The White House Office of Management and Budget (OMB) this week issued a memo directing executive agencies to intensify their efforts to plan for sequestration. Unless Congress acts to amend current law, the automatic spending cuts will take place on March 1, 2013 and would reduce federal agency spending by $85 billion for the remainder of fiscal 2013. The memo describes some of the potential consequences of sequestration for certain education programs, social services, and domestic defense programs, and also indicates that sequestration would likely necessitate hundreds of thousands of federal employee furloughs. It directs agencies to adhere to a set of guiding principles in developing their operation plans if sequestration occurs. The memo encourages each agency to use flexibility when available to minimize impacts on the agency’s core mission, identify the most appropriate methods to reduce civilian workforce costs, determine where savings may be achieved  under individual contracts or grants, consider funding flexibilities, and be aware of legal notification requirements under the Worker Adjustment and Retraining Notification (WARN) Act. While this guidance from OMB directs agencies to intensify their planning efforts for potential sequestration, the memo also advises agencies to generally continue normal spending and operations for the time being. However, the memo also explains that circumstances may require some agencies to take certain actions in the immediate- or near-term to ensure sufficient fiscal 2013 funding is available to meet the agency’s core requirements and mission. Agencies faced with such circumstances are instructed to coordinate closely with OMB before taking any actions. The memo also notes that in addition to the sequester, the upcoming expiration of the Continuing Appropriations Resolution (CR) for fiscal 2013 on March 27, 2013 has created further budgetary uncertainty.

Sequestration, originally scheduled to occur on January 2, 2013, was postponed until March 1, 2013 by the American Taxpayer Relief Act. Since the two-month delay was paid for by reducing discretionary spending caps and raising additional revenue from retirement accounts, the total amount of across-the-board cuts under the sequester was reduced by $24 billion. According to a recent analysis by Federal Funds Information for States (FFIS), if sequestration takes place on March 1, states may see an overall reduction of $4.4 billion in federal funds for fiscal 2013 for the programs FFIS tracks in its database that are subject to sequester. Roughly 82 percent of federal grant funding that states receive is exempt from sequestration, however.

Links: OMB Memo; FFIS Report