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Labor Cost Management Is Key to Coping With Sequester at Agencies

David McNew/Getty Images
A KLM Royal Dutch Airlines jet taxis into take-off position as cars enter Los Angles International Airport on Monday. Delays have been reported at some airports because of the furloughing of air traffic controllers under the sequester.

This may be small solace to airline passengers waiting out delays at airports in Los Angeles and New York, but the general consensus in Washington is that the real pain from budget cuts under the sequester may not be felt until the end of the summer or even next year. That’s because managers of federal agencies are using whatever flexibility they can, according to officials at agencies and unions representing workers, to cut down on furloughs to minimize disruptions in services.

It’s a common-sense approach, but for managers at federal agencies it also presents something of a double-edged sword: The better they can patch together solutions over the coming weeks, the more palatable the automatic, across-the-board spending reductions will appear to the public. And that means agencies will be more likely to have to live with the tighter budgets and smaller staffs that the sequester has brought them.

“The more pain, the more transparent it is that the cuts are problematic,” said Sharon Parrott, vice president for budget policy and economic opportunity at the Center on Budget and Policy Priorities.

The recent budget control laws (PL 112-25, PL 112-240) lowered the cap on regular discretionary spending to about $984 billion in fiscal 2013 from $1.043 trillion in the previous budget year and is slated to knock it back to $967 billion for fiscal 2014.

The workforce is the most obvious target for those cutbacks. Total personnel costs, including pay and benefits, were $458.4 billion in fiscal 2012, according to the Office of Management and Budget. That’s up from fiscal 2011, when total personnel costs were $432.6 billion, of which $299.57 billion went for civilian employees.

That’s why management of labor costs, by far the largest single cost within government operations, is central to coping with the sequester at government agencies.

That was evident to the traveling public in the past week, as the first furloughs at the Federal Aviation Administration led to lengthy delays at Los Angeles International and New York-area airports. FAA data showed that there were almost double the number of delays on Monday as there would have been without the furloughs. About 1,200 were attributable to staffing reductions, the agency said in a statement.

Experts say those delays may be only the start of problems at agencies as they roll out furloughs, one day every two weeks for employees at most agencies and perhaps once a week for workers at the Department of Defense, the single largest federal employer.

“We’re seeing some broad outlines, but we’re not seeing the negative impact right now,” said Peter Winch, deputy director of field services at the American Federation of Government Employees, which represents about 650,000 workers.

The next outcry could come May 24, when the IRS begins implementing furloughs for 89,000 employees, forcing the shutdown of the agency’s toll-free help and Taxpayer Assistance Centers.

“We settled on having uniform furlough dates for everyone and closing down agency operations entirely,” acting IRS Commissioner Steve Miller wrote in a memo to workers. “This way, the IRS can gain additional cost savings on utilities and other services in our work locations.”

The sequester was triggered on March 1, but agencies had to give 30 days’ notice in formal notification of labor actions, delaying the start of these unpaid leaves.

It could be some time before furloughs begin at the Pentagon. Congress exempted 1.4 million men and women on active duty from furloughs, but the Pentagon may have to demand them of its estimated 718,000 civilian workers. The Pentagon has not yet announced a final decision on how many furlough days will be required, but work is under way to find alternatives.

Pentagon officials have been working on a reprogramming request to shift money to better manage the sequester. The Defense Department already has cut back on travel and maintenance and imposed a hiring freeze. Defense Secretary Chuck Hagel told a House panel this month that the Pentagon still is trying to “at least minimize” the number of furlough days, even after having last month reduced its initial estimate.

“As you know, we’ve moved from 21 to 14 [days], and maybe we can get better, maybe we can’t,” Hagel said.

The Pentagon is trying to make the potential furloughs as painless as possible on the customers of its commissaries, said Ray Cantu, a meat cutter at Fort Sam Houston in San Antonio, Texas, and a president of the AFGE unit that represents workers nationwide at the Defense Commissary Agency. He said his union sought to have the furloughs fall on Sundays, a day for which workers receive higher pay. That was rejected because Sunday is a busy shopping day at the commissaries, Cantu said.

“I thought the whole idea was to save money because of the debt,” Cantu said. “The customers could adjust to any day that we open or close.”

Some agencies have been able to avoid furloughs entirely. Food and Drug Administration Commissioner Margaret Hamburg this month told a Senate panel that her agency cut back on travel and training expenses and on consulting grants to conserve money. The FDA also has not filled all of the positions that Congress had provided for through the regular budget.

“So we won’t be able to hire up as much as we would like,” Hamburg said. “But we won’t have to furlough anyone because we’re under where we would like to be, where we think we actually need to be.”

Other agencies may face similar questions if Congress does not amend the spending caps that will get even tighter next year under the sequester.

Democrats are pushing to raise the cap on regular discretionary spending back to the original $1.058 trillion for the fiscal year that begins Oct. 1, but the second year of sequester will bring that down to $966 billion if nothing changes.

The decisions on how to implement the spending cuts will be handled differently for fiscal 2014, however. Instead of making across-the-board cuts, as happened in fiscal 2013, lawmakers are supposed to make these decisions through the appropriations process for fiscal 2014.

Steve Bell, the senior director of Economic Policy at the nonprofit Bipartisan Policy Center and a former Republican staff director for the Senate Budget Committee, said many newer members may be surprised by the response in their districts to the sequester.

“They really haven’t had an uproar from their constituents yet,” Bell said.

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