degree of agency flexibility
A performance budget has been characterized by executive agencies as a "contract for performance" entered into between the legislative and executive branches of government. The agency is given flexibility in expending state funds (including transferring money between budget lines and between agencies) in exchange for committing to achieving certain predetermined broad, but measurable outcomes. Agencies are allowed to manage their financial and personnel resources as they see fit (but obviously within legal bounds) in order to accomplish specified goals and objectives. Resources may be shifted to high priority areas as managerial needs demand in order to meet the objectives. This budgetary latitude is a major departure for the Legislature which traditionally has had a vested interest in not only the goals and priorities of state agencies but also the manner in which they are carried out. The Legislature has relied upon budget lines to direct and control agency actions and program implementation.

Whether the Legislature ultimately will relinquish its traditional level of control over budget details and implementation strategies, remains to be seen as the new budgeting approach is implemented. It may be particularly difficult in a political environment such as the legislative one for legislators to relinquish decisions in areas such as agency staffing levels, transferring positions, private sector contracting or out of state travel without a high degree of confidence that the managerial structure in the executive branch will be vigilant in assuring responsible implementation and efficient use of state funds and resources at all times. Furthermore, the performance budgeting process is designed to provide accountability for results and the operations of an agency, but not its size or structure. The Legislature historically has been concerned with both aspects. If the appropriations process will no longer be used to control or direct agency structure or size, another legislative mechanism will need to be developed to provide sufficient organizational oversight, a legislative function still demanded by the public.

In addition, under performance budgeting, traditional programs will not necessarily be identified or tracked as discreet programs areas. Instead, various components of the programs will be encompassed by the broader goals and objectives. The public, however, still readily identifies with specific programs, e.g., circuit breaker tax program, lakes protection, child health care and school construction because it is at the program or implementation (strategy) level that most members of the public interact with state government. As a result, legislators may need to develop new mechanisms to readily gather and assess program information needed or demanded by constituents, constituents to whom the legislators are ultimately accountable.

Governmental reorganization as an outgrowth of performance budgeting
Maine's performance budgeting law shifts the focus of state government from measuring and funding agency efforts to measuring and funding agency results. In doing so, the emphasis necessarily must shift from organizational structure and programs to goals and objectives that involve coordination of programs by several agencies and inter-departmental cooperation. This shift raises a question as to whether full implementation of the performance budgeting law will lead to reorganization of departments. The answer is uncertain, but will likely to depend upon the degree to which joint goal setting leads to joint strategy implementation under performance budgeting.

The law requires identification of common policy areas and joint strategic plan development in three steps:

• grouping all agencies into policy areas centered around common goals and objectives;
• developing strategic plans within policy areas that identify common goals, objectives and strategies; and
• developing budget proposals for all programs within policy areas tied to joint strategic plans.

As agencies identify program areas having goals or objectives in common with other agencies, there likely will be attempts to consolidate duplicative or closely related programs in order to reduce redundancies. Some shifting of entire programs may occur, particularly if, upon review, they have little relationship to an agency's overall mission. However, wholesale reorganization of a department or departments is less likely to occur regardless of policy area considerations. This is because department level missions in Maine are already sufficiently distinct, and departments currently tend to be structured along policy lines. Therefore, organizational changes would most likely be fine-tuning, or shifting or eliminating programs that no longer clearly further an agency's goals.

Performance budgeting also has some potential to affect committee structure in the Legislature. As recently as 1994, the Legislature consolidated and restructured its joint standing committees, resulting in 17 committees organized by broad policy area. These committees oversee agencies that fall within these policy areas. The current structure is generally compatible with the concept of policy areas under performance budgeting. Even so, the fit may not be precise. For example, the Joint Standing Committee on Natural Resources oversees the departments of Environment Protection and Economic & Community Development, but not the departments of Conservation, Marine Resources or Inland Fisheries & Wildlife. Performance budgeting may force a re-evaluation of the committee structure, and perhaps some restructuring so that committees can provide a consistency, and a coordinated assessment of agencies within a broad policy area.

Under Maine's performance budgeting law, the Legislature (acting through its Legislative Council) reserved for itself a key role in defining policy areas and grouping agencies into those areas. Consequently, it will have a significant opportunity to develop a policy area framework that is consistent with the Legislature's committee structure and needs, and not be driven by the current or proposed alignment of executive agencies.

