Federal Agencies, Employee Unions Prepare for Sequester Cuts

Without congressional action on the sequester, its sharp across-the-board cuts would affect the budgets of most federal agencies including those that regulate the telecom and technology marketplaces. The sequester is an automatic, 10-year, $1.2 trillion across-the-board budget cut that begins in January and was required by the Budget Control Act of 2011 (http://xrl.us/bnoiym). The cuts were intended to provide incentive for the Joint Select Committee on Deficit Reduction to achieve $1.2 trillion in savings, which the bipartisan panel of House and Senate members ultimately failed to do.

Officials from OMB and OPM called federal employee union leaders Friday to discuss how agencies plan to address the looming sequester. Hiring freezes, worker furloughs and spending cuts may be implemented if Congress does not act to delay or avoid the sequester altogether and some agencies may feel the need to take personnel actions sooner than other agencies, the officials told union leaders. If any personnel actions become necessary, agencies should be actively engaged with their unions and “bargain impact and implementation consistent with the law and their collective bargaining agreements,” Kelley said.

Congress needs to “stop looking at federal employees as the way to fix our country’s economic troubles,” Kelley said. “Federal employees and their agencies have critical work to do. Congress should reach a deal as quickly as possible to avoid an interruption in the provision of vital services to the public.”

President Barack Obama held a meeting at the White House Friday with the bipartisan, bicameral leadership of Congress to attempt to forge a last-minute compromise to address the scheduled tax increases and federal spending cuts. Between Monday and Wednesday, the Bush-era tax cuts, payroll tax cuts, emergency unemployment benefits and alternative minimum tax exemption will all expire and sequestration will kick in. Invited to attend the closed-to-the-press meeting were: Vice President Joe Biden, Senate Majority Leader Harry Reid, D-Nev., Senate Minority Leader Mitch McConnell, R-Ky., Speaker of the House John Boehner, R-Ohio, House Minority Leader Nancy Pelosi, D-Calif., and Treasury Secretary Timothy Geithner. At our deadline it was unclear whether a bargain was struck at the meeting to avoid or delay sequestration.

If the president and congressional leaders fail to strike a deal this weekend, the U.S. financial markets will drop at some point next week, said Charles Konigsberg, president of the Federal Budget Group, a company that tracks budget issues. “The markets will definitely react and the question is will Congress and the president react to this by just fixing the tax problem or fixing the spending cuts at the same time,” he said. “I don’t think anyone has figured out how to unwind the politics of the spending cuts.”

"Congress can stop this at any time,” said Center for American Progress Fellow Scott Lilly. “Once people realize the implications of the service cutbacks the pressure to stop this and find some other path is going to be immense. I think at some point Congress is going to realize they don’t want to go where this train is headed,” he said in a phone interview. But if Congress does fail to reach an accord by Wednesday morning federal agencies will have to “implement a whole series of measures in every agency to bring them down to the spending level that will be compliant with the new levels that sequestration mandates,” he said. “I would guess that you will see a schedule for furloughs that will inform people not to show up for work on such and such days and agencies trying to figure out how to maintain their service levels.”

But the effect on telecom regulations is going to be “close to zero,” said Jeffrey Eisenach, a visiting scholar at the American Enterprise Institute and a former economics official at the FTC and OMB. “I don’t think anyone will notice a difference at the FCC as a result of sequestration,” he said in an interview. Most agencies are likely preparing for a hiring freeze, and a procurement freeze on their discretionary purchases, he said. “If you are talking about the FCC all you are talking about are people and desks. ... I imagine some people would say that would be crippling, but my instinct is that life will go on.”

The FCC’s budget for salaries and expenses would be cut 8.2 percent, equal to roughly $28 million, if Congress doesn’t act to stop sequestration before Wednesday, OMB said in its September sequestration report. USF is exempt from the sequester, but the FCC’s spectrum auction program account would undergo a 7.6 percent cut, or $300,000.

Salaries and expenses for the FTC would be subject to a $26 million cut under sequestration and NTIA would face a $4 million cut, OMB said. NTIA’s state and local implementation fund would undergo a 7.6 percent cut, or $5 million, and the sequester would cut the agency’s public safety trust fund by 7.6 percent, or $8 million. Justice Department Antitrust Division salaries and expenses would undergo a $3 million cut under sequestration. It would also slash $7 million from DOJ’s budget for tactical law enforcement wireless communications and information sharing technology.

The Department of Homeland Security would undergo a $39 million cut to its departmental operations budget. The Broadcasting Board of Governors would be forced to cut $61 million from its budget for international broadcasting operations and $1 million from its budget for broadcasting capital improvements. Salaries and expenses for the Privacy and Civil Liberties Oversight Board are also sequestrable, though OMB’s report didn’t specify what percentage or amount.