Assumptions Underlying Performance-Based Budgeting

Interest in ‘performance budgeting’ is growing despite a lack of research on its effectiveness. U.S. states have largely used ‘incremental’ and ‘formula’ budgeting processes to fund higher education. However, more than half of them are experimenting with some form of ‘performance budgeting’. There have been similar attempts to reform budget practices in the U.S. in the past, but most of these processes have been largely abandoned. Governmental ‘performance budgeting’ for higher education assumes policy objectives are stable, complex decisions on budget trade-offs can be made at governmental levels on the basis of data, institutions operate as bureaucracies, resources can be linked to outcomes, outcomes are identifiable and can be agreed upon, accountability can be achieved through budget policies, and current practices create incentives to enrol unqualified students. These assumptions are not realistic. Consequently, ‘performance budgeting’ will not meet proponents expectations and will suffer the fate of past budget fads.