Better Budgeting for Better Results

Performance-based budgeting reforms can save Nevada taxpayers billions

By Geoffrey Lawrence
  • Thursday, January 20, 2011
Executive Summary 

A difficult path lies ahead for Nevada lawmakers in the 2011 Legislative Session. State agencies have requested $8.35 billion in state General Fund spending to continue operations into the 2011-13 budget cycle.

At the request of the state budget director, agency directors have identified strategies for reducing costs by 10 percent, bringing total requests down to $7.53 billion. Yet, this amount still far exceeds available revenues, which are projected at $5.34 billion.

Reconciling state finances will require Nevada lawmakers to embrace an entirely new approach toward budgeting. The baseline budgeting methodology currently followed by the state is fundamentally flawed. It assumes perpetual spending increases, irrespective of revenues, and exacts no accountability for how taxpayer dollars are spent.

Nevada needs a new approach. In other states, performance-based budgeting has regularly produced significant savings — while also making it much more likely that the real priorities of lawmakers are met. Legislators can ensure that state agencies pursue savings and efficiencies in behalf of taxpayers by giving agency directors — in exchange for increased personal accountability — the incentives and autonomy to actually do so.

The system-wide accountability born of performance-based budgeting will increase the efficiency with which Nevada lawmakers' priorities are met. When legislators allocate funding toward accomplishment of some particular policy objective, they want assurances that any funding increase will translate into a proportional increase in performance. However, this has rarely been the case.

Legislative intent has often been sabotaged by the very policy designs lawmakers themselves have imposed — designs inadequate to accomplish the results intended. So, from a performance-based budgeting perspective, this analysis offers specific policy reforms. They would greatly increase government efficiency in the high-priority areas of K-12 and higher education, health care and public safety.

Finally, the analysis recognizes that government labor costs in Nevada, particularly at the local level, greatly exceed those of other states. Significant savings are available if Nevada's collective bargaining law is reformed to allow local governments greater flexibility with regard to personnel compensation. If local government employees in Nevada were merely compensated at the national median, lawmakers could extract approximately $2.3 billion in biennial savings — an amount directly fungible to the state General Fund.

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