Analysis: How agencies get to a 5 percent budget cut in 2013

Thursday - 8/18/2011, 5:21pm EDT

Doug Davidson, Director in the Global Public Sector Practice, Grant Thornton

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Jonathan Breul, Executive Director, IBM Center for the Business of Government

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By Jolie Lee
Federal News Radio

Agencies must cut 2013 budgets by at least 5 percent of enacted discretionary spending this year and submit a version of a budget requests that makes an additional 5 percent in discretionary cuts. The mandate is outlined in a memo from Office of Management and Budget Director Jacob Lew.

Non-defense and non-national security agencies will be impacted the most by this mandate, said Doug Davidson, director in the Global Public Sector Practice at Grant Thornton, and the publisher of the Federal Financial Management News blog, FedCFO.com.

At these agencies, what are now plans for voluntary buyouts and hiring freezes may become layoffs if agencies want to achieve the reductions, Davidson said.

The memo's timing might be reactionary "to some criticism in the press that agencies have not received guidance at this point," Davidson said. He added that agencies should have received guidance from OMB by the beginning of June to prepare for the 2013 budget.

The Aug. 17 memo does not include instructions for submitting budget requests. That information will be in the OMB Circular A-11, which has not been published, Davidson said.

Sept. 12 is the normal budget submission date, but "that's not likely a reality this year," he said.

In the meantime, agencies are operating under heavy uncertainty and in "desperate need of guidance" on budget matters from the administration, said Jonathan Breul, executive director, IBM Center for the Business of Government.

OMB's mandate for two versions of the 2013 budget requests indicates an administration that's "trying to figure out what its options are and what various levels of reduction are going to will mean as far as discretionary appropriations," Breul said. The administration has "a government to operate and they've got some big negotiations in front of them."

Despite the memo, some agencies may still make requests above their current appropriations. However, Breul said, "The smart ones will start planning for a longer-haul set of reductions because that's what the cards suggest."