Since 1999, New Mexico has used performance-based budgeting—the practice of applying programmatic results to inform decision-making—to drive a more effective and efficient government. To support this effort, the state’s Legislative Finance Committee (LFC) has developed and adopted various tools that enable it to track statewide and agency outcomes, as well as to identify cost-effective programs in which to invest state resources.

One tool includes a cost-benefit analysis model that allows the LFC to better understand the cost of the state’s social services programs, the returns on those investments, and cost-beneficial alternatives to existing programs. Using this tool, the LFC was able to calculate and show policymakers that investing in evidence-based programs proved to reduce recidivism could yield returns as high as $26 for every $1 invested.

After years of this outcomes-based effort, the committee created a Legislating for Results framework, which outlines a systematic approach to using research and performance data to inform the budget process. This framework contains five actions that LFC analysts take to help leaders better interpret and use research and analysis in their decision-making.

1. Use performance data to set priorities.
   Throughout the year, analysts use statewide performance indicators to identify policy areas and outcomes that are underperforming and require additional review. These surveillance efforts, which are detailed in quarterly report cards issued to each major agency, help the LFC select priority areas for subsequent analysis and evaluation.
2. Review program effectiveness information.
   After selecting priority areas, committee analysts review existing research on the effectiveness of the programs operating in that policy area. To do this, they utilize research clearinghouses, which review and aggregate impact studies in order to rate programs by their level of evidence of effectiveness. These in-depth analyses help the LFC determine the strengths and weaknesses of current resource allocations and form the basis for subsequent budgetary recommendations.
3. Develop budget recommendations.
   Per annual budget guidelines, analysts use performance data, program evaluation results, and cost-benefit analyses to identify which programs are most likely to yield both desired outcomes and a return on taxpayer investment. The analysts then use this information to help craft budget recommendations. These recommendations have resulted in maintaining or increasing funds for programs identified as cost-effective, while funds have been shifted away from programs shown not to work or not to generate returns on taxpayer dollars.
4. Monitor program implementation.
   Analysts use performance reports and other tools to track the core components of each program and ensure that implementation is consistent with the program’s original design.
5. Evaluate outcomes.
   Analysts compare program outcomes against set targets—benchmarked against achievements by other states, industry standards, national data, and findings from existing program evaluations—to determine whether programs are achieving desired results.

Through this process, the state has been able to systematically analyze and fund innovations within a number of high-priority policy areas. For example, after observing consistently low literacy rates among New Mexico’s children, LFC analysts reviewed data to determine the potential causes and propose programmatic solutions supported by strong research. The state identified prekindergarten as a good investment and conducted a program evaluation that demonstrated positive, substantial long-term results. Leaders expanded two pre-K programs, allocating $7.8 million to an extended pre-K program that served children for longer hours in fiscal year 2015 and an additional $2 million in fiscal 2016 to expand pre-K services to 3-year-olds. The committee then looked at short-term impacts and found that the percentage of participants reading at grade level in kindergarten and third grade had improved. The state will continue to track these investments and examine the longer-term impacts on grade school reading levels.

For more information:

• New Mexico Legislative Finance Committee, “Accountability in Government Act,” https://www.nmlegis.gov/Entity/LFC/Accountability_In_Government_Act.
• New Mexico Legislative Finance Committee, “Legislating for Results,” https://www.nmlegis.gov/Entity/LFC/Documents/ Accountability_In_Goverment_Act/Legislating For Results.pdf.
• New Mexico Legislative Finance Committee, “Evidence-Based Early Education Programs to Improve Education Outcomes” (2014), https://www.nmlegis.gov/Entity/LFC/Documents/Results_First/Evidence-Based Early Education Programs to Improve Education Outcomes.pdf.
• The Pew Charitable Trusts, “New Mexico’s Evidence-Based Approach to Better Governance” (2014), https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2014/08/new-mexicos-evidence-based-approach-to-better-governance.
• The Pew Charitable Trusts, “The Pew-MacArthur Results First Initiative in New Mexico,” (2013, updated 2014) http://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2013/10/23/the-pewmacarthur-results-first-initiative-in-new-mexico.