Expectations of accountability; incentives and disincentives for performance
As stated above, performance budgeting allocates resources based on the achievement of measurable outcomes, which are in turn related to an agency's strategic plan. Implicit in this budgeting approach is the increase or decrease of appropriations to an agency based upon an agency's performance in meeting outcomes. Currently, however, no state has actually proceeded to this stage of budgeting, partly due to limited institutional capacity to examine current indicators and report on performance. The state of Texas has developed a series of options that states might consider in basing appropriations on performance. If an agency meets or exceeds performance goals and objectives, the result might be:

• increase overall agency funding
• exempt the agency from reporting requirements
• allow the agency to retain any (or a percentage of) cost savings
• publicly recognize the agency for its achievements
• award bonuses
• expand agency responsibilities

Conversely, if an agency does not meet the performance goals and objectives the result might be:

• conduct a management audit to evaluate and develop a remedial plan
• reduce agency funding
• withhold agency funding until goals and objectives are met
• reduce the agency director's salary
• transfer agency responsibilities to another entity
• replace agency managers or create an oversight body

Employee and agency incentives can be extremely useful in motivating and mobilizing a large work force toward a common good. This approach raises some difficulties, however. Often government is performing certain functions because they are deemed to be essential for the public's well-being and the private sector is unable or unwilling to perform them. The need for those functions presumably will remain even if agencies do not meet the expected level of performance, so decreasing the funding or taking other punitive measures may only exacerbate the problem. Furthermore, such a system of incentives and disincentives presumes that an agency controls all factors relating to successfully meeting goals and objectives which is often not the case when dealing with complex, societal issues.

Lastly, if achieving objectives and goals becomes not a management tool, but instead a legislative requirement for agency survival, then agency managers will quickly learn to set low performance targets so success can always be demonstrated. Creativity and risk-taking would be discouraged for fear they may result in not meeting the established goals.

Budgeting in the public sector ultimately is about reconciling competing values and priorities with available resources. As such, performance accountability must not be relegated to a cookbook application of budget rewards and punishments; rather, to be successful in the long term, it must be viewed (and used) as a management tool, applied rationally, and evaluated in the context of current conditions and resources, to move agencies and their employees toward more efficient and effective operations in accordance with legislatively established priorities.

Strategic planning and performance budgeting can become important tools for the Legislature and the executive branch in managing state government, not just in making budget decisions. They can assist the Legislature in developing state policy, monitoring the implementation of these policies and goals and assuring their consistency between agencies, and making budget decisions. Officials in the executive branch can use strategic planning and performance budgeting to assist them in managing the daily operations of agencies, focusing on results and the quality of service to stakeholders, and improving overall agency efficiency.

Strategic planning and performance budgeting are not panaceas, however, and will require a large amount of effort and cooperation by both the Legislature and the executive branch if they are to be instilled in state government and succeed. They represent a dramatic shift in focus for Maine State Government and it will take several years to realize their benefits as they are fully implemented. Strategic planning and performance budgeting in the public sector have their strengths as well as a number of limitations and uncertainties as discussed above. As a result, they must be adapted to meet Maine's needs and applied as management tools to articulate and guide policy decisions in state government, rather than principally as auditing tools, if the public is to see beneficial results in the long term.

Blackerby, Phillip, Strategic Planning: An Overview for Complying with the Government Performance and Results Act of 1993, Armed Forces Comptroller, Vol. 39, No. 1 (Winter 1994), pp. 17-22

L.D. 1790; An Act to Implement Performance Budgeting in State Government, 1996

Florida Legislature, Office of Program Policy Analysis & Government Accountability, Performance-Based Program Budgeting in Context: History and Comparison, Report 96-77A, April 1997

Maine State Government, State Planning Office, Office of Training & Quality & Bureau of the Budget, Strategic Planning & Performance Budgeting: Orientation Handbook, May 1996

Maine State Legislature, Office of Policy and Legal Analysis, Strategic Planning and Performance Budgeting: A Guide For Legislators, June 1996

National Conference of State Legislatures, The Performance Budget Revisited; A Report on State Budget Reform, February 1994

Osborne, David & Gaebler, Reinventing Government, 1993

Public Law 1995, Chapter 705; An Act to Implement Performance Budgeting in State Government

State of Maine, Special Commission on Governmental Restructuring, Final Report of the Special Commission on Governmental Restructuring, 1991

State of Maine, State Planning Office, Minnesota: Performance Budgeting and North Carolina: Performance Budgeting, unpublished papers, 1995

State of Minnesota, Program Evaluation Division, Office of the Legislative Auditor, Performance Budgeting, February 1994

State of North Carolina, Office of State Planning & Office of State Budget and Management, 1995-1997 The North Carolina State Budget: Primer to Performance/Program Budgeting, undated

State of Texas, Governor's Office of Budget and Planning, Detailed Instructions for Preparing and Submitting Requests for Legislative Appropriations for the Biennium Beginning September 1, 1993, June 1992

State of Texas, Governor's Office of Budget and Planning, Instructions for Preparing and Submitting Agency Strategic Plans for the Period 1997-2001, December 1995

The author acknowledges the contributions of the staff of the Office of Policy and Legal Analysis and the Office of Fiscal and Program Review. Views expressed in this article are those of the author and do not necessarily represent the views or positions of the Maine Legislature or its staff offices.

For more information about ASLCS, write or call:

Joan Barilla
National Conference of State Legislatures
7700 East First Place
Denver, CO 80230
Phone: 303/856-1349
FAX: 303/364-7800
E-mail: joan.barilla@ncsl.org