Regulatory Focus™ > News Articles > OMB to Federal Agencies: Begin Planning for Massive Budget Cuts

OMB to Federal Agencies: Begin Planning for Massive Budget Cuts

Posted 02 August 2012 | By Alexander Gaffney, RAC 

The White House Office of Management and Budget (OMB) wants federal agencies, including the US Food and Drug Administration (FDA), to remember that on 1 January 2013, all agencies may lose nearly a tenth of their appropriated budget unless Congress acts to override a budget trigger passed into law in 2011.

The 2011 action, known as the Budget Control Act (BCA) of 2011, instituted a trigger procedure known as budget sequestration. Under the procedure, if Congress is unable to come up with $1.2 trillion in cuts over the next decade, the sequestration would immediately become law and make draconian cuts of its own.

FDA stands to lose 7.8% of its appropriated budget, which amounts to $195 million based on its 2012 appropriated budget of $2.5 billion, of which industry-paid user fees are not a part.

One of the biggest questions surrounding the cuts is how they would be applied to each agency, notes Steven Grossman of the advocacy group Alliance for a Stronger FDA. "For example, if sequestration were to apply at the Cabinet level, the Secretary of HHS would see the 7% to 10% cut taken against HHS programs and be able to prioritize funds among them.  She might choose to preserve FDA's funding level, while cutting another program by a greater amount than the average cut."

More likely, writes Grossman in his 27 July post, is a cut at the center level, with each center being forced to prioritize its funding and make cuts accordingly.

OMB Plans Meetings on Budget Cuts

These issues will start coming to light shortly, writes OMB in a letter sent to all federal agencies on 2 August announcing planned meetings between it and other federal agencies. "In the near term, OMB will consult with you on such topics as the application to your agency's accounts and programs of the exemptions from sequestration … and the applicable sequestration rules specified in [The BCA]."

Though OMB said it hopes Congress will act to avert the planned cuts under the BCA, it said it will, "Undertake additional activities related to the implementation of the BCA," including working with agencies on how to make cuts under the law. The cuts will only be able to be calculated once the fiscal year 2013 budget is enacted, OMB explained.

"In the meantime, agencies should continue normal spending and operations since more than 5 months remain for Congress to act."

What remains to be seen is whether Congress will.


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