Funding human services: fixed utility versus fixed budget

It is argued in this paper that government allocations for human services based on inputs rather than outcomes, reduce efficiency in social and health service provision. An alternative system of budgeting or contracting on the basis of cost-per-closed case and case outcome is discussed. An interdependency between fixed budget and fixed utility models of allocation is affirmed. The locus of decision-making for operationalizing this interdependency is seen as the program and budget review panel to which operating agencies and government departments must submit financial and program accounting information from year to year. In isolation, the fixed budget approach degenerates into routine allocation or contract renewal with a focus on such input and output variables as volume of service and unit cost, and the fixed utility approach, into political stalemate. Simulated examples are given to demonstrate how allocation on the basis of inputs and outputs alone provides an incentive to inefficiency, and a fixed utility orientation to efficiency.