NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

The LFC is only preparing FIRs on bills referred to the Senate Finance Committee, the Senate Ways and Means Committee, the House Appropriations and Finance Committee and the House Taxation and Revenue Committee. The chief clerks are responsible for preparing and issuing all other bill analyses.

Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Room 416 of the State Capitol Building.

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates House Bill 37

SOURCES OF INFORMATION

Department of Public Safety

Economic Development Department

Department of Finance and Administration

State Records Center and Archives

Administrative Office of the District Attorneys and District Attorneys' Offices

Health Policy Commission

SUMMARY

Synopsis of Senate Finance Committee Amendment

The Senate Finance committee amended Senate Bill 111 as follows:

• It changes the time requirement as follows: (a) June 1 to develop the instruction for performance measure development, (b) July 1 requires all agencies to submit proposed performance measures for each approved program to the division, and (c) September 1 to submit the performance-based budget request.

• It deletes subparagraph C, D and F of Section 8 to provide flexibility to both the executive and legislature in developing incentive and disincentive measures in recommending budgets and deletes privatization references.



• Item 14 this amendment requires the division to develop an implementation schedule whereby all state agencies, including the judicial branch of government and institutions of higher education, will move to the performance-based program budgeting concept by the end of fiscal year 2004.



• Item 25 of this amendment changes budget submission requirements for the governor from October 1 to January 1 which is earlier than the current deadline of the 25^th legislative day of each regular session.

Synopsis of Bill

SB111 would use the state budget process to define outputs, outcomes and performance measures which would be evaluated annually to determine the performance of state government programs and provide more cost-effective and responsive government services.

Each state agency that would be required to submit a performance based program budget would be required to submit a list of agency programs prior to April 1 of each year. The list would be reviewed by the budget division of the Department of Finance and Administration and the Legislative Finance Committee and a approved list would be required to be issued within 30 days of receipt.

Prior to May 1 of each year, the budget division in consultation with the LFC would develop instructions for development of performance measures for evaluating the program. Prior to June 1 the agencies would be required to submit a performance-based budget request.

This bill allows the governor and the LFC to include incentives and disincentives as part of their budget recommendations. The date for the governor's submission of the budget to the legislature would also be changed from no later than the 25^th legislative day to not later than October 1 of each year.

This bill contains an emergency clause and would take effect immediately upon signature of the governor.

Significant Issues

Enactment of this bill would provide greater accountability for the use of taxpayers dollars by providing a mechanism to measure performance of government run programs, including qualitative and quantifiable input, output and outcome indicators of services provided to citizens. For example, performance based program budgeting would provide information to answer questions such as: has expanding funds for the DWI program made any impact to reduce fatalities caused by DWI related accidents; has the Economic Development Department attracted more business to New Mexico to reduce the unemployment rate.

According to the Economic Development Department, agencies would be held accountable for the services and products they deliver.

The Health Policy Commission states "The Governor's budget would be available to the Legislature during the period of legislative budget development." This would eliminate uncertainty regarding his request.

The State Records Center and Archives indicated one of the consequences of not enacting this bill would make assessment of agencies and their value to governance of the state more difficult.

The Governing Magazine gives New Mexico a grade D+ for managing for results and states "New Mexico not only hasn't been managing for results, it has had a hard time accepting the validity of the idea. Now, some state leaders are trying to move in this direction, but they're faced with starting from scratch.

Most cabinet agencies do create some kinds of measures-mostly measures of outputs. But it's too early to tell what effect this is having. Though good intentions are abundant, right now the effort is little more than a paper exercise.

FISCAL IMPLICATIONS

The fiscal implications of implementing performance based program budgeting at this time is indeterminate; however, initially it may require additional funds to provide adequate training to identify performance indicators, measures and systems to track output and outcomes. But, in the long-run the state will be able to identify marginal and/or ineffective programs which can be eliminated to provide cost savings to the taxpayers.

The Administrative Office of the District Attorneys indicated that the fiscal impact of this bill would be substantial for some agencies if their base budget is reduced due to poor performance. However, agencies which are efficient and productive might be rewarded with additional funding.

ADMINISTRATIVE IMPLICATIONS

There is a potential for increasing administrative efficiency since under performance based program budgeting only three major cost categories will be tracked instead of the eleven currently required in the Appropriation Act. The performance based program budgeting concept will also positively impact the state-wide accounting project by simplifying the budget tracking and by eliminating the need for processing numerous budget adjustment requests.

DUPLICATION

This bill duplicates HB37

TECHNICAL ISSUES

The bill does not state when all agencies will be required to comply with performance based program budgeting; however, the State Budget Division would be given the authority to establish a schedule to systematically implement performance based program budgeting. A amendment would be required to establish FY2003 or FY2004 to convert all state agencies, including the judiciary branch of government and institutions of higher education to implement performance based program budgeting.

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