With Potential 2017 Cuts Looming, OPM Updates Furlough and RIF Guidance

The Trump administration’s proposed budget cuts leave the fates of hundreds of programs and even entire agencies hanging in the balance next year, but agencies could face severe cutbacks more immediately.

The White House suggested an additional $18 billion in reductions to non-defense discretionary spending for the rest of fiscal 2017 in a supplemental request to House Speaker Paul Ryan, R-Wis. Both the departments of Defense and Homeland Security would be exempt from the cuts. With agencies operating under a continuing resolution through late April, they would likely have just five months to implement the cuts -- or less time if Congress passes another short-term stopgap measure before addressing Trump’s proposal.

Budget experts cautioned that such significant spending reductions on that type of tightened timeframe could trigger agencies to send employees home without pay, much like they were forced to do when sequestration kicked in after Congress failed to reach a budget deal in 2013.

The Trump administration, in fact, appears to be gearing up for that possibility. In updated guidance dated March 2017, the Office of Personnel Management issued clarification for agencies on the procedures for implementing administrative furloughs. The guidance was last updated in June 2013. OPM maintains separate guidance for furloughs required by a government shutdown.

“An administrative furlough is a planned event by an agency which is designed to absorb reductions necessitated by downsizing, reduced funding, lack of work, or any other budget situation other than a lapse in appropriations,” OPM explained in the guidance. “An example of when such a furlough may be necessary is when, as a result of congressional budget decisions, an agency is required to absorb additional reductions over the course of a fiscal year.”

OPM also issued new guidance on possible reductions in force, titled “Workforce Reshaping Operations Handbook.” The agency put forward the new manual to “provide assistance to agencies that are considering and/or undergoing some times of reshaping (e.g. reorganization, management directed reassignments, furlough, transfer of function, reduction in force.)” The guidance details layoff procedures under federal law and regulations. An OPM spokesman said the updates were intended to "consolidate existing tools and guidance that agencies can use" rather than to issue new policy.

Reaching Trump’s proposed reductions in just five months would cause significant strain on federal agencies; in March of 2013, the Obama administration was forced to administer a sequester of about $26 billion. That led agencies to implement furlough plans (most of which were eventually scaled back from initial estimates) and hiring freezes, cut services to taxpayers, and delay planned contracts and investments.

Danny Werfel, controller at the Office of Management and Budget when Obama’s White House was forced to sequester funds from agencies, said all those options would likely be back on the table. Agencies would have limited time to adjust to new spending levels, forcing them to accelerate their planning activities.

Agencies must examine “practically what can be done in the short run compared to things that take longer to implement,” Werfel said. Agencies, he added, have experience in “staging acute budget events,” both when being downsized and in periods like after the 2009 American Recovery and Reinvestment Act passed and they had to determine the best way to get money out the door quickly.

“If the reality is you have to cut a certain percent you’ll start to find a certain roadmap for how you’re going to do it and what makes the most sense,” he said. Werfel explained in 2013 agencies were required to submit their plans for handling sequester cuts to OMB for review and comments.

David Reich, a senior fellow at the Center on Budget and Policy Priorities who spent 17 years as a staffer on the House Appropriations Committee, said an $18 billion cut to domestic agencies over five months would “certainly” require furloughs. Some agencies, such as the Social Security Administration, have already detailed plans to furlough employees. Unlike in 2013, Reich explained, agencies would have even less time to prepare for the cuts.

“The added problem,” Reich said, “is back in 2013 there was some forewarning sequestration was coming. It did not catch agencies totally unaware.” He added: “This one certainly would give much less warning, much less time to plan.”

That added runway, Werfel said, allowed agencies to explain to policymakers what outcomes to expect from the cuts and to notify stakeholders and the public of anticipated impacts.  Furloughs, he said, “are not easy to carry out,” but each agency would have to make decisions “balanced against a variety of moving pieces” to determine “what are the right levers to pull.”

RIFs are likely a longer-term solution, as the byzantine laws and appeals process generally prevent agencies from turning to them quickly. They are not off the table, however, especially if Trump’s fiscal 2018 budget goes into effect (Trump’s budget specifically calls on the Environmental Protection Agency to cut its workforce by 3,200, for example). They have been used less historically, Werfel said, but “there’s a precedent for them.”

Agencies, he added, can learn some lessons from 2013 and other years.

“The best approach here is to make sure the process is thoughtful, strategic and includes stakeholder engagement,” Werfel said. “It’s not easy stuff.”