The Case for Performance-Based Budgeting in a New Era of Government Responsibility

With the federal government scaling back financial assistance and reducing community investments and administrative capacity, cities, counties, and special districts are left to fill in the gaps. From public housing authorities navigating HUD’s changing expectations, to local departments grappling with aging infrastructure and strained service delivery, the pressure is rising.

The next era of local government finance will demand more than cost containment or minimal incremental budget growth—it will require clarity of purpose.

Any budget conversation worth having should start with a simple but powerful question:
“Why are we spending money the way we are?”

Too often, the answer is:

• Because we did last year.

• Because prices went up.

• Because it’s what leadership wants.

These are rationales, but they are not rooted in performance insights. Looking at budget spending in the context of performance challenges governments to answer that question differently:

• Because our programs are delivering impact.

• Because the programs are achieving results tied to our mission.

• Because we are measuring impact and holding ourselves accountable.

What Is Performance-Based Budgeting?

Performance-Based Budgeting is not a new fad. First implemented in the 1940s by the U.S. Department of Defense, it has since been adopted by governments and nonprofits around the world. The core idea is simple: presenting performance information alongside budget requests helps decision-makers fund what works and rethink what doesn’t.

Performance-Based Budgeting links resources to measurable results. Instead of focusing only on inputs—like historical spending patterns, staff salaries, or vendor contracts—it asks:

• What outcomes are we trying to achieve for the community?

• Which programs are helping us get there?

• Are we spending the right amount for optimal impact?

Performance Measurement: The Foundation of Performance-Based Budgeting

Before any organization can adopt Performance-Based Budgeting, it must first build a performance measurement system—a periodic, systematic way to collect, analyze, and report data. These data should track:

• Resources used (inputs)

• Work produced (outputs)

• Results achieved (outcomes over time)

Performance-Based Budgeting is not a “carrot-and-stick” framework. Its objective is not to reward departments that hit their metrics and punish those that don’t. Rather, it aims to improve program effectiveness by tying funding to results—not effort alone.

But measurement only matters if it is actionable. If performance data doesn’t inform strategic or operational decisions, it’s just noise. That’s why Performance-Based Budgeting must be embraced by leadership and paired with meaningful evaluation.

Forms of Performance-Based Budgeting: One Size Does Not Fit All

Local governments can tailor Performance-Based Budgeting in several ways:

• Priority-Based Budgeting: Score programs based on alignment with community values and strategic goals.

• Performance-Informed Budgeting: Use performance data to shape decisions while retaining flexibility.

• Stat Models: Use performance dashboards and regular reviews to assess department results.

For example, a housing authority might budget based on outcomes like unit turnaround time, tenant satisfaction, or voucher lease-up rates—not on applications processed or work orders completed. At the city or county level, a government might continue or expand a workforce development program based on six-month employment rates—not the number of training sessions hosted.

Starting Small: How to Implement Performance-Based Budgeting Incrementally

Transitioning to a Performance-Based Budgeting system is a significant shift. To determine the level of detail and complexity a government can support, implementation can follow a phased approach:

1. Pilot within one department or program that already collects some data.

2. Expand to related functions like internal shared services or capital planning-focused agencies.

3. Refine measures over time as staff capacity and system maturity grow.

For example:

• Measuring fire department effectiveness solely by response time can be misleading. A better metric might be the percentage of fires contained to a single room.

• Counting potholes filled is an output measure; a better metric might be lane miles of roadway maintained per employee.

Departments can start with these questions in their budget requests:

• What did we accomplish last year?

• What is different this year?

• What are our goals for the coming year?

• How will additional (or fewer) resources impact our outcomes?

Alternatively, public sector agencies may adopt Performance-Based Budgeting as a universal strategy in a single implementation to eliminate friction between departments required to demonstrate impact and those that are not.

Avoiding Pitfalls

A poorly designed Performance-Based Budgeting system can do more harm than good. For instance, slashing a program’s budget due to underperformance—without understanding the root cause—could lead to even worse results.

Instead, governments should:

• Refine measures regularly.

• Use data to support—not penalize—program improvement.

• Maintain flexibility to fund emerging priorities.

Performance-Based Budgeting isn’t a silver bullet—it’s a practice that improves over time. Coupled with alternate revenue sourcing, it can help governments weather uncertainty, stay aligned to mission, and demonstrate accountability to funders and constituents.

BRONNER’s Four-Step Framework

BRONNER helps local governments transition to Performance-Based Budgeting through a proven four-step framework:

1. Define Programs and Structure
   Programs should be tied to service delivery, with clear mission statements, objectives, and strategic goals. This helps identify overlaps and reduce redundancy.

2. Identify Output and Performance Measures
   Output is what you did. Performance is what changed.
   Example: An after-school program may serve 100 children (output) but only show grade improvement in 20 (performance). Both matter—but performance metrics demonstrate whether the program is working.

3. Develop a Data Collection Process
   Without reliable data, Performance-Based Budgeting fails. BRONNER helps governments map current tools, assess gaps, and build sustainable systems for tracking performance. ARPA SLFRF recipients already do some of this—Performance-Based Budgeting simply formalizes and expands it.

4. Align the Organization
   Culture change is critical. Department heads, finance staff, and elected officials need a shared language and common goals. BRONNER’s ADKAR-based change management experts support adoption and training for successful implementation. Community engagement matters too—residents deserve to see how dollars lead to impact.

Final Thought

As federal support dwindles, state and local governments will not only need to do more with less—they’ll need to do better with what they have. That starts with budgeting for results, not routines.

Performance-Based Budgeting is not just a financial tool—it’s a leadership strategy.

Need help starting the shift?
BRONNER partners with governments to build practical, tailored Performance-Based Budgeting systems that support strategy, improve services, and make every dollar count.