Four Agencies' Varied Approaches to Sequestration

Uncertainty appears to be the one constant shared by agencies grappling with sequestration, as suggested in the diverse approaches being taken by four in a sampling by Government Executive.

The president’s March 1 sequestration order, as described by the Office of Management and Budget, requires a 7.8 percent reduction in defense discretionary funding and a 5 percent cut in non-defense discretionary spending. But because these cuts must be achieved over only seven months instead of 12, the effective percentage reductions will be about 13 percent for non-exempt defense programs and 9 percent for non-exempt nondefense programs.

The precise percentage, the extent of an agency’s room to maneuver and its ability to take advantage of savings pocketed earlier in the fiscal year all depend on the nature of its mission and programs.

“Many programs will have to cut services by more than 5 percent in the remaining months of 2013,” noted Sharon Parrott, vice president for budget policy and economic opportunity at the Center for Budget and Policy Priorities. “In some programs, an assigned 5 percent cut in annual funding would require something closer to a 10 percent cut over the seven months that remain in fiscal 2013,” she said, giving a hypothetical example.

“While agencies generally were told to operate normally prior to January despite the fact that sequestration was scheduled to go into effect, some managers used their flexibility to take steps, such as postponing hiring, to save money earlier in the year,” she said. “The ability to do so differed significantly by program, depending on how funds are used and whether the agency mission requires steady expenditures during the year or allows the agency to bunch some of them in certain quarters.”

Parrott’s examples of programs that have to spend money throughout the year to continue providing benefits include the Women, Infants and Children nutrition program and federal unemployment insurance.

Entitlement programs, such as Medicare and Medicaid, are exempt under sequestration, which means largely business as usual at the Health and Human Services. “We do not have final plans or estimates of the impacts on HHS employees at this time,” said Bill Hall, director of the HHS news division. “But we continue to evaluate the situation and have made no determinations at this point as to whether we will need to implement any furloughs.”

Energy Department Deputy Secretary Daniel Poneman has sent letters to at least 10 governors outlining coming cuts to states partnering in programs, noting that the department’s overall budget will be cut by $1.9 billion in fiscal 2013. “For the state of Texas,” he wrote to Gov. Rick Perry, “the department’s preliminary analysis is that the impacts will include” direct reductions to federal contractors of $22 million, including reductions to the cybersecurity program at the Pantex plant of more than $11 million, which could result in 2,500 furloughs or layoffs at that site. “The department is reallocating money from long-term efforts to limit sequestration’s near-term impact,” Poneman wrote. “The impact of prolonged or permanent sequestration, then, would be greater than described here.”

At the Internal Revenue Service, acting Commissioner Steven T. Miller warned of a likelihood of furloughs in a Feb. 28 memo to employees. “We will continue to operate under a hiring freeze, reduce funding for grants and other expenditures, and cut costs in areas such as travel, training, facilities and supplies,” he wrote before sequestration took effect. “In addition, we will need to review contract spending to ensure only the most critical and mandatory requirements are fully funded.”

The size of the anticipated budget cut at IRS makes “a number of furlough days necessary,” Miller said. “Despite our current and planned efforts to cut expenses, the reality is that our greatest expense, by far, is employee pay.” Miller added: “We know that asking you to take even one furlough day is difficult. That’s why we’ve spent so much time and energy trying to minimize the impact on our employees as much as possible while carrying out our mission. We will continue to look for cost savings in the coming weeks and months.”

Miller also promised to engage with the National Treasury Employees Union to “ensure that any necessary furloughs are applied in a fair and appropriate manner and consistent with our collective bargaining agreements.”

Furloughs are also possible at the Housing and Urban Development Department, though no specifics have been announced. Employees were given access to a website that contains links to congressional testimony on sequestration by Secretary Shaun Donovan, as well as letters sent to 50 governors and state housing agencies.

In the letters, Donovan stressed coming cuts to individual families, including homeless veterans. He told New Hampshire Gov. Maggie Hassan, “You can expect reductions totaling approximately $5 million compared with fiscal 2012 levels for rental assistance provided through the Tenant Based Rental Assistance program; for homeless assistance and affordable housing; community development and special needs assistance provided through the HOME and Housing Opportunities for Persons with AIDS (HOPWA) formula grant programs.”

Assistant HUD Secretary Sandra Henriquez wrote state housing chiefs saying that HUD’s Public Housing Operating Fund subsidy program, because of Congress’ current budget plans, would be prorated at a lower rate, at 81 percent rather than the 92 percent, not factoring in sequestration.