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NPRI analysis: Performance-based budgeting would save Nevada more than $3 billion



A new policy study from the Nevada Policy Research Institute details how converting Nevada’s budgeting process to a performance-based approach would maintain or increase levels of government service while saving the state more than $3 billion.

The study, titled “Better Budgeting for Better Results: Performance-based budgeting reforms can save Nevada taxpayers billions,” was authored by NPRI deputy director of policy Geoffrey Lawrence, who outlines a strategy for revamping Nevada’s budgeting process and demonstrates how the study’s recommendations are already saving other states billions of dollars.

“With Nevada facing a shortfall of $1 billion, there has never been a better time to reevaluate how the state budget is created,” said Lawrence. “Instead of funding programs without first determining how effective they are, Nevada lawmakers need to think in terms of purchasing outcomes. This study provides a framework for policymakers to prioritize policy objectives, agree on metrics to measure success and use state resources to contract for the delivery of stated policy objectives.”

Performance-based budgeting, also known as budgeting for outcomes, has already been adopted by several states. The State of Washington began using performance-based budgeting in 2002 and, as a direct result of the new method, was able to reduce its General Fund spending by $2 billion biennially. In Nevada, former Assembly speaker Barbara Buckley, the Spending and Government Efficiency (SAGE) Commission and the Nevada Taxpayers Association have all expressed support for a form of performance-based budgeting.

“Once lawmakers have adopted a performance-based budgeting process, they can then change the mindset of the entrenched bureaucracy to value the achievement of outcomes over the funding of inputs,” said Lawrence.

The study also details how Iowa’s award-winning “Charter Agency” model has empowered agency directors to become more like CEOs — receiving financial rewards for success and facing consequences, including dismissal, for failure.

“The success Iowa’s Charter Agencies have had in doing more with less is dramatic and encouraging,” said Lawrence. “Under the Charter Agency model, Iowa’s Department of Natural Resources reduced the average turnaround time for permit applications from 187 days to 30 days. Its Veterans Home, a long-term care facility, reduced the number of patients experiencing moderate to severe pain by half. These reforms didn’t just save Iowa money. They improved people’s lives.

“Performance-based budgeting and Charter Agencies represent the type of win-win reforms that Nevada’s lawmakers must implement if they wish to increase and maintain state services while balancing the budget without raising taxes.”

The NPRI study also details, from a performance-based budgeting perspective, specific policy reforms that would greatly increase Nevada government’s efficiency in the high-priority areas of K-12 and higher education, health care and public safety. The study also notes that wages in Nevada, particularly at the local level, far exceed the national median, and that significant savings are available if Nevada’s collective bargaining law were reformed to allow local governments greater flexibility with regard to personnel compensation.

In total, the study’s suggestions would save Nevada approximately $3.5 billion.

An executive summary of the study is available online at http://www.npri.org/publications/better-budgeting-for-better-results. The full study can be downloaded at http://www.npri.org/docLib/20110119_Better_Budgeting_2011-2013.pdf.

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