To amend sections 126.02 and 126.022 and to enact sections 117.46 and 126.18 of the Revised Code to require performance budgeting by most state agencies and to require performance audits of those agencies.

Section 1. That sections 126.02 and 126.022 be amended and sections 117.46 and 126.18 of the Revised Code be enacted to read as follows:

Sec. 117.46. Each biennium, beginning with the biennium ending June 30, 2013, the auditor of state shall conduct a performance audit of four state agencies selected by the auditor of state that have been required to file performance data with the director of budget and management under section 126.18 of the Revised Code for at least one biennium. Two of the audits shall be of administrative departments listed in section 121.02 of the Revised Code or the department of education and two of the audits shall be of other state agencies. The performance audits under this section shall be conducted pursuant to sections 117.01 and 117.13 of the Revised Code.

Sec. 126.02.  The director of budget and management shall prepare and submit to the governor, biennially, not later than the first day of January preceding the convening of the general assembly, state budget estimates of revenues and expenditures for each state fund and budget estimates for each state agency, except such estimates as are required under section 126.022 of the Revised Code. The budget estimates for each state agency for which direct appropriations are proposed shall include the following details:

(A) Estimates of the operating budget;

(B) Estimates of the subsidy appropriations necessary, delineated by a distinct subsidy program;

(C) Estimates for special purposes, delineated by a distinct special purpose program;

(D) Estimates of appropriations necessary from each fund in reasonable detail to allow for adequate planning and oversight of programs and activities.

In the preparation of state revenue and expenditure estimates, the director of budget and management shall, not later than the fifteenth day of September in the year preceding the first regular session of the general assembly, distribute to all affected state agencies the forms necessary for the preparation of budget requests, which shall be in the form prescribed by the director in consultation with the legislative service commission to procure information concerning the revenues and expenditures for the preceding and current bienniums, an estimate of the revenues and expenditures of the current fiscal year, and an estimate of the revenues and proposed expenditures for the respective agencies for the two succeeding fiscal years for which appropriations have to be made, and, as applicable, the performance data required by division (A) of section 126.18 of the Revised Code. Each such agency shall, not later than the first day of November, file with the director its estimate of revenues and proposed expenditures for the succeeding biennium and, where required by section 126.18 of the Revised Code, a comprehensive and integrated statement of agency missions and outcome and performance measures.

Each such agency shall, not later than the first day of December, file with the chairperson of the finance committees of the senate and house of representatives and the legislative service commission a duplicate copy of such budget request.

The budget request shall be accompanied by a statement in writing giving facts and explanation of reasons for the items requested. The director and the legislative service commission may make further inquiry and investigation as to any item desired. The director may approve, disapprove, or alter the requests, excepting those for the legislative and judicial branches of the state. The requests as revised by the director constitute the state budget estimates of revenues and, expenditures, and performance measures which the director is required to submit to the governor.

The director shall determine a method to incorporate the principles of zero-based budgeting into the forms prescribed in this section.

Sec. 126.022.  Not later than four weeks after the general assembly convenes in each even-numbered year, the director of budget and management shall prepare and recommend to the general assembly, subject to the concurrence of the governor, estimates of revenues from, or derived from, payments to the state under the tobacco master settlement agreement and, expenditures of such revenues for the biennium beginning on the following first day of July, and, as applicable, the performance data required by division (A) of section 126.18 of the Revised Code. Each state agency affected by such revenues or expenditures shall submit to the director of budget and management any related information the director requires, in such form and at such times as the director prescribes, and, where required by section 126.18 of the Revised Code, a comprehensive and integrated statement of agency missions and outcome and performance measures.

Sec. 126.18. (A) Except for the offices of the attorney general, auditor of state, governor, secretary of state, and treasurer of state and agencies of the legislative and judicial branches, each state agency filing budget requests under section 126.02 of the Revised Code shall, in accordance with the schedule set forth in division (B) of this section, include with its requests data that measure the performance of the programs and activities of the agency in meeting program goals and objectives. Data reported shall include indicators of output, efficiency, outcomes, and other measures relevant to each program and activity. The agency shall also include historical data needed for an understanding of major trends and shall set targets for future performance where feasible and appropriate. All such data shall be presented in a manner that serves to assist legislative review of and decision making concerning the programs and activities of the agency.

(B)(1) Division (A) of this section shall apply to the budget requests of the department of education, department of job and family services, and two other state agencies selected by the director of budget and management beginning with their budget requests for the biennium ending June 30, 2013.

(2) The director of budget and management shall divide all other state agencies subject to division (A) of this section into the following three categories:

(a) Agencies to which division (A) shall apply beginning with their budget requests for the biennium ending June 30, 2015;

(b) Agencies to which division (A) shall apply beginning with their budget requests for the biennium ending June 30, 2017;

(c) Agencies to which division (A) shall apply beginning with their budget requests for the biennium ending June 30, 2019.

(C) The director shall provide all agencies subject to division (A) of this section with substantial technical assistance in carrying out the requirements of that division and shall review the appropriateness, validity, and reliability of agency performance measures and data.

(D) Beginning with the biennium after the biennium in which the budget requests of the Ohio board of regents first become subject to division (A) of this section, the board shall offer assistance to each state university or college as defined in section 3345.12 of the Revised Code in developing relevant performance measures for the university's or college's programs and activities and in setting targets for future performance where feasible and appropriate.

Section 2. That existing sections 126.02 and 126.022 of the Revised Code are hereby repealed.

Section 3. Notwithstanding anything to the contrary in section 117.16 of the Revised Code, the Auditor of State, pursuant to section 117.46 of the Revised Code, shall conduct performance audits of the Department of Education and the Department of Job and Family Services during the biennium ending June 30, 2013.