OMB Asks Federal Agencies for 5 Percent Budget Cuts in FY 2012

On June 8, Peter Orszag, Director of the Office of Management and Budget (OMB), issued a memorandum directing the heads of executive departments and agencies to identify FY 2012 spending cuts in low-impact programs to reduce each agency’s discretionary budget by 5 percent. The guidance instructs agencies to target low-priority programs, and not to use across-the-board cuts, to reach the 5 percent reduction. OMB sent out similar guidance last year.

In another move to address the deficit, the Administration will propose legislation that would allow agencies to have greater transfer authority for administrative savings, by allowing agencies to use half of the savings for high-priority programs and the other half for deficit reduction. The Department of Defense currently has similar authority. The Administration’s proposal would likely limit total transfers by an agency to no more than 5 percent of its total appropriation.

Last month, the President sent a proposal to Congress asking it to grant him, and future presidents, a modified version of the line-item veto. The proposal would give him 45 days to review legislation and to send a list of spending items he views unnecessary back to the Hill. Congress would then have 25 days to approve or reject the list, without amendment. Congress has not shown much support for the proposal.