Does Citizen Participation Matter to Performance-Based Budgeting?

ABSTRACT

According to the meta-analysis on performance budgeting theory and practice, the relationship between citizens’ role and performance-based budgeting is an important but under-researched topic. Missing in our understanding of the determinants of performance budgeting is an examination of how citizen participation fosters the usage of performance information in the local budgetary process. This research is intended to understand the role of citizens to use performance budgeting, particularly for strategic planning and performance evaluation. To examine the research question, this study hypothesizes that local governments with a commitment to citizen participation tend to use performance budgeting. The results allow confirming that the hypothesis is supported, and to clarify our knowledge of the role of citizen input in government fiscal decisions.

KEYWORDS:

• citizen participation
• local government
• performance budgeting

Acknowledgements

The author is indebted to Dr. Carol Ebdon, Dr. Jooho Lee, and Dr. Changsoo Song for their helpful comments on the manuscript. I would like to thank PPMR’s editors and the anonymous reviewers for their constructive comments and criticisms.

Notes

Citizen participation has been identified as representing stakeholders, interest groups, and the entire public, but many studies do not apply the identification to their empirical model for either stakeholders, interest groups, or the entire public (Berman, 1997; Miller, 2012; Wang & Wan Wart, 2007; Yang & Callahan, 2005). The literature on performance budgeting does not address the role of particular citizens or citizen groups but emphasizes the entire public’s opinion in developing performance indicators (Poister & Streib, 1999; Rivenbark & Kelly, 2006). Thus, this study focuses on the entire public to define citizen participation.

According to ICMA (2011), among the municipalities with a population of 2,500 and over, the nonelected leader-based government form is 59% followed by the elected leader-based government form (34%), town meeting (6%), and representative town meeting (1%). The distributional ratio between elected-based and nonelected-based governments is approximately 2:3. Among the 1,612 samples of this study, 33% (532) of respondents had the elected leader-based government form, whereas 66% (1,080) of respondents had the nonelected leader-based government form. Thus, the samples are appropriate.

Missing values are excluded in the results of the model (See Table 3). Thus, the number of usable samples is 1,252.

The literature argues that organizations employ strategic planning to implement optimal fiscal strategies for the effects of fiscal threats in general (Bryson, 2011; Hendrick, 2003; Jimenez, 2013). Through strategic planning, organizations can enhance the management efficiency of public budgeting (Hendrick, 2003). During the Great Recession, many local governments made optimal fiscal decisions to maximize public service utility as well as to minimize public service costs by implementing long-term fiscal policies, based on strategic planning, as one of the important performance budgeting processes (Jimenez, 2013). In the 2009 ICMA survey, 77% of the respondents answered “yes” to the following question: “If your local government has a strategic or long-range plan, is it linked to the budget process?” The literature indicates that strategic planning is one of the financial management ways relevant to the budget process. Furthermore, program evaluation results are considered appropriate criteria for budget decision-makers to implement public service cuts and layoffs in the budget process (Levine, 1985). Consequently, it is highly possible that organizations merge strategic planning and program evaluation systems into the budget process. This study captures performance budgeting by considering the links between “budget process” and “strategic planning” as well as between “budget process” and “employee-performance evaluation” in the 2009 ICMA survey. However, answering both “yes” for the dependent variables may not imply that all local governments connect strategic planning and performance evaluation with the budget process. Due to the data availability, this study could not find local datasets to fully measure performance budgeting applied to strategic planning and performance evaluation. Thus, the dependent variables may produce biased results. This is one of the limitations of this study.

There are many cases when organizations utilize employee performance to evaluate program performance because employees are the main actors to operate public service programs. For example, the program performance of the fire department is captured by “inspections performed and fire calls answered” (Mikesell 2007). In the continuum of this case, the police department adopts “hours on patrol and responses to calls for assistance” to measure program performance in general. Thus, program performance can be considered the aggregation of employee performance. Grossi et al. (2016) suggest that personal evaluation is one of the important criteria to capture program performance in the budget process. Despite the connection between employee performance and program performance, the second dependent variable may not fully represent performance evaluation that has another indicator regardless of employee performance (e.g., hours of educational training program in the fire department). Thus, a proxy measure of employee assessment is adopted to indirectly measure performance budgeting applied to the program evaluation stage in this study.

The survey question, “Were citizens involved in decision-making related to fiscal crisis, such as decision-making about how to allocate resources?” shows resource allocation in the budget process during the Great Recession. Although this survey question is limited to the period of the Great Recession and does not cover all budget stages composed of development, planning, resource allocation, and evaluation, the citizen participation variable is taken to represent an important budget process to allocate financial resources. V. O. Key (1940) defined public budgeting in summary: “On what basis shall it be decided to allocate x dollars to activity A instead of activity B?” (p. 1138). This definition implies that the core of public budgeting is resource allocation. Based on the definition, this study adopts citizen participation related to resource allocation. However, one of the limitations is that the key independent variable does not cover all budget stages during the pre- or post-Great Recession.

The question included “Master of Public Administration” (39.9%) followed by “Four-year college degree” (24.8%), “Other Master’s degree” (20.2%), “Some college” (9.6%), “High school degree” (3.1%), “J.D.” (1.3%), and “Ph.D.” (0.7%). This study recategorized the education level in order to remove overlapped concepts of educationalal attainment, such as J.D. and Ph.D. Finally, the education level question embraces “High school degree,” “Some college degree,” “Four-year college degree,” “Graduate degree,” and “Ph.D. or J.D. degree.”

There is no agreement on the best way to measure fiscal health. Furthermore, various indictors and dimensions have been used to capture fiscal health. This study focuses on service level solvency by replicating Mohr’s model (1969) whereby governments with higher per capita expenditure can offer organization members an education program to facilitate innovation adoption.

Additional information

Notes on contributors

Ji Hyung Park

Ji Hyung Park is an assistant professor in the Department of Political Science at James Madison University, Harrisonburg, VA.