Agencies' FY 2015 budget planning 'tied up in knots' by uncertainty

Wednesday - 8/28/2013, 4:06pm EDT

Robert Shea, principal at Grant Thornton, on "In Depth" with Francis Rose

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The budget situation for fiscal 2014 is still murky. Funding for the current year runs out Oct. 1, there's no word on a budget or even a stopgap continuing resolution and the across-the-board sequestration cuts are still threatening to gum up the works.

But, believe it or not, agencies are already planning for their 2015 budgets. Preliminary plans are due to the Office of Management and Budget next month.

But with no funding deal in sight for the next fiscal year, how can agencies already be planning for the following year?

"I think it's safe to say, agencies are used to this situation," said Robert Shea, a former OMB official in the George W. Bush administration and now a principal at Grant Thornton in an interview on In Depth with Francis Rose.

Agencies have, by and large, become inured to widespread budget uncertainty, Shea said. For example, last year, there were five stopgap funding measures, which kept government spending afloat in the absence of a full-year budget. The year prior, there were eight.

"A lot of uncertainty, though, means this area of the world is going to be tied in knots for the foreseeable future," he added.

OMB has also provided exhaustive guidelines for agencies as they plot out their budgets.

In May, the Office of Management and Budget released guidance directing agencies to cut discretionary spending by 10 percent by targeting low-priority programs.

"It's not as hard as you think because the cuts they're going to be receiving are going to be on the margins," Shea said. "There're going to be big programs that take big whacks, but those are going to be exceedingly rare. Pretty much everybody else is going to have to assume a 5 or 10 percent across-the-board cut, unfortunately."

But while it's possible for agencies to plan budget reductions amid so much uncertainty, it's still not an optimal situation.

"What that means is we're not able to focus spending cuts on programs that aren't working as well and re-allocate those funds to programs we know to be working," Shea said. "We also don't have a lot of good information to use to cut programs. That's why you see across-the-board furloughs rather than more targeted spending cuts at things that really wouldn't impact performance."

As the clock ticks down on the remainder of fiscal 2014, agencies still have some loose ends to tie up regarding fiscal 2014 funding, Shea said.

Last year's continuing resolution coupled with the automatic sequestration cuts constrained spending in the early part of the year.

"So there's right now a lot of pent-up spending that folks are trying to get out the door before the end of the fiscal year, because woe be the agency with unobligated balances at the end of the year after they've been crying wolf about the devastation of sequestration cuts," Shea said.

Congress returns to Washington from its August recess in a few weeks, but House and Senate leaders and appropriators have been mum, so far, on any funding deal that spells out how to deal with sequestration.

"There's hope, which springs eternal, that a grand bargain — or something close to it — will be entered into between now and the end of the calendar year," Shea said, "but there's not much hope that it gets done between now and the end of the fiscal year."

Still, even that seems a remote possibility, Shea said. "I hate to be a pessimist, but I think we're likely to see FY '14 and '15 look a lot like '13."

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