Performance budgeting

Performance budgeting links appropriations to a program's expected or achieved results, outcomes, outputs, or unit costs, rather than simply increasing the previous year's line items. It contrasts with traditional line-item budgeting, which allocates money by input category, salaries, supplies, travel, without reference to what those inputs accomplished.

Agencies define performance measures, or KPIs, for each program, often summarized in a logic model that shows how spending is expected to connect to outputs and outcomes. Budget requests are then justified with that evidence, and actual results are reviewed against targets in later cycles, sometimes informed by a formal program evaluation. Some jurisdictions describe variants of the same idea as "results-based budgeting" or apply zero-based budgeting principles alongside it; a related but distinct discipline, cost-benefit analysis, goes further and converts results into monetary value rather than tracking them as performance indicators.

Performance budgeting is meant to improve efficiency and accountability by making the link between spending and results explicit. Common pitfalls are agencies optimizing for metrics that are easy to hit rather than outcomes that matter, and choosing measures that are easy to collect rather than meaningful. It is a different lever from participatory budgeting, which changes who decides how money is spent rather than what evidence those decisions rest on.