Federal agency and department leaders should plan for a 5 percent reduction in discretionary spending in fiscal year 2013, and prepare for more cuts –at least 10 percent–according to a White House Office of Management and Budget memo. At the same time, OMB urged agencies to look for opportunities to enhance economic growth.
Unless agencies have been given explicit direction to the contrary by OMB, overall agency funding requests for fiscal year 2013 should be “at least 5 percent below your 2011 enacted discretionary appropriation,” OMB Director Jacob Lew wrote in an Aug. 17 memo to federal agency and department heads.
“As discussed at the recent Cabinet meetings, your 2013 budget submission should also identify additional discretionary funding reductions that would bring your request to a level that is at least 10 percent below your 2011 enacted discretionary appropriation,” he said.
But Lew also asked agencies to “identify programs to ‘double down’ on” where “they provide the best opportunity to enhance economic growth.”
“Finding the savings to support these investments will be difficult, but it is possible if (budget plans) cut or eliminate low-priority and ineffective programs while consolidating duplicative ones; improve program efficiency…; and support fundamental program reforms that generate the best outcomes per dollar spent,” Lew said.
He also instructed agencies to avoid cross-the-board reductions or “reductions to mandatory spending in appropriations bills, reclassifications of existing discretionary spending to mandatory, or enactment of new user fees to offset existing spending.”
Over the past year, many agency CFOs have already identified efficiencies and savings. This means a 5 percent or, possibly, 10 percent reduction may well leave no alternative to the implementation of wider and deeper reductions to staff and programs.” – James Windle
Federal chief financial officers have been bracing for one of the most challenging times in their budgeting careers as they look for ways to curb federal spending.
Agencies are accustomed to building 5 percent and 10 percent reduction scenarios.
“What’s noteworthy is that there is not even a request to build budgets at last year’s level,” said James Windle, who has worked in the White House Executive Office and in Congress, and is now a research fellow at National Defense University.
“Under normal circumstances and given the dramatic growth in discretionary spending over the last decade, the 5 percent reduction requested in the OMB FY 2103 guidance would be painful but manageable for CFO’s to execute without major disruptions in staffing and programs,” Windle said.
“However, over the past year, many agency CFOs have already identified efficiencies and savings. This means a 5 percent or, possibly, 10 percent reduction may well leave no alternative to the implementation of wider and deeper reductions to staff and programs.”
Making matters worse, with the 2012 fiscal year beginning in less than seven weeks, Congress has yet to pass any of the spending bills that will keep government operating. Consequently, agencies are bracing for another protracted period working within the confines of a continuing resolution.
“It’s a budgetary pressure cooker for CFOs,” said a Congressional aide, who agreed to comment if not identified.
“A lot of the onus will be on them and federal managers to do more with less. The good side – it will incentivize actions to find more efficiencies. The bad, CFOs will have to make some tough decisions and trade-offs to make sure they’re fulfilling agencies’ missions without reducing quality and delivery.”
“Added into the mix is an unpredictability around the budget cycle,” the aide said. “They know there are going to be more budget food fights on the Hill – over a likely omnibus or (continuing resolution), and of course the supercommittee,”
That unpredictability was reflected in the delayed release of the Aug. 17 memo, which arrived weeks later than usual. OMB traditionally gives budget guidance to agencies in June, but was delayed amid the uncertainty surrounding the extended debt ceiling debate.