Sequestration causing planning headaches for agency managers

Friday - 2/15/2013, 8:25pm EST

With sequestration set to go into effect in less than two weeks, agencies are intensifying their planning for the automatic, across-the-board cuts.

But that's no easy task for agency managers, who are faced with competing priorities and compressed deadlines, according to two federal-budget experts.

Joe Kull, a director in PricewaterhouseCoopers' Washington Federal Practice and the former deputy comptroller for federal financial management in the Office of Management and Budget, and Thad Juszczak, a director at Grant Thornton and former federal budget official, shared their perspectives on sequestration planning on the Federal Drive with Tom Temin and Emily Kopp.

"Most federal agencies have financial systems that have some capability to do what-if drills," Juszczak said. "But in budgeting, a lot more importance has to be related to the policies ... rather than the dollar amounts in particular."

In other words, agencies should let their missions and their priorities guide their budgetary decisions, he said.

Over the years, agencies have grown used to a certain amount of political uncertainty when it comes to budgeting, Kull said, which will come in handy now. Stopgap funding measures — and the attendant threat of government shutdowns — have become a common practice in recent years.

"I think we have to remember that this is not the first time that we've had this kind of a problem," Kull said.

Sequestration poses unique challenge

Still, sequestration poses a unique challenge for a number of reasons.

For one, the cuts are across-the-board, meaning agencies won't be able to shelter high-priority programs with cuts elsewhere. Every line item will get slashed by the same percent — about 9 percent for civilian agencies and 13 percent for Defense.

The across-the-board nature of the cuts could be particularly destructive, Juszczak said.

Typically, when an agency faces a budget cut, "you can immediately turn around and say, 'What are the lowest priority things that I have, so that I can take those off the table and continue to accomplish my mission?'" he said. "But the sequester has that little kicker in it that says, 'No, we're going to hit every single account, every program, project or activity and you have to take the same percentage cut in all of those.'"

That forces agencies to rethink their typical budgeting process, Juszczak said. "Because whatever your highest priority was, you never thought about cutting that," he added.

Also complicating matters is the fact that the cuts are slated to go into effect about halfway through the current fiscal year. That means the total budget reductions will have to be squeezed from a smaller chunk of agencies overall budgets.

To top it all off, the continuing resolution currently funding government operations expires March 27, less than a month after sequestration is set to kick in.

"So how do you start planning when you don't know what your final number's going to be?" Kull said. "That just makes it very complicated."

Agencies' goal: Protect the mission

Agencies are now likely planning on a macro level, Kull said. But those plans will have to firm up as the deadline approaches. "The prime objective of all this is to try to protect the missions to the extent possible so that brings in another factor in weighting how the cuts are made, where they're made, who's impacted by it," he said.

OMB has said employee furloughs — likely one day a week for the remainder of the fiscal year — wouldn't happen immediately, in part, because agencies are required to provide employees sufficient notice.

While such workforce reductions are designed to help agencies trim their budgets, preparing for furloughs can often carry hidden costs, Juszczak said.

"Ultimately, you're probably ending up with your workforce spending a lot of time wringing their hands, wondering what's going to happen, not doing what they should be doing and that's true whether you're in the budget staff or anywhere," he said.

Despite all the uncertainty about sequestration, Kull said at least one thing is clear. The federal government is entering a "new era of budgeting."

In the past, agencies might have expected some downward fluctuations year-to-year before a righting of the ship, so to speak. Now, the baseline is trending downward, Kull said.

"And that's something people have to get used to," he added. "In all likelihood you're going to have to readjust priorities even in the out years in order to make sure the highest priority things get done, because there may not be enough money to continue as you have in the past."

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