The Office of Management and Budget’s instruction to agencies to cut 5 percent of their budget by reducing or terminating poor performing or low priority programs is nothing new.
The White House made the same request last year and found that Congress accepted 60 percent of its suggestions. In fact, most of the recent administrations have asked agencies to figure out how to tighten their belts, finding limited success with lawmaking agreeing to about 15-to-20 percent of the recommendations.
However, what is different this time is the environment in which OMB is working and the idea of letting agencies keep a portion of their savings.
“It’s a clear attention to cost control and efficiency, but it’s not just knocking out programs that don’t work, there is an imperative to do more with less,” says Jonathan Breul, a former OMB official and executive director of the IBM Center for the Business of Government. “The spring guidance is real clear to agencies in anticipation of 2012 budget that there are still ways the government can use proven cost saving strategies particularly those private sector demonstrated to make daily operations more efficient and improve performance at lower costs.”
Breul adds that going after low impact programs is a good starting point.
OMB director Peter Orszag, who described the guidance during a speech in Washington at the Center for American Progress, says program duplication is rampant across the government.
“We cannot afford to waste money on programs that do not work, are outdated or are duplicative of one another,” he says. “Yet right now there are over 110 programs that cover science, technology, engineering and math education across 14 different agencies, over 100 programs that support youth mentoring and over 40 programs in 11 agencies with responsibility for employment and training.”
Orszag says these examples are among the reasons why the administration has proposed cutting $20 billion a year for the last two years.
Under this new guidance, agencies by Sept. 13 must submit to OMB justification for cutting or reducing discretionary programs and subprograms that either are under performing or do not meet the agency’s mission. This request follows on the White House’s plan to freeze non-homeland security and defense discretionary funding for 2010, 2011 and 2012.
“You have a special time here with the President and the Congress in the same party and facing huge debts and deficits, so you might have a greater chance than usual to get these cuts enacted,” says Robert Shea, who ran the performance management effort at OMB under the last administration and now is a director in Grant Thornton’s global public sector. “I think agencies will be hard pressed to come up with good justifications for why they these are low performing or low priority as opposed to others. The traditional challenge is a lack of good data on how the programs are performing.”
In fact, the Government Accountability Office Monday issued a new report looking at how OMB and agencies are measuring program efficiency under the Program Assessment Ratings Tool (PART). Shea was a co-creator of PART and ran the initiative for the Bush administration.
GAO says 69 percent of the time the programs were missing input metrics and without these typical elements can result in measures that do not truly capture efficiency.
Shea says the metrics are important because when you identify programs to cut, supporters of those programs come out of nowhere to try to stop the process.
“This will be a huge sales job to Congress,” he says. “The devil is in the details because agencies will need a legitimate basis for their recommendations for terminations and reductions. If they have strong data to back up their claims, they will improve their chances of success.”
Shea says when he was at OMB, the Bush administration ran into Congress pushback several times when trying to cut or reduce programs.
Breul says overcoming the culture of chief financial officers and budget officers of viewing large budgets as part of their power will be challenging as well.
But he also says starting small, finding success and expanding it is the way to go, similar to what the Defense Department is doing in its attempt to move $100 billion to the warfighter mission.
Shea and Breul say the other important aspect of the administration’s plan is to let agencies keep some of the savings.
Orszag says as part of the legislative proposal to Capitol Hill, the White House will ask that Congress pass legislation letting agencies to keep up to 50 percent of the administrative savings they achieve after they receive their budgets. The savings could for the current or the next fiscal year.
“In addition, we’ve had this problem, similar to flexible spending accounts, where if you get to the end of the year and you have an extra $100 in your account, you go out and buy a new computer even if you don’t need it,” he says. “We are now allowing agencies that forgo that to roll over half of the money into the next fiscal year so they don’t just waste the money on unnecessary expenditures.”
Shea says OMB tried this before, asking for Congressional approval to keep 10 percent of savings achieved by disposing of real property.
“Congress was loathe to give us the authority to retain even 10 percent,” he says. “But it is a really important lever to incentivize agencies to be aggressive about where they propose to cut and how they propose to save.”
OMB isn’t solely focusing on cutting programs as a way to save money.
Orszag sees improved efficiencies through technology and other areas as opportunities to do more with less.
OMB will issue further guidance around technology and financial systems in the coming months to improve how agencies oversee and manage them, he says.
Finally, Orszag says President Obama will issue a memo requiring the Department of Health and Human Services to cut its improper payments for the Medicare fee-for-service program by 50 percent by 2012.
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