Performance-based Program Budgeting

1. Performance-based Program Budgeting

2. Today’s Agenda

3. Today’s Agenda

4. The Need to Change the Way GovernmentDoes Business • State government must continue to become more effective and efficient so that every tax dollar it uses is stretched as far as possible; • It must become smarter about how it operates and delivers services to the people of the Commonwealth; • State government needs to make sure that it focuses its limited resources on the things it needs to do to achieve better results for the people of the Commonwealth • To do this we need to get better at: • facilitating thoughtful and effective engagement with the public; • aligning resources to strategic goals and priorities; • And identifying outcomes that need to be achieved and regularly collect information to evaluate what is and is not working.

5. The Current Problem • Currently there is no easy and effective way to communicate about all the things government does and how well it is doing them. • We don’t link our strategic priorities, our goals and our strategies for achieving them to the budget. • Most of the information we get about government is organized around series of financial reports that focus on how we pay for things. • Organization - branches of government, secretariats, departments, etc • Expenditures - line items, object codes, classes (subsidiaries) • Revenue - revenue sourcesand types • Sources of Funds - budgeted, capital, federal, trust funds

6. Success can be achieved through the development of a program budget A performance-based program budget can help us achieve: • thoughtful and effective engagement with the public about the different things State Government does; • better linkage between budgeting and strategic planning; • And a way to report metrics that tell us how we are doing and gives us information to help make better decisions that help drive high performance “Performance-based program budgeting” is the practice of developing budgets by program (rather than for example by line item) while at the same time providing or linking information about the prior or expected results of the program and the cost of the program.

7. Best Practices to Develop a Program Budget • Begin with a common definition of programs and set of examples • Have agencies participate and agree with the definitions development • Use terminology that is understandable by layperson and is intuitive • Gain Executive and Legislative support • Create a hierarchy of statewide defined and mandated attributes and agency defined and optional attributes • Strive to make the program definition a meaningful management tool, not just a “paper exercise” • Tie resources to objectives, priorities, and strategies • Strike the right balance between recognizing discreteness and avoiding duplication • Focus on best practices for facilitating cultural change, including significant training and education • Over time, shift the budget debates from a focus on inputs (e.g., how many FTE) to a focus on programmatic outputs and outcomes (e.g., number of clients served and accomplishment of mission)

8. Examples of How a Program Budget is Organized Description Virginia Example Major program for summarized reporting 7 • Level 1 Major subprograms for reporting 150 Subprograms to be equivalent to budget line items 700 Subprograms for optional reporting 1,200 Subprograms for optional reporting 2,000

9. How a Program Budget Might Work in Massachusetts We expect that the different levels will be used for different purposes:

10. A Case Study: Two Examples from EOHHS Health and Human Services has been trying to align strategic priorities with the budget for the past couple of years: • Spending Plan Development • Connecting Spending Plan Development with Strategic Plan Development • DCF example from FY2010-11 Spending Plan • Development of an Alternative Budget Framework • Does our current line-item budget align with how we tend to Talk about our programs and service?

11. Presentation Outline Each department is asked to fill out a template along with their spending plans providing the following information: • Department Strategic Priorities and Outcomes • Spending Trends and Projections • Status of FY10 Reform and Savings Initiatives • FTEs and Contract Employees • Revenue Trends and Projections • FY11 Investment, Divestment, and Re-Structuring Ideas • Other Information

12. Results and Priority Areas: Department of Children and Families – FY10 Example: Priority areas are from FY 10 and have not been updated Economic Growth and Job Creation Quality, Affordable Health Care For All Effective Government Safe Communities World Class Education MassGOALS Priority Areas Efficient Transportation and Mobility Clean Energy and Housing Affordable Housing Civic Engagement Economic Growth and Job Creation Wellness and Quality Health Care Operational Priorities Safe Communities World Class Education EHS Results Priority Areas Rationalizing Health Care Cost POS Reform Ending Homelessness Communities First EHS Priorities Ending Homelessness, Promoting Economic Opportunities Positive Youth Development • Operational Efficiency • CQI • Care Coordination • POS Reform CY&F Cluster Priorities • Well-being • Health • Education • Functioning Children & Families Commitments Community Connected Care Effective Leadership Safety Permanency

13. Strategic Priorities and Outcomes Safety • Overview Priority Statement #1: Children and families will be free from risk of harm. • Maltreatment in closed cases • Repeat maltreatment • Safety from maltreatment in placement • Social Worker contact with families • Social Worker contact with children Priority Statement #2: Children will experience permanency through stable living situations and lifelong connections. • Family preservation • Kinship Care • Permanency through reunification • Timeliness of adoption Priority Statement #3: Children and families will experience increased wellbeing. • Timeliness of 30-day medical care • MCAS Results Permanency Wellbeing

14. Safety: Funding and Trends • Estimated SFY09 spending related to Safety * # of 51A’s received

15. Safety Statement #1: Maltreatment in Closed Cases • All children will be safe from repeat maltreatment. • Of all clinical cases that close during the year, the percent that reopens in protective cases within 90 days of being closed. • Indicates a positive outcome relative to the safety and well being of the children with whom DCF has been involved. • Key Learnings: • Results indicate DCF is closing appropriate cases • SFY08 Actual = 2.8% • Course Corrections: • DCF has adopted this measure into its Continuous Quality Improvement (CQI) process. • Scorecards are utilized to closely monitor and improve performance on this indicator. • DCF will establish criteria for safe case closure in SFY10 to support implementation of the Integrated Casework Practice model.

16. Approach to Program Budgeting • Development of an Alternative Budget Framework • In fall 2010, Secretary Bigby challenged EOHHS commissioners and executive staff to collaborate on alternative budget framework that would better align with the populations we serve and the programs EOHHS provides • By allocating all of our accounts into a population-focused framework, we are able to see all of our spending for each of our major populations in a single place. This allows us to track program relationships across departments, understand the impact of cuts in one area on related areas, and to better understand how to manage services and programs across departments.

17. EOHHS Alternative Budget Framework

18. FY11 H.2 Alternative Budget Framework

19. Where Do We Go From Here? The Executive Order calls for: • The publication of strategic plans and the Budget at the same time; • Development of a program taxonomy (definition) and other necessary analytical tools to enable performance-based program budgeting to inform and be incorporated into the annual budget beginning with the fiscal year 2014 Budget Recommendation. Working Group: • Over the summer a working group was formed to begin thinking about the development of a state-wide program definition. • Progress has already been made to develop the first to two levels of program definitions • More work needs to be done before we can get to a third level

20. The Path Toward Program-Based Performance Budgeting in Massachusetts Develop Program Structure • Develop program definitions • Develop a mechanism for accounting and reporting with a "program code" attribute for all transactions in MMARS • Develop performance measures under MassGOALS initiative • Governor signs an Executive Order Representative Program Build Foundation • Develop crosswalk from prior line item structure to new programmatic line item structure • Continue to enable accounting and reporting with a "program code" attribute for all transactions in MMARS with a focus on improving accuracy. • Continue to develop performance measures under MassGOALS initiative • Develop and provide dedicated change management to enable agencies to make the transition to program-performance-based budgeting • Associate performance measures with new programmatic line item structure • Accomplish changes in state finance law Transition • Develop, propose and review the FY15 budget in a program-performance based approach • Approve the FY15 budget in a program-performance based approach • Load the FY15 budget in MMARS under the new approach Sustain • Open the year under the new program-performance-based approach

21. Where Do We Go From Here? Questions?