Social Waste or Outcomes Achievement? Exploring the Impact of Performance Budgeting on Municipal Fiscal Health

Abstract

Performance budgeting is a contentious area in public administration literature. While performance budgeting systems are widely adopted with promises of better fiscal outcomes, public administration theory implies that this practice may generate social waste. Most empirical research that finds null or negative effects of performance budgeting focuses only on how performance budgeting affects resource allocations and cost savings. This study aims to fill the gap in the literature by conducting a quantitative panel-data analysis to determine whether the inclusion of performance information in municipal budgets contributes to better fiscal outcomes. An ordered logit regression analysis in the context of 125 large U.S. cities over a 12-year span (2008–2019) demonstrates that performance budgeting is positively associated with municipal fiscal health.