Agency Officials Eye White House Report for Sequestration Impact

The sequester, an automatic, ten-year, $1.2 trillion across-the-board budget cut that begins in January was required by the Budget Control Act of 2011 (http://xrl.us/bnoiym). The cuts were intended to provide incentive for the Joint Select Committee on Deficit Reduction to achieve $1.2 trillion in savings, which the bipartisan panel of House and Senate members ultimately failed to do (CD Nov 15 p1). If the sequester proceeds unabated, agency budgets could see cuts as large as 7.8 percent across the board, said a recent report from the Professional Services Council (http://xrl.us/bnoi4m). Focus is on the coming OMB report because it’s expected to spell out what steps Cabinet-level and quasi-independent regulatory agencies of the executive branch would need to take to cut pay and other expenses if Congress doesn’t avoid sequestration, union representatives and an agency official told us.

OMB urged agencies to continue normal spending and operations, since Congress still has 16 weeks to act on a balanced reduction plan, said a recent memo sent to agency heads (http://xrl.us/bnonmw). For the immediate future, OMB plans to consult with agencies on how to apply for exemptions and determine what reporting requirements agencies will need to meet, the memo said. Over the long term, OMB will work with agencies to collect information on sequestrable amounts, determine unobligated balances and calculate the percentage reductions necessary to implement the sequestration, it said. The Commerce Department, of which NTIA’s a part, is consulting with OMB on the matter, a department spokeswoman told us.

FCC officials are planning for cuts as high as 20 percent, said Ana Curtis, an attorney there and chapter president of the National Treasury Employees Union (NTEU) representing FCC and Commerce Department employees among others. “That would be extremely painful for us ... any kind of cut could really affect our mission,” she told us. “There is not too much fat for us to cut. The FCC people have been very conservative as far as hiring.” Curtis said the FCC has roughly 1,600 employees, down from a high of 2,300 employees in 2004. The FTC employs nearly 1,200 employees, RUS has 298 and NTIA has 275, agency spokesmen said.

Also at the FCC, officials are likely developing a short-term plan to deal with the sequester’s impact on operations, said Blair Levin, the former chief of staff to Chairman Reed Hundt, a Democrat who ran the commission in the 1990’s. “If I were in my old job at the FCC and there was a sequestration, my plan would be a short-term plan and not a long-term plan. And the reason for that is it is unlikely to be a long term event,” said Levin, executive director of GigU, which is connecting communities with universities to super-fast broadband. “People generally believe that when confronted with how difficult it would be to address these things, Congress would do something different."

Eyes on OMB Report

Unions representing regulatory staff said they're looking for OMB guidance. Unions want to know if staff face cutbacks that could result in lost jobs, their representatives told us. OMB has not said when the report will be disclosed, and a spokeswoman had no comment for this story. FCC, FTC, NTIA and RUS spokesmen declined to comment.

"The OMB report will determine how and where they are going to sequester these funds, because right now we are not really sure,” said a spokesman for the National Federation of Federal Employees. NFFE represents workers at the Department of Agriculture, which includes RUS. “The one thing we know for sure is that the effect of sequestration on these agencies is going to be devastating,” the union spokesman told us. “The macro effect is that there will be less employees doing the same amount of work with less resources, and at the end of the day that means fewer and less quality services for the taxpayer.”

Agencies could be saved if Congress agrees to delay the sequester or develop a deficit reduction plan that avoids the need for it, an alternative which the White House has endorsed. OMB said in its memo to agency heads that it urged Congress to “redouble its efforts to reduce the deficit in a bipartisan, balanced and fiscally responsible manner” to avoid sequestration. “Sequestration is bad policy, was never meant to be implemented and should be avoided through the enactment of bipartisan, balanced deficit legislation.” Congress has not enacted any 2013 appropriations bills, and members are negotiating a six-month Continuing Resolution (CR).

Center for American Progress’s Scott Lilly is among those who said they're waiting to see if Congress will act on sequestration when lawmakers return to Capitol Hill next week. Theoretically, Congress could attach a provision to the CR that postpones the effective date of the sequester, said the senior fellow at CAP, a self-described progressive nonprofit chaired by former President Bill Clinton’s chief of staff. But time is short and Lilly’s doubtful that such a scenario would happen before the election, he told us. “I'm getting the impression that things are not lining up. I thought people sooner or later would understand the consequences, but that clearly is not what is taking place. ... If it’s not done before they go home [for the election], I don’t see that there is a very good possibility that it will happen afterwards.”

The Sept. 7 report will bring greater clarity, said Charles Konigsberg, president of the Federal Budget Group, a company that tracks budget issues. “There is not a lot of mystery about the sequester ... because the cuts will be around 8 percent and will be completely across the board, down to the program and project activity level. So there is not a lot of room for departments to say ‘OK, we are going to take it out of this program or that program,’ they just don’t have that latitude.” Broadly, the sequester will make the administration of federal programs “immensely more difficult in 2013,” Konigsberg said. “Whether it is an 8 percent cut for non-defense programs or an 11 percent [cut] for defense programs, that is a huge cut. Especially when you are already a quarter the way through the fiscal year.”

Agencies can achieve the savings required by a sequester two ways, said Lilly. They can cut staff, difficult because agencies would incur a large number of separation charges, he said. “Employees have accumulated vacation time, they have sick leave, there are a number of administrative costs connected with dismissing people, and so you might not get half a year’s savings out of a reduction in force.” Employees could be furloughed for a day or a day and a half per pay period, Lilly said. There are expensive administrative costs and complicated legal questions associated with furloughs, he said. “What does that mean for the FTC in terms of the number of cases they could bring to court or the number of regulatory actions they can bring? ... You're talking about a pretty significant diminution of capacity."

Any department cuts stemming from a sequester “will unquestionably undermine federal employees and the services they work everyday to provide,” said Colleen Kelly, NTEU’s president. The FCC already lacks the staff needed to fulfill its mission efficiently, and the agency would be particularly harmed by a sequester, she said. “While the FCC is funded through fees, this funding is subject to Congressional appropriation, which means the commission will be just as exposed to egregious and harmful cuts as other agencies.”

Konigsberg said delaying implementation of the sequester would be a “very good idea,” but he wasn’t going to hold his breath. “The logical time and place to do this is to amend the CR and kick the can down the road a little bit,” he said. “If there is serious talk about doing that, I think it’s great, because this kind of self-imposed recession is ridiculous.” A recent Congressional Budget Office report indicated that the sequestration’s fiscal tightening would likely lead to a recession in 2013 (http://xrl.us/bnoome). “But at the moment I don’t see it happening because the fundamental gridlock [in Congress] is over the tax cuts, and to kick the can down the road, you have to get over that gridlock.”