Agencies Will Have to Race the Clock to Spend Massive Influx of Money

After years of absorbing cuts or flat spending levels, most federal agencies will soon face a novel dilemma: spending a massive influx of money with only a few months to get it out the door.

A recent agreement struck by congressional leadership and signed into law by President Trump boosted non-defense discretionary spending for agencies by $63 billion in fiscal 2018. The measure also included a continuing resolution through March 23 to buy lawmakers time to write line-by-line appropriations, meaning a forthcoming omnibus bill will give agencies only about six months to spend the new funding before it expires Oct. 1. Such a tight timeline could prove problematic for agencies and put pressure on many areas of their operations, according to former federal budgeters.

“This will tax grant making, contract professionals, hiring professionals,” said Robert Shea, a former associate director for administration and government performance at the Office of Management and Budget in the George W. Bush administration. “This is going to tax every facet of the agencies just to make sure they’re spending wisely.”

The problem has been exacerbated, he said, as the Trump administration has instructed agencies not to anticipate what may come from Congress and instead assume the reduced spending levels proposed under the president’s budget. The White House proposed cutting domestic spending by $54 billion in fiscal 2018. Absent normal planning, the condensed scheduled will add pressure on agencies looking to allocate additional funds.

There has been “unusual restraint in agency spending based on what they’ve had,” said Shea, now a principal at Grant Thornton. That means agencies will have “precious little amount of time to figure out how to invest that money.”

The reduced timeframe is something lawmakers are considering as they write an omnibus bill that will set spending levels at each agency.

“We obviously don’t want to pour money into accounts that can’t be spent responsibly,” said Matt Dennis, a spokesman for Democrats on the House Appropriations Committee. He added that concern applies to both defense and non-defense spending. Just last week, Gen. Glenn Walters, the assistant commandant of the Marine Corps, told members of the Senate Armed Services Committee he was concerned about having only half a year to spend a year’s worth of money and asked for flexibility in moving some fiscal 2018 money in fiscal 2019.

Dennis said “many accounts” will have extra time to “get the money out the door” as long as future appropriations bills do not rescind it. A Republican aide on the committee said much of the money will go toward programs and activities already ongoing, but the panel "is always concerned that agencies may rush to spend given the yearly expiration of certain funds."

Some accounts have a specific lapse date of Sept. 30. Agencies generally seek to avoid letting funds elapse, as it makes it more difficult to justify future requests for increases. They can ask Congress for rollover authority, but typically only a fraction of what actually remained is awarded.

“The system [provides] incentives to spend every little bit they have lest they lose it” in future years, Shea said.

Alice Rivlin, OMB director in the Clinton administration, said agencies are likely already working on how they will spend the money.

Shea agreed that “prudent” agencies have seen the “writing on the wall” and begun planning.

“In general,” Rivlin said, “I suspect the agencies will be scrambling to get the money obligated as fast as possible.”

David Reich, a senior fellow at the Center on Budget and Policy Priorities who spent 17 years as a staffer in the House Appropriations Committee, said there was reason for optimism in expecting agencies to spend their forthcoming budget surges responsibly.

“Of course, this is not the ideal way to do it. It would have been far better to have this deal made last year,” Reich said. But, he added, “Good use can still be made of these funds, as late as they are.”

For formula grants, he noted, the process is pretty straightforward and amounts can be plussed up or new grants can be awarded to states, school districts and other municipalities. Agencies can simply move further down the list in awarding research grants.

“This is not good,” Reich said. “It would have been better if grantees had more time to plan, but I imagine it is surmountable.”