As reported in the January 16^th edition of Washington Report, 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. In the memo, OMB directs agencies to adhere to a set of guiding principles in developing their operation plans if sequestration occurs. Each agency is encouraged to use flexibility when possible 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.

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 that are subject to sequester. However, they also estimate that roughly 82 percent of federal grant funding states receive is exempt from sequestration.

Links: OMB Memo; FFIS Report