Observers say budget cuts may be preferable to uncertainty.
A just-past-deadline deal to put off a decision about drastic federal spending cuts until February will provide little solace for government technology chiefs and may be more damaging than if the draconian cuts had gone into effect, observers said Wednesday.
With no final decision on how or even whether to avert the slate of automatic cuts known as sequestration, agency leaders must spend two more months planning and budgeting for the most austere outcome or risk violating budgeting laws by overspending, said Alan Balutis, a former chief information officer at the Commerce Department and now a director at Cisco’s Internet Business Solutions Group.
The major change resulting from the last minute deal is that if and when a sequestration-averting plan comes through, agencies will have only seven months to rejigger their spending to conform with final budget allowances before the government fiscal year ends in September 2013, Balutis said, rather than nine months if a deal had been reached by January 1, the initial deadline.
Sequestration was part of a larger self-imposed austerity program that also included massive tax hikes. The nation was scheduled to go over the so-called cliff at midnight on New Year’s Day unless the White House and congressional Republicans could reach agreement on less severe or more targeted measures.
That agreement, which passed the Senate on New Year’s Eve and the House on New Year’s Day, raised taxes only on the wealthiest Americans but delayed a decision on sequestration until the end of February.
“In many ways I view it as worse than if we had joined hands with Thelma and Louise and actually gone over the cliff,” Balutis said Wednesday. “At least we’d know what’s in store for us and we could begin to plan and take action.”
With their budgets in limbo for another two months, agency officials are likely to put off new projects and to consider less ambitious and cheaper options for contracts that do go forward, said Julie Anderson, chief operating officer with Civitas Group and a former deputy assistant secretary at the Veterans Affairs Administration.
That could mean slower progress on a number of the government’s major technology priorities including shifting government systems to off-site computer clouds and making more government data available to private-sector entrepreneurs in machine readable formats.
Contractors also will likely be hesitant to take on new risks during the two-month sequestration delay, Anderson said. Civitas is a consultant for federal contractors.
The Office of Management and Budget will likely urge agencies to develop more concrete plans for how they will continue essential operations if sequestration does go into effect during that time, she said. OMB issued general guidance on sequestration planning in December.
Anderson agreed with Balutis that sequestration may be preferable to continuing uncertainty for both agencies and contractors.
“Uncertainty is paralysis,” she said.
Balutis and Anderson were both pessimistic about the chances for a grand spending deal in February when Congress will also debate raising the limit on federal borrowing.
“I have a feeling that there will be another short term fix that may take us to summer,” Anderson said.
“I think most people feel like it will be the Perils of Pauline again, and once again we’ll go down to the wire,” Balutis said. “But you won’t see much change in that period. No one’s going to come and sprinkle rationality dust around Capitol Hill so a new spirit of comity will prevail . . . Republicans still control the House and Democrats control the Senate.”