Government by Traffic Light

The Bush administration’s performance-measurement plans may mean a new challenge to state and local control.

Almost lost in the crossfire over President Bush’s budget for the coming year is a new emphasis on performance in the federal bureaucracy. “Dollars will go to programs that work,” the budget says, and “those programs that don’t work will be reformed, constrained, or face closure.” If this new process sticks, it could have a huge impact not only on the way Washington operates but on the federal relationship with state and local governments.

Cabinet officers were stunned this year when they went to the White House to make their annual budget appeals. The President and his staff sent them back to their agencies with an unmistakable message: Too many programs are not performing well—so big changes have to be made. Whatever the difficulties might be, the Bush administration seems determined to use performance measures to drive its future budget decisions. The president has said he’ll hold cabinet officials personally responsible for the programs they manage.

In order to do this, Bush’s people have set up a rather simple system of scorekeeping by “traffic lights.” Agencies get a green light for success, yellow for mixed results and red for unsatisfactory progress. Some 130 separate scores have already been assigned in the categories of human capital, competitive sourcing, financial management, e-government and integrating budgeting and performance. The grading is pretty tough. Among the entire 130, graders at the Office of Management and Budget gave only one “green light,” to the National Science Foundation for financial management. On the other hand, the scorecard is chock full of “red lights.” Many departments with important intergovernmental responsibilities—including Education, Health and Human Services, Housing and Urban Development, Interior, and Transportation—got red lights across the board.

Cynics have dismissed the effort as one more in a long line of failed budget schemes. There’s reason, however, to think that things might be different this time. Unlike previous budget reforms, this one has been written into law, which makes it harder for the process to evaporate.

If making this processs work at the federal level seems a little problematical, it is even more problematical as it relates to governments further down the scale. In any program that involves more than one level of government, responsibility is shared and goals vary widely. Part of the mission of most intergovernmental programs, in fact, is providing federal money to support state and local goals. Federal officials have not yet thought through how to incorporate these goals in the process. Nor have they determined how to accommodate the wide variation of state and local approaches in such areas as Medicaid and welfare reform.

Measurement also becomes more difficult as more jurisdictions are involved. There have to be multiple traffic lights, ones that take into account state and sometimes local performance. So far, those don’t exist. The existing traffic lights incorporate only a federal perspective. A substantial amount of work needs to be done to expand them.

Ultimately, the idea behind the system isn’t just to scold the weak performers—it’s also to reward good programs and to increase incentives for high performance. To improve performance across the board, the budget proposes an incentive grant program for states that do the best job.

Just how many incentive grants there will be remains questionable. As Governing’s annual performance report cards have revealed, few state and local governments currently have robust performance-measurement systems in place. If the system is weak in its pieces, it is nonexistent in linking its elements. Any measure of how well diverse governments pursue their interrelated goals and link them to budgetary decisions would surely produce red lights across the board.

What will happen if the administration further tightens the screws on the performance system but the system isn’t ready for the complexities of federalism? The result could be a subtle but crucial centralization in federal grant programs. The more that money follows results—and results are defined by federal agencies—the less flexibility state and local officials will have. Unless they can mount their own performance systems to push back on the federal process, state and local officials could find their discretion eroded by federal performance standards that will be difficult for them to meet.

It’s hard to argue with the basic goal of this process. When money is tight, it ought to be spent on the programs that produce the best results. Coupling performance measures with budget decisions is one sure way to get everyone’s attention. But it’s also important that, in our zeal to use the new performance tool, we don’t erode the genuine sharing of responsibility on which the success of so many intergovernmental programs will depend.

To see the traffic-light scorecard, go to the Office of Management and Budget Web site at http://www.whitehouse.gov/omb/budget/fy2003/bud09.html