Seventeen months after approving a debt limit deal which included across the board budget cuts as a last resort for deficit control, Congress adjourned for the weekend without taking any action on the sequester, as $85 billion in budget cuts will start going into effect on Friday night.
"Americans know that Washington has a spending problem," said House Speaker John Boehner.
"It must be addressed," the Speaker added.
Since they compromised on the fiscal cliff deal and agreed to new taxes on the wealthy, Republicans have repeatedly said they would not cave on the sequester, arguing that new taxes aren't the answer, while for Democrats, they have to be part of the equation, as they argue spending cuts will harm economic growth.
"Congressional Republicans have shown no interest in averting this latest manufactured crisis," said House Democratic Leader Nancy Pelosi, who argued that "across-the-board spending cuts that will harm our economy and undermine job creation."
What it means is that at some point on Friday, President Obama will formally authorize the sequester, as agencies all across the government will be given their orders on how much must be cut from each spending account.
What follows is a memo from the Office of Management and Budget to federal agencies, giving them recommendations about what - and what not to do - as the sequester kicks in:
SUBJECT: Agency Responsibilities for Implementation of Potential Joint Committee Sequestration
Unless Congress acts to amend current law, the President is required to issue a sequestration order on March 1, 2013, canceling $85 billion in budgetary resources across the Federal Government. Because these cuts must be achieved over the remaining seven months of the fiscal year, the Office of Management and Budget (OMB) estimates that the effective percentage reductions are approximately 9 percent for nondefense programs and 13 percent for defense programs. These reductions will result in significant and harmful impacts to national security and domestic priorities.
The President has been clear that sequestration is bad policy that was never intended to be implemented, and the Administration remains hopeful that Congress will act to avoid it through an agreement on balanced deficit reduction. However, because legislation may not be enacted to avoid sequestration before the current deadline of March 1, 2013, executive departments and agencies (agencies) with sequestrable accounts have been engaged in planning activities to operate at the lower, post-sequestration funding levels should it be necessary.
This guidance builds on prior communications with agencies about the implementation of sequestration, and addresses questions that have been raised as to certain categories of planning activities.
Agency Planning Activities
OMB Memorandum 13-03, Planning for Uncertainty with Respect to Fiscal Year 2013 Budgetary Resources, directed agencies to begin planning activities to operate with reduced budgetary resources in the event that sequestration occurs. Agencies' planning efforts must be guided by the principle of protecting the agency's mission to serve the public to the greatest extent practicable. Planning efforts should be done with sufficient detail and clarity to determine the specific actions that will be taken to operate under the lower level of budgetary resources required by sequestration. For example, agencies should identify any major contracts that they plan to cancel, re-scope or delay as well as any grants that they plan to cancel, delay, or for which they plan to change the payment amount. Similarly, agencies should identify the number of employees who will be furloughed, the length of expected furloughs, the timing of when furlough notices will be issued, and the manner in which furloughs will be administered. In some cases, agencies may not be able to ascertain all of this information prior to March 1. However, agencies should continue to engage in intense and thorough planning activities to determine all specific actions that will be taken as soon as practicable.
Communications
To the extent permitted by law, agencies should inform their various partners and stakeholders in a timely and complete manner of the impact of sequestration so that third parties are able to adjust their operations and plans as appropriate. Accordingly, at this time, agencies should be actively and continuously communicating with affected stakeholders-including States, localities, tribal governments, Federal contractors, Federal grant recipients, and Federal employees-regarding elements of the agency's planning that have a direct impact on these groups. These communications will vary greatly by agency and by stakeholder, but agencies should be as specific as possible in order to provide sufficient detail to be helpful to these stakeholders in understanding the implications of the reduced budget authority resulting from sequestration.
With regard to any planned personnel actions to reduce Federal civilian workforce costs, consistent with Section 3(a)(ii) of Executive Order 13522, agencies must allow employees' exclusive representatives to have pre-decisional involvement in these matters to the fullest extent practicable and permitted under the law. In particular, in instances where agencies are considering potential furloughs, agencies have a duty to notify their exclusive representatives and, upon request, bargain over any negotiable impact and implementation proposals the union may submit, unless the matter of furloughs is already covered by a collective bargaining agreement. Agencies should ensure that they are fully aware of and in compliance with any and all collective bargaining requirements, and should consult with their General Counsel or appropriate labor relations office for questions regarding these requirements and appropriate interaction with employees and unions on these matters.
Acquisition
Due to the Government's large acquisition footprint, sequestration will inevitably affect agency contracting activities and require agencies to reduce contracting costs where appropriate. As with all actions taken as a result of sequestration, agencies should ensure that any contract actions are both cost-effective and minimize negative impact on the agency's mission to the extent practicable.
Program, acquisition, financial/budget management, information technology, and legal personnel should work together to make determinations regarding contracts in light of sequestration. As a general matter, agencies should only enter into new contracts or exercise options when they support high-priority initiatives or where failure to do so would expose the government to significantly greater costs in the future. Agencies may also consider de-scoping or terminating for convenience contracts that are no longer affordable within the funds available for Fiscal Year 2013, should no other options exist to reduce contracting costs in these instances.
Should such steps be necessary, agencies must evaluate the associated costs and benefits of such actions, and appropriately inform and negotiate with contractors. Finally, agencies should take all appropriate steps to minimize to the extent practicable the impact on small businesses of reduced contracting activities.
Financial Assistance
Given the widespread use of grants, loans and other Federal financial assistance to nonfederal entities (e.g., State, local and tribal governments, non-profit organizations, and companies), sequestration will impact the funding of these activities. As a general matter, agencies should ensure that any new financial assistance obligations or funding increases under existing agreements are consistent with the need to protect the agency's mission at the post-sequestration level. In light of sequestration, agencies may also consider delaying awarding of new financial assistance obligations, reducing levels of continued funding, and renegotiating or reducing the current scope of assistance. Agencies may be forced to reduce the level of assistance provided through formula funds or block grants. Should any such steps be necessary, agencies should evaluate the associated costs and benefits of such actions and appropriately engage and inform recipient(s) as early as possible.
Increased Scrutiny of Certain Activities
In determining the appropriate manner to achieve funding reductions, agency heads must also ensure that their agencies have risk management strategies and internal controls in place that provide heightened scrutiny of certain types of activities funded from sequestered accounts. To the extent these accounts remain at the post-sequestration funding level, increased scrutiny should apply to:
• hiring new personnel;
• issuing discretionary monetary awards to employees, which should occur only if legally required until further notice; and
• incurring obligations for new training, conferences, and travel (including agency-paid travel for non-agency personnel).
In light of the reduced budgetary resources available due to sequestration, expending funds on these activities at this time would in many circumstances not be the most effective way to protect agency mission to the extent practicable. Therefore, agency leadership should review processes and controls around these activities, and ensure that these activities are conducted only to the extent they are the most cost-effective way to maintain critical agency mission operations under sequestration.
Please contact your OMB Resource Management Office (RMO) if you have any questions about or need assistance with this guidance.
The move drew praise from budget watchdogs on Capitol Hill who think an awful lot of money can be squeezed out of each agency.
"I applaud the White House’s decision to reverse its opposition to using options like a hiring freeze and travel restrictions to avoid inflicting pain on the American people through their sequestration policy," said Sen. Tom Coburn (R-OK).
"While some in the administration have previously dismissed these savings as a ‘drop in a bucket,’ the fact is each drop adds up to a torrent of savings," Coburn added.
