Sequestration would cost civilian agencies $39 billion, contractor group says

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Nondefense agencies would be hit with $39 billion in top-line budget cuts if the current law’s threat of sequestration kicks in on Jan. 2, 2013, according to new calculations by the Professional Services Council, a contractors trade group.

Though Congress and the White House could still reach a budget deal and head off the 2011 Budget Control Act’s requirement of across-the-board reductions, industry groups have been sounding the alarm about the short- and long-term harm the indiscriminate cuts would impose -- particularly in defense.

In a pivot to the civilian agency side, the council recently analyzed sequestration’s likely impact on 16 nondefense agencies for fiscal 2013. It assumed that Congress will pass a six-month continuing resolution, as expected, and that fiscal 2012 enacted levels form the basis for applying the cuts.

Total civilian agency spending would decline from $551 billion to $512 billion, with the Veterans Affairs Department, under the law, unaffected. The impacts are not uniform because some budget cuts for some agencies are already in the works. The budget cuts would be felt, in descending order, by the Health and Human Services Department ($6.2 billion); Education ($5.3 billion); small agencies and certain programs in intelligence and disaster relief ($4.3 billion); State ($3.4 billion); Homeland Security ($3.1 bilion); Housing and Urban Development ($2.9 billion) Energy ($2.1 billion); Justice ($2.1 billion); Agriculture ($1.7 billion); NASA ($1.4 billion); Transportation ($1.1 billion); Labor ($1 billion); Treasury ($1 billion); Commerce ($0.7 billion); and the Environmental Protection Agency ($0.7 billion).

Council President and Chief Executive Officer Stan Soloway told Government Executive “the current read is that there is very little chance of a change before the election. All agree that sequestration is a terrible idea, but there’s no consensus on what a solution would look like.” The stalemate could change after the election and again after Jan. 2, he added. Soloway added his organization does not involve itself in appropriations debates, but a look at the practical effects of sequestration tells him it will “wreak havoc on agencies and their ability to fulfill their mission.”

An earlier council analysis of the impact of defense cuts of 9.6 percent showed that, because military personnel funds are exempt, the budget categories hit hardest would be procurement and operations and maintenance.

The Obama administration so far has declined to spell out details on sequestration planning, though it must submit such a plan by Sept. 6 under a law passed in August.

In an Aug. 20 report and letter to President Obama, acting Office of Management and Budget Director Jeffrey Zients provided a highly preliminary estimate of one of the new budget law’s provisions. A separate sequester that hits if Congress exceeds a cap on discretionary spending would amount to $6.6 billion in the law’s security category and $0.4 billion in its nonsecurity category.

Correction: A previous version of this story misstated the amounts of the budget cuts as percentages instead of billions. The errors occured in the numbers inside parentheses in the fourth paragraph and have now been corrected. 

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