Life in Budget Limbo
Why has the performance level of the federal government declined so noticeably over the past several decades? One advantage of living in Washington is that you often hear government employees talking informally about the political problems that make it almost impossible for them to do their jobs effectively.
The talk among some of my government buddies this week was an obscure facet of federal budgeting called a "continuing resolution." This is what Congress passes when it hasn't gotten its act together to pass a real appropriations bill before the start of a new fiscal year. The CR, as it's known, allows agencies to continue operating at the same spending level as in the previous year. But it plays havoc with normal management functions such as planning and contracting.
We are now a month into fiscal 2008 without Congress having approved a single appropriations bill. That means that every federal agency is operating on a CR basis, with that funding due to expire Nov. 16. We'll have the federal government in shutdown mode in several weeks unless Congress kicks the can down the road with another continuing resolution.
President Bush has taken shots at the Democratic Congress recently for this failure to pass appropriations bills. But his partisan attacks trivialize the seriousness of this congressional breakdown. Late appropriations have become a chronic problem, whichever party controls Congress. According to Philip Joyce, a budget expert who teaches at George Washington University, Congress has managed to pass all its appropriations bills on time in only four years since 1977. That's pathetic.
The problem has actually become worse since the 1974 Congressional Budget Act, which delayed the start of the fiscal year to Oct. 1 from July 1 to give Congress more time to do its job. According to a 1997 article by University of Maryland political scientist Roy T. Meyers, the percentage of late appropriations bills increased after Congress extended its deadline.
Meyers summarized the inefficiencies that result from having to run an agency without knowing your budget. "When regular appropriations are delayed, uncertainty about final appropriations leads many managers to hoard funds; in some cases, hiring and purchasing stops. These effects are so unnecessarily counterproductive, it is surprising [the comic strip] 'Dilbert' has not devoted a month to this topic."
Joyce argues that government contractors jack up their prices to compensate for the risk and uncertainty. And he notes the added cost for federal agencies that have to plan for the possibility that a new CR won't be approved and that they may have to shut down. "That's what economists would call a dead-weight loss," Joyce says.
"It's a lousy way to do business," says Leon Panetta, who grappled with these issues as director of the Office of Management and Budget in the Clinton administration. "You're almost guaranteeing that there will be incompetence, because the agencies don't have the resources to do the job."
The budget breakdown is as serious for those who receive federal money as for the bureaucrats who dole it out. Panetta notes the problem facing school districts around the country that count on federal spending. They have to make plans at the beginning of the school year in September, but with Congress in CR mode, they don't know if they can count on the federal money. So they often delay big items such as construction or new programs.
Similar inefficiencies are evident across the federal government because of the congressional logjam. Douglas Holtz-Eakin, who is Sen. John McCain's senior economic adviser, recalls the hiring problems he encountered when he ran the Congressional Budget Office from 2003 to 2005. Economists customarily apply for jobs in January, which was often before Congress had passed an appropriations bill for his little agency. "To make an offer, you need to know from Congress how many [full-time equivalents] you've got. It's terribly frustrating."
Is it surprising that in this budget morass, government agencies lose their edge? How do you innovate if you don't know how much money you've got? A continuing-resolution world means business as usual. At the National Institutes of Health, which is supposed to fund cutting-edge science, the confusion affects the size and timing of grants. To cope with late appropriations, NIH must award grants at only 80 percent of the desired amount -- and then backfill later, with more cumbersome paperwork.
Politicians regularly take shots at Washington bureaucrats, but federal workers rarely get a chance to fire back. They should. Congress's failure under both parties to do its most basic job -- fund the federal government -- is a national disgrace. If they were normal federal employees rather than solons of Congress, they would have been fired long ago for gross incompetence.