The administration would have flexibility in doling out potential Pentagon budget cuts that could kick in next January, a former White House official said.
John Cooney, previous general counsel at the Office of Management and Budget (OMB), joined other federal budget experts at a conference yesterday in explaining to contractors how the so-called sequestration cuts to defense and non-defense spending could be addressed by the White House and Congress this year.
Those cuts, which total $1.2 trillion, could come in January 2013 under the Budget Control Act of 2011. The law cut the Pentagon’s long-term spending plans by nearly $500 billion and said if a special congressional committee could not craft a plan last year to make further government-wide cuts, which they did not, a sequestration process would trigger an additional $1.2 trillion in cuts starting next year–with half coming from the Pentagon. Those second wave of cuts to the Pentagon, which would be on top of the initial cuts, could work out to be $492 billion from 2013 to 2021.
Cooney said those sequestration cuts–which some lawmakers are trying to prevent–would not necessarily result in across-the-board reductions to defense contracts.
“While the (sequestration) cuts are required across the board at the line-item level, the president does have some ability to influence exactly what does get funded in a sequestration year,” he said at the “Surviving Sequestration” event arranged by the Professional Services Council (PSC).
Cooney explained that if the sequestration cuts stand, closer to the Jan. 3, 2013 start date OMB will implement the spending reductions by formally “impounding” the sequestered funds and issuing an “apportionment” to each agency. An apportionment, he said, is a legally binding order that bans agencies from spending more than allowed by OMB.
President Barack Obama could issue the apportionments as soon as September, but could also wait closer to the start date of the cuts to give Congress time to stop the sequestration cuts, which Obama opposes.
Cooney discussed how the president could issue so-called policy apportionments, a controversial move that could help promote his priorities.
“OMB can issue a directive to an agency to say, ‘I know in this line item you have $1 million to spread among these six programs. We want you to spend no more than $50,000 on programs one, two, and three, and we want the rest split equally between the other programs,’” the former OMB official said.
“In other words, the president could put a thumb on the scale,” he said. “He can direct the agencies where they have to spend the money, and he can favor some programs over other programs, even within a single line item.”
This move to influence funding under sequestration is “highly controversial among the agencies, highly controversial in Congress, but the president does have that authority if he chooses to use it,” Cooney said.
He further predicted that if the sequestration cuts stand OMB and agencies will aggressively reprogram funds to lessen the impact of any such cuts.
He also noted that the agencies would have “substantial discretion” in applying the sequestration cuts, even though they are intended to be made via uniform percentage spending cuts within each line item in appropriations bills.
Agencies could allocate funds differently among programs in a line item, between personnel reductions and contract expenditures within a program, and among contracts for a single program, he said.
He said this whole process would take several months, and predicted contracting officers likely will be told “only very late in the process” what cuts they will have to implement in their programs.
“The reason for that is that the policy decisions won’t have been made until very late in the process,” he said. “This will remain dynamic right until the end.”