An examination and analysis of the application of performance-based budgeting systems in California urban transit agencies

Purpose. The purpose of this study was to determine the status and assess the impacts of performance budgeting implementation in California urban transit operators. The study sought to examine the relationships between budgetary skill capacities, use of performance-based budgeting, funding allocation decision making, and transit performance.;Theoretical framework. The theoretical framework of this study is based on the research foundations of: budget theory; organizational theory; systems theory; and decision theory. Budget theory was discussed under the political, economic and management perspectives. The study highlighted researchers' dissatisfaction with the adequacy of budget theory, hence the relevance of other groups of theory to explain the budget process.;Methodology. The subjects in the present study were 38 budget officers of urban public transit systems of California. Subjects responded to an 89-item research instrument assessing the use of performance budgeting, budgetary skill capacity, resource allocation and performance budgeting impacts, as well as demographic characteristics of the respondents. The study also reviewed two pieces of secondary data: (a) Budget documents of 6 transit agencies to determine the extent of performance measurement use, and (b) selected funding and performance data for 11 large transit systems obtained from the National Transit Database to determine the relationship between funding levels and transit performance.;Findings. Examination of quantitative and qualitative data from the 38 urban public transit systems, the National Transit Database and budget documents indicated that (a) the application of performance-based budgeting in California urban transit systems is still very limited despite widespread use of performance measurement, (b) professionally competent budget staff are more likely to implement performance-based budgeting, (c) the use of performance budgeting is associated with improved resource allocation decision making, and (d) resource allocation decision making is positively associated with improved transit performance. The hypothesized relationship between performance budgeting and transit performance could not be supported.;Conclusions and recommendations. The study data support the conclusion that performance budgeting plays an important role in improving transit effectiveness. Applied recommendations include adopting an agreed performance measurement framework, improving budgetary staff competencies and requiring change-oriented leadership to alleviate implementation challenges. Further research is advised: an assessment of performance changes on a pre- and postbasis for transit systems that implemented performance budgeting would provide more conclusive evidence of performance budgeting's impact on performance. Further studies on the implementation challenges of performance budgeting in transit agencies may further inform the discussion. The study could also be replicated on a national scale in order to take advantage of a greater number of subjects from different geographical locations.