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DIRECTOR OFFICE OF MANAGEMENT AND BUDGET BEFORE SUBCOMMITTEE ON TRANSPORTATON, TREASURY, POSTAL SERVICE AND GENERAL GOVERNMENT COMMITTEE ON APPROPRIATIONS U.S. HOUSE OF REPRESENTATIVES March 19, 2003 Mr. Chairman, Representative Olver, Members of the Subcommittee, I am pleased to be here this afternoon to discuss the President’s FY 2004 Budget request for the Office of Management and Budget (OMB).Advancing the War on Terrorism and Invigorating the Economy Before I review OMB’s budget request, I would like to briefly outline the President’s top priorities for his FY 2004 Budget. The President plans to prosecute the war on terror relentlessly. There is no more effective way to protect Americans, or, as we now say, to provide “homeland security,” than to root out terror and stop it before it can reach our shores. The President’s Budget provides $380 billion for the war on terror and the continued rebuilding of our national security capabilities. Spending on domestic homeland security is also given top priority, with spending rising at the fastest percentage rate of any major category.The President is also committed to reinvigorating an American economy that has grown for five consecutive quarters, but at a rate that he deems far too slow. To this end the President proposes a major growth and jobs plan, the third of his Presidency. Beyond these objectives, the President urges greater spending on a host of essential activities: veterans’ programs, the education of our disadvantaged and disabled children, and the alleviation of Africa’s AIDS tragedy. The request also seeks increased funding for highway and traffic safety initiatives and provides over 300 additional air traffic controllers and aircraft inspectors to enhance aviation safety. While the deficits in the President’s budget are manageable relative to the size of the economy, we are determined to reduce deficits and work our way back to balance. Discretionary spending soared when we ran budget surpluses. Even with the return to budget deficits, we have continued to increase discretionary spending to meet the new threats posed by the aftermath of September 11th. Relative to this elevated base in spending, the President proposes to hold the rate of growth of the federal government to no faster than the growth of American family income. Measuring Performance and Delivering Results The President is constantly focused on the results government produces. Whether the topic is education, compassion, or homeland security, the measure of success is not how much we spend but how much we achieve. In a results-oriented government, the burden of proof rests on each federal program and its advocates to prove that the program is getting results. The burden does not rest with the taxpayer or the reformers who believe the money could be better spent elsewhere. There can be no proven results without accountability. These ideas are simple, but they do not reflect how things have operated in the federal government. Instead, the Washington mentality has generally assumed that program funding should steadily increase with the only question being “by how much?” This type of thinking has wasted untold billions of dollars and prevented the emergence of results-oriented government. This budget makes an unprecedented effort to assess the effectiveness of specific federal programs. It introduces a new rating tool to hold agencies accountable for accomplishing results. Programs are rated from Effective to Ineffective, and the ratings and specific findings produced will be used to make decisions regarding budgets and policy. The tool assumes that a program that cannot demonstrate positive results is no more entitled to funding, let alone an increase, than a program that is clearly failing. This Program Assessment Rating Tool (PART) is discussed in far greater detail in a new volume in the budget document – the Performance and Management Assessments volume. We readily admit that it is far from perfect. In fact, after using it for the first time, we have identified a number of shortcomings that will need to be addressed. But it is an important next step in changing the way federal managers think about their responsibilities. It places the burden of proving effectiveness squarely on their shoulders. With further improvement and use, it will provide incentives for federal managers to make their programs more effective. It will provide meaningful evidence to this Committee and others to help inform funding decisions, and identify flaws in underlying statutes that undermine the effectiveness of programs.Linking Pay and Performance – the Human Capital Performance Fund I would like to highlight another issue under this subcommittee’s purview that is related to performance – the “Human Capital Performance Fund” -- that is proposed in the FY 2004 Budget. In the federal civil service system, pay is generally unrelated to performance. Rewarding high-performing employees and those with unusually important skills is an essential improvement over the current practice of evenly spreading pay raises across the federal workforce, without real regard to performance or contribution. As a step toward building a performance-oriented pay system, the Administration has proposed to create the “Human Capital Performance Fund” for 2004 to allow managers to increase pay beyond annual raises for top employees and address other critical personnel needs. Reforming the pay structure of the federal government’s senior managers (as the Administration has laid out) is another important step to encourage high performance and foster accountability. In coming months, I would like to work with you to enact the Human Capital Performance Fund and Senior Executive Service pay reform proposals.OMB Budget Since the late 1970s, the federal budget has grown more than five-fold and the Office of Management and Budget (OMB) has assumed a number of new responsibilities, including regulatory review in the early 1980s and more recently in the area of electronic government. Despite this dramatic growth in the scope and span of the federal government and OMB’s responsibilities, OMB has shrunk as an organization from 715 positions to 516 proposed in this budget, nearly a 30% decline. The FY 2004 request for OMB follows two years in which OMB subjected itself to discipline far more severe than that it proposed for virtually any other Department. We did so to make sure that we had searched for all available efficiencies, and taken every step to maximize productivity. During the first two years of the Bush Administration, I have insisted that OMB’s budget be essentially flat. To meet our rising fixed costs, with unchanged resources, we have reduced OMB’s authorized positions from 527 to 510. In fact, our current on-board FTE level is only 491. During this same period, we have demanded more from OMB: we’ve launched the President’s Management Agenda; reinvigorated regulatory analysis; established an Information and Technology office; and, oversaw all aspects of the creation of the Department of Homeland Security – the largest federal reorganization since the creation of the Department of Defense. OMB is the primary – some would say the only – federal agency devoted to saving rather than spending taxpayer dollars. The work of our analysts proves, on a daily basis, a case for spending restraint in programs across the government. When the merits of our work are recognized and enacted, huge multiples of OMB’s budget are saved. Our people’s work on better management of the federal government is also yielding taxpayers handsome returns. As a result of the efforts of the staff at OMB, we have also: updated Social Security regulations to improve program management, saving over $2 billion over ten years; consolidated 22 federal payroll systems into two payroll partnerships, saving the federal government an estimated $1.2 billion over the next decade; strengthened the financial management and fiscal integrity of the Medicaid program