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March 24, 2004

Mr. Chairman, Representative Olver, Members of the Subcommittee, I am pleased to be here this morning to discuss the President’s FY 2005 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 2005 Budget. That Budget reflects his top priorities: winning the war on terror, protecting the homeland, and strengthening the economy.

The President is committed to spending what is necessary to provide for our security – and restraining spending elsewhere. Since September 11, 2001, more than three-quarters of the increase in the Federal Government’s discretionary spending has been directly related to our response to the attacks, enhanced homeland security, and the War on Terror. The President’s 2005 Budget continues this spending trend: significant increases in essential funding for our security programs, combined with a dramatic reduction in the growth of discretionary spending unrelated to security.

The President’s Budget is built on the sensible premise that Government spending should grow no faster than the average increase in American family incomes, which is approximately four percent. This Budget proposes to hold the growth in total discretionary spending to 3.9 percent and to reduce the growth in non-defense, non-homeland security spending to one-half of one percent, below the rate of inflation.

The President’s Budget builds on the pro-growth economic policies that have laid the foundation for the economic recovery now underway, and for sustained economic growth and job creation in the years ahead. With continuation of the President’s economic growth policies and sound spending restraint as reflected in the Budget, our projections show the deficit will be cut by more than half over the next five years.

The spending restraint reflected in this Budget is not automatic. So we are also proposing new statutory budget enforcement mechanisms, establishing limits in law on both discretionary and mandatory spending, and requiring that any increases in spending be paid for by spending offsets.


Finally, the President is keeping his Administration focused on what the American people care about – results. The measure of government’s success is not how much we spend, but rather how much we accomplish.

Measuring Performance and Delivering Results

Whatever we agree to spend, we want to make sure that our investments get the results the American people expect. Our budget includes program assessments designed to ascertain whether programs are working and, if not, how to fix them. The program assessments in this year’s budget are based on the rating tool we introduced last year – the Program Assessment Rating Tool, or PART. The PART suggests to us what we need to do to improve program performance and achieve greater results.

The President’s FY 2005 Budget includes PART assessments of 40 percent of the government's programs. We will soon complete more assessments so that by the end of this fiscal year, we will have evaluated the performance of 60 percent of the government's programs. Within the next three years, we plan to have assessed the programs that account for almost all of the Federal Budget. These assessments do not drive funding recommendations automatically up or down, but they do give more information about performance with which to make more informed budget and management policy decisions.

The PART assessments are discussed in detail in the Analytical Perspectives volume of the Budget. We believe the PART is an important step in changing the way Federal managers think about their responsibilities. In addition, it is our hope that the PART will provide meaningful information to this Committee and others in Congress to help inform funding decisions and identify and correct flaws that undermine the effectiveness of programs.

Another way we are working to get more value for the taxpayer is through the President’s Competitive Sourcing Initiative. Before this initiative was launched, too few agencies regularly assessed the efficiency of the commercial activities they performed. Today, more and more agencies are using the basic principle of competition to help reduce costs, improve customer satisfaction, and generate results for the taxpayers.

Three years after launching the initiative, most agencies have established and refined the processes necessary to conduct public-private competitions in a transparent and fair manner. Employees are encouraged to think creatively in developing the most efficient organization possible to perform commercial work. By comparing the improved in-house organization to private sector solutions, managers can determine which sector – public or private – can provide the greatest results at the best value to the taxpayer. It is a testament to the quality of our Federal workforce that in-house employee groups win such competitions a majority of the time. Regardless of who wins the competitions, agencies are able to reduce costs and increase results when performing commercial activities. Demonstrating such results not only conserves precious tax dollars, but it also instills in citizens greater confidence in the effectiveness of their government.


We appreciate that the Subcommittee has focused on this important initiative. Last year, we worked with you to craft a provision to document the costs of and savings from competitive sourcing studies conducted by Federal agencies. This report – due to be published on or before May 24th – will provide facts about competitive sourcing that may be used to inform the debate and maximize the potential of public-private competition. We look forward to continuing to work with you on this issue.

OMB’s Budget

The FY 2005 Budget includes a request of $76.6 million for the Office of Management and Budget (OMB), a 2.1 percent increase above FY 2004, which is devoted solely to maintaining our current workforce. I want the Committee to know that I reviewed this request before submitting it with particular care, to assure myself that a 2.1 percent increase was warranted in light of the more modest 0.5 percent increase requested for non-security related discretionary spending overall. Because OMB’s budget has remained nearly flat in real terms during this Administration, even as OMB’s responsibilities have continued to expand, I believe this request is both justified and appropriate.

OMB’s responsibilities have continued an expansion that has been underway for more than two decades, beginning with regulatory review and more recently including the area of electronic government. During the first three years of the Bush Administration, we have demanded more from OMB: we’ve launched the President’s Management Agenda; reinvigorated regulatory analysis; and established an Information Technology office.

