Before the end of the fiscal year on September 30, most agencies go into panic-mode. Those who are close to exceeding their budgets for the year do whatever they can to stay just under budget to make sure they don’t get in trouble, just in case it’s their turn to have someone on Capitol Hill or in the bureaucracy take a look at their books. This is the good side of panic-mode and needs to be pushed further. If agencies aren’t able to run within their budget, changes must be made.
The bad side of panic-mode is when agencies haven’t spent enough. In an atmosphere of ballooning debt and busted budgets, it’s insane to think there are agencies out there trying to spend as much money as possible at the end of the year, but that’s exactly what happens. Why? Because any money they don’t spend in their budget goes right back to the Treasury. There’s no carrying over budget the budget surplus. There’s also no reward for the people who keep an agency working under budget, other than the occasional kudos and good marks on the resume of some of the leaders. Perhaps worst of all is the reality that these agencies know all-too-well: if they don’t spend all the money they’re allotted, there’s a chance their budgets will be cut.
An argument can be made that this system makes sense because it keeps agencies working as close to their allotment as possible. We don’t want them to be too far under budget, the argument goes, because that means they’re not doing the entire job they’re supposed to do. On the surface, this might actually make a little sense. In reality, it’s complete hogwash.
A business or department within a business that’s able to perform well while staying under budget is doing a good job. If people within this business or department are able to accomplish their goals by innovation, improving efficiency, or cutting costs without cutting corners, rewards are normally expected. The owners get higher profits. Managers and employees often get bonuses. The coffers are increased to prepare for future challenges. All is well.
That’s not how DC works. Spend all the money you can without going over and you get to keep your job. Do better than you’re supposed to do and you’re going to get the shaft. That mentality is one of the reasons we’re not working down the debt, not reducing budgets, and failing more often than succeeding at achieving the goals for the people. If DC had more of a business-like mentality, the effectiveness of nearly every agency would be improved.
When Donald Trump was elected President, there was hope that this might be the way government headed. When he started plugging in business professionals into his cabinet, hope rose even further. What we’ve seen is the exact opposite. There have been good moves made in some agencies and departments, but they’ve been mostly improvements on the original theme rather than the drastic transformation and paradigm shift we’ve needed.
Veronique de Rugy posted a very enlightening article over at Reason:
For executive branch departments, Fichtner shows that on average, 16.3 percent of contract expenditures happen in September. This is twice as much as the 8.3 percent of the annual budget you would expect to be spent in a given month if the money were split evenly across the year. The State Department and the Department of Housing and Urban Development are even worse, consistently spending a third of their total contracting budgets in September.
This happens regardless of administration, party control of Congress, or type of budget resolution. And it is not new. Back in 1978, the Government Accountability Office sounded the alarm with a report finding that agencies on average spent 21 percent of their budgets in the final two months of the fiscal year.
How much money are we talking about? In 2017, federal agencies excluding the Department of Defense spent $11.1 billion in the final week of September. Despite Trump’s big promises to find cost savings, the Office of the President alone spent $21.8 million on furniture, electrical hardware, supplies, and flooring—four times as much as Barack Obama spent during the same period a year earlier.
Is there a solution? Yes. Hold people accountable for wasteful spending, especially if they go over budget, but more importantly reward people and agencies for smart spending. Give out bonuses. Allow a certain percentage of their surplus to go towards the following year. Treat running an agency like running a business. It won’t solve all the problems, but at this point we need every positive fiscal move we can make.