Can Centralized Performance Budgeting Systems Be Useful For Line Ministries? Evidence From Chile

A forthcoming article in Public Budgeting & Finance by Juan Pablo Martinez Guzman (UMD) discusses performance information use in line ministries in Chile. The question whether line ministries use performance information is important because in centralized top-down governance systems they may be perceived as externally imposed and, therefore, resented. The author offers several insights from this detailed case-study based on process-tracing methodologies.

The main findings for variables that either facilitated or hindered the use of centralized performance information systems are presented in table 2.

Overall, it appears that any resentment from line ministries can be overcome by involving third party technical experts, selecting homogenous performance measures, spending sufficient effort for (quality) program structuring, and investing in human capital.

These findings are directly relevant to many other central and regional governance systems around the world that operate in top-down performance regimes. A caveat is, however, each of Chile’s four key performance indicators appear to have emerged from separate waves of performance management reforms in the country. So, the road to performance information use in line ministries in centralized governance systems can run for decades. Martinez Guzman (page 9) writes that:

“performance indicators were the first component of Chile’s performance budgeting system, initially introduced in only five institutions through a pilot plan in 1993. The use of performance indicators expanded quickly to most of Chile’s government agencies, reaching 80 percent of them by the year 1997. From 1998 to 2000, performance indicators were used to determine if institutions would be awarded economic bonuses through the PMG. Because of their linkage to the PMG, performance indicators were excluded from budgetary appendices during the years 1999 and 2000. In 2001, performance indicators were removed from the PMG and restored as budgetary appendices. Finally, in the year 2011, performance indicators were reintroduced as the basis to determine PMG’s variable remunerations, and were also kept as part of the budgetary appendices that are presented to the legislature.”

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