Despite continued growth in the scope of OMB’s responsibilities, OMB’s authorized workforce has shrunk from its peak of 715 positions in the late 1970s, to 527 positions in fiscal year 2001, to 510 positions proposed in this budget. OMB's FY 2005 budget includes no new funding initiatives, but the 2.1 percent requested increase will permit OMB to continue current operations and meet current challenges.

OMB is committed to producing the best work in support of both Executive and Legislative branch decision makers. OMB's FY 2005 request reflects our desire to continue supporting both branches effectively, while maintaining budgetary restraint.

Executive Office of the President Appropriation

The Executive Office of the President (EOP) includes a number of organizations dedicated to serving the President. As part of the 2005 Budget, the Administration requests a three-part financial restructuring initiative, which would:

  • consolidate the annual appropriations for the White House Office (WHO), Office of Policy Development (OPD), Executive Residence, White House Repair and Restoration, Office of Administration (OA), National Security Council (NSC), and the Council of Economic Advisers (CEA) into a single appropriation called “The White House;”

  • provide a 10-percent transfer authority among the following eight accounts: The White House (consolidated account), Special Assistant to the President and Official Residence of the Vice President, Office of Management and Budget, United States Trade Representative, Office of National Drug Control Policy, Council on Environmental Quality, and the Office of Science and Technology Policy; and,

  • centralize the telecommunications infrastructure costs for the Executive Office of the President into the Office of Administration program.

I understand that Tim Campen, Director of the Office of Administration, is testifying before you next week and will address these efforts in detail at that time.

Linking Pay and Performance – the Human Capital Performance Fund

The government's most important assets are its 3.2 million employees and service members. Our Federal pay policy should focus on developing that workforce, effectively and responsibly recruiting, retaining, and motivating the quality people we need to accomplish the government’s varied missions. We do not have a government-wide problem with recruiting and retaining individuals to serve in the Federal workforce. However, there may be particular skills or localities where recruitment and/or retention are a problem. The President’s Budget recommends that the Congress adopt a pay policy flexible enough to address these circumstances.

Under the President’s proposal, Federal civilian employees would receive approximately 2 percent in additional pay, composed of: an across-the-board pay raise of 1.5 percent in 2005; an additional 0.2 percent spread across the government that managers can use to reward performance or address particular recruitment or retention needs they may have; and, $300 million for the Human Capital Performance fund. The Human Capital Performance Fund will allow managers to increase pay beyond annual raises for top employees and address other critical personnel needs. The Fund is designed to spur the move to performance-based pay by rewarding high-performing employees and those with badly needed skills, instead of supporting the current practice of evenly spreading pay raises across the Federal workforce without real regard to performance or contribution.

The Administration believes the components of this pay policy are crucial for the effective and responsible recruitment, retention and motivation of quality people we need to accomplish our mission. We urge the Congress to support this approach.

Electronic Government (E-Gov)

A key component of the President’s Management Agenda is the Electronic Government (E-Gov) Initiative, which is designed to bring more services to the American citizen over the Internet, make government more efficient, and improve IT management throughout the Executive Branch. I would like to highlight a program under the purview of this subcommittee – “The E-Gov Fund” – which supports projects that make Federal information and services more readily available to members of the public, the business community, and State and local governments, as well as between Federal agencies.

The President’s Budget requests $45 million for the E-Gov Fund so that we can continue and expand upon the successes we have already achieved in this effort. Over the last year, the Federal government made significant progress toward becoming a transformed and more productive “E-Government” to better serve citizens. Through the use of the E-Gov Fund we were able to jump start efforts to make it easier for citizens to obtain services from and interact with the Federal government, to improve government efficiency and effectiveness, and to increase the government’s responsiveness to citizens.

Even with limited funding, this Initiative is achieving noteworthy successes, including the following: GovBenefits is providing online access to 419 citizen-focused Federal benefit programs and 48 state level benefit programs; E-Payroll is migrating 22 payroll providers down to four; USA Services is presenting a single face of government for citizens by providing timely, accurate and consistent responses about government information and services via email, phone, fax, letter and the web; and, is making available online more than $360 billion in annual grants from 26 Federal agencies for which grantees can apply. A full report of the use of the $5 million you provided in FY 2003 is available in the March 8, 2004, Report to Congress on Implementation of The E-Government Act at


Since President Bush took office, our Nation has confronted a cascading set of challenges. The President and Congress responded on all fronts, with tax relief to get the economy going, the largest reorganization of the Federal Government in 50 years to help secure the Nation by creating a new Department of Homeland Security, and the largest increases in the defense budget since the Reagan Administration, to wage and win the War on Terror. The President’s 2005 Budget builds on this record of accomplishment. With renewed economic growth and the Congress’ cooperation in restraining spending and focusing it on our most critical priorities, we can accomplish the great goals the President has set for the country, while dramatically improving our budget situation.

I look forward to working with the Committee on the OMB Budget and the overall FY 2005 Budget.