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April 21, 2005

Mr. Chairman, Senator Murray, Members of the Subcommittee, I am pleased to be here this morning to discuss the President’s FY 2006 Budget request for the Office of Management and Budget (OMB).

Winning the War on Terror, Protecting the Homeland and
Strengthening the Economy

I would like to begin with a brief review of the President’s overall FY 2006 Budget. The 2006 Budget funds efforts to defend the homeland from attack. We are transforming our military and supporting our troops as they fight and win the Global War on Terror. We are helping to spread freedom throughout the world. We are promoting high standards in our schools. The President’s policies in this Budget, especially tax relief, have helped create millions of new jobs, a rebound in business investment, and record homeownership rates. In order to keep our economy strong, and achieve the President’s goal of cutting the deficit in half by 2009, we need to continue the President’s pro-growth policies and exercise even greater spending restraint.

During the first term the President committed to spend what was needed to win the War on Terror and protect the homeland -- and he committed to enforce spending restraint elsewhere. Because of this focus, deficits are below what they otherwise would have been. With continuation of the President’s pro-growth economic policies and responsible spending restraint, we will remain on track to cut the deficit in half by 2009, to a level that is well below the 40-year historical average deficit of 2.3 percent of GDP.

The Administration proposes to tighten spending further this year by limiting the growth in overall discretionary spending, even after significant increases in defense and homeland security, to 2.1 percent—less than the projected rate of inflation. In other words, under the President’s 2006 Budget, overall discretionary spending will see a reduction in real terms. In non-security discretionary accounts, the President proposes to cut spending by nearly 1 percent—the tightest such restraint proposed since the Reagan Administration.

The Budget also proposes more than 150 reductions and eliminations in non-defense discretionary programs, saving about $20 billion in 2006, and an additional set of reforms in mandatory programs, saving about $137 billion over the next 10 years.

Delivering Results

To ensure the Federal Government spends taxpayer dollars most effectively, the Administration continues to implement the President’s Management Agenda (PMA). The PMA helps individual agencies and programs focus on and produce results, and promotes this goal through several key components: strategic management of human capital; competitive sourcing; improved financial performance and reporting standards; electronic government (e-gov) initiatives; and integration of budget policy with performance measures.

OMB has successfully designed and implemented the Program Assessment Rating Tool, or PART, to help agencies measure the success of their programs, focus efforts to improve program performance, and set budgetary policy accordingly.

OMB’s Budget

Consistent with the President’s overall FY 2006 budget proposal, the Office of Management and Budget has submitted a disciplined request. OMB’s total budget request amounts to $75.1 million – the same as was appropriated for the agency in the 2005 Budget process.

To achieve this spending restraint, OMB is pursuing cost savings wherever possible. As in the past, OMB is achieving cost savings largely through reductions in staffing. Last year, OMB was appropriated $1.6 million less than the President’s budgetary request. In addition, OMB – like other agencies – absorbed a pay raise of 3.7 percent. To accommodate lower funding levels, we have reduced OMB staff from 527 positions in fiscal year 2001, to 510 positions in 2004, to the 490 positions anticipated for 2005 and 2006.

With these lower levels of resources and staffing, we believe OMB can continue to deliver high-quality performance and fulfill our many important core responsibilities. Our best known of these responsibilities is the preparation of the President’s annual Budget. In addition, our responsibilities include oversight of budgetary matters, management issues, the Administration’s legislative proposals, regulatory reforms, procurement policies and other important subjects. We assure that all such proposals are consistent with relevant statutes and Presidential objectives. In meeting these responsibilities, OMB is prepared to work within the constraints of a tight budgetary environment.

I look forward to working with the Congress to develop a final budget that is consistent with our goals of spending discipline and focusing on priorities.