OMB wants agencies to 'own' their budget cuts

Wednesday - 9/28/2011, 5:36am EDT

Jason Miller, executive editor, Federal News Radio

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Agencies should own the cuts to their budgets for 2013 and beyond.

That is the message the Office of Management and Budget is trying to send to agency leaders as they negotiate the president's budget request for fiscal year 2013 scheduled to be sent to Congress in February.

OMB Director Jack Lew said Tuesday the White House doesn't want to dictate how agencies make decisions.

"We want to give agencies tools and do it in a way that is perhaps less directive and more as guidance," Lew said during a speech at the Partnership for Public Service in Washington.

"I think agencies are going to need to make those kinds of decisions and say 'We can do deeper on the administrative side because we have to limit program cuts. Or instead of doing the depth of administrative cuts, we would rather take it more out of programs,'" Lew added. "On a macro level, I'm trying to build in to the process that kind of dialogue. I do believe ownership at departmental level at a time of constraint is important."

Agencies sent their initial budgets to OMB earlier this month, but the process is just getting started. OMB will review the proposals and negotiate through December.

OMB issued budget guidance in August, directing agencies to revise their 2013 requests to cut 5 percent in discretionary spending and to offer ideas to cut at least another 5 percent.

Lew said so far agencies seem to understand the fiscal constraints the government is under.

"They don't all hit the mark," he said. " I don't want to say we've hit that point where every agency has come in at guidance and our work is done. But there does appear to be a sense of realism and I'm trying to capitalize on that because I believe partnership is actually the most effective way to work between OMB and the agencies."

Lew added each agency will find ways to reduce its budget differently. Some will reduce spending on administrative functions. Others will cut program areas, while some will look at their workforces to find savings.

"We need to look at what the agencies do, what the state of their IT systems is and what the state of their workforce is and come up with a package that is right for the agency," he said.

At least 14 agencies have asked the Office of Personnel Management for " target="_blank">approval to offer buyouts and early retirements. Other agencies, such as the Navy, are trying to cut spending on technology systems.

Learning from mistakes

A new report from the Partnership and Booz Allen Hamilton warns against repeating the mistakes of the 1990s, when cuts to the workforce and other back-office functions left agencies in trouble.

The survey of current and former feds found that the workforce took too big of a hit. For example, the impact on NASA's workforce was significant. For example, according to the report, 18 percent of NASA's workforce was under 30 in 1989. By 2004, that figure dropped to 4 percent.

The study found many agencies lost their recruiting know-how and university connections, and the hiring freeze stopped the pipeline of entry-level workers, who would mature and replace older workers as they retired.

And finally, the survey said the tools used by agencies for buyouts and early retirements need to be updated since the $25,000 offer hasn't changed since the early 1990s.

Lew said OMB is well aware of the need to balance savings and the importance of maintaining skilled and motivated workforce.

But he would not discount the possibility of more cuts to federal employee pay and benefits. The White House froze employee salaries through 2012, and just last week proposed raising the amount employees contribute to their retirement accounts.

"We are not going to be in a place where we can say there is nothing else that can happen regarding federal workers," Lew said. "We think there is a measured way to address issues regarding federal workers while still maintaining all the incentives we need to attract and retain high quality federal employees."

He said the issues with federal employees is part financial and part a question of respect. Lew said feds understand when there are tough financial times, they have to do their share.

"What they have a harder time understanding is when they do a good job, they are being blamed for it," he said. " We need to separate these issues."