2011 Lane Reports

Zero-based Budgeting Holds Much Promise for Illinois' Fiscal Future

The Lane Report, February 2011
Tuesday, February 1, 2011 6:00 am
by Marc J. Lane

An unheralded provision of last spring's budget legislation adds Illinois to the growing roster of states committed to performance-driven budgeting. “Budgeting for outcomes” was introduced by former Washington Gov. Gary Locke in 2002, when he faced a $2.5-billion budget shortfall. Mr. Locke reformed the way state officials prioritized and spent taxpayer dollars and, by 2003, had closed a nearly 15% budget gap. Since then, state after state has followed Mr. Locke's lead, demanding that budgets be designed from the ground up, a common-sense practice now mandated in Illinois for fiscal year 2012 and beyond.

Budgeting for outcomes, or BFO, will require Illinois' elected officials to start from scratch. No longer will budgeteers be permitted simply to adjust last year's line items up or down, implicitly inviting bureaucrats to pad their agency's costs and hide their surpluses in an effort to boost allocations or fend off draconian cuts. Instead, policymakers will seek to deliver measurable outcomes to citizens at the price taxpayers are willing to pay.

The new law requires the governor and all the state's other constitutional officers, after first consulting with the General Assembly, to define priorities for each executive agency and identify desired outcomes along with the programs and strategies most likely to achieve them. The governor will recommend appropriations based on those priorities and goals, and then track and publicly report annually on progress toward the state's highest-priority outcomes.

Officials will need to determine how much the state will spend and how revenue will be raised to cover those expenditures. They'll need to work with citizens and interest groups to see which results are most important to them. And they'll need to figure out how much each outcome is worth to the public and how to allocate finite resources among all of them.

BFO challenges leaders to rethink their priorities and managers to rethink how they will deliver state services. Policymakers will fund, reform or cut programs as their impact is measured, and public dollars will be redeployed from low-value and special-interest projects to initiatives most valued by the population at large.

While performance-driven budgeting can help policymakers rationally decide which projects are worth preserving or even expanding—and which projects, lacking public support, funding or measurable outcomes, need to be scrapped—it will take courageous leadership to render and carry out those tough decisions. BFO has been remarkably successful in other states, and it holds great promise for fiscal responsibility in Illinois. May our elected officials put politics, turf and egos aside, and deliver on that promise.


Marc J. Lane, a business and tax attorney and financial advisor, practices law at The Law Offices of Marc J. Lane, P.C. (www.MarcJLane.com) in Chicago.


Reprinted with permission from Crain Communication Inc., Copyright 2011.


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