Making smart cuts in a difficult federal budget climate

Joe Davidson
Columnist September 27, 2011

Budget cuts are coming. No question about that.

The real issue is will the slicing be done with the fine touch of a surgeon’s scalpel? Or will the axe-swinging Paul Bunyan be the model?

Joe Davidson writes the Federal Diary, a column about the federal workplace that celebrated its 80th birthday in November 2012. View Archive

Those are among the issues Office of Management and Budget Director Jack Lew likely will discuss when he meets with more than 100 federal managers and leaders who are scheduled to attend the Tuesday release of a report on “Making Smart Cuts.”

In the hope the Obama administration and Congress can learn from history, the report, by the nonprofit Partnership for Public Service and the Booz Allen Hamilton consulting firm, draws lessons from government cutbacks during the 1990s and provides recommendations for today’s legislators and policy makers.

Max Stier, the Partnership’s president and chief executive, said, via e-mail that he hopes “the report will influence legislative and administrative policy. The goal of the report is to help inform agency decisions as they navigate this difficult budget climate.”

In the introduction to the report, Stier and Jack Mayer, executive vice president of Booz, said “we must not repeat the mistakes of the past by making arbitrary or across-the-board cutbacks, whether in programs, services or staffing, that might save money in the short term, but do great damage in the long run by creating a less effective government.”

To learn from the past, Booz and the Partnership (which has a content-sharing relationship with The Washington Post) interviewed more than 30 current and former senior federal officials and public policy experts about how agencies dealt with big budget cuts in the 1990s.

They outlined eight budget cutting strategies and the pros and cons of each. They also “cautioned that none of the strategies would be successful in isolation” according to the report.

Here are the eight strategies from the 1990s and some of their ups and downs:

●Across-the-board cuts that apply the same percentage reduction everywhere is “easy” for agency leaders, says the report, because they don’t have to decide what or where to cut. That means the hard decisions are postponed as some programs could be hollowed out if cuts persist.

●Programmatic cuts that reduce or kill money for a particular program. This allows agencies to protect their best programs, but can be difficult and time consuming to implement.

●Cutting administrative costs such as procurement and training. This can decrease managerial layers, which might seem like a good thing in the short term, but overtime this method can weaken the organization’s leadership and managerial capacity.

●Reducing staff. This is favorite of some congressional Republicans and it can cut costs significantly in the short term. But the three advantages outlined in the report are trumped by the five disadvantages listed, including hindering an agency’s ability to fulfill its mission.

●Consolidating functions can achieve economies of scale, but could result in a downgrading of service if training for employees is not adequate.

●Re-engineering means redesigning processes to improve the flow of work. This can result in better customer service, but sometimes savings are incremental and hard to quantify.

● Investing in information technology sounds like a good idea that can increase productivity. The report didn’t cite this example, but as the Office of Personnel Management found with a planned retirement calculator that it finally scuttled in 2008, a new computer program might not work as advertised.

●Contracting out work to private companies was a favorite tool of the George W. Bush administration. This does allow agencies increased flexibility, but as the report notes, this also “may lead to cost overruns, fraud, waste and abuse.”

One key take-away from the report is “those agencies that took a systemic, strategic approach to implementing deep budget cuts were the ones that were best able to mitigate their adverse impact,” said Ronald Sanders, a Booz Hamilton senior executive adviser who was the intelligence community’s chief personnel officer until he retired last year.

“The other key take-away has to do with opportunity,” he added. “That’s not a word often associated with budget cuts, but we found that many agencies were able to leverage those cuts to bring about much-needed changes in the way they did business, sometimes achieving dramatic improvements in efficiency and effectiveness.”

Asked whether Congress and the administration, with their dysfunctional relationship, can work together to make “smart cuts,” Stier focused instead on agency leaders. He is confident they can “step up and find new and innovative ways of doing business.”

Yes, but will the budget that emerges from that train wreck on Capitol Hill let them?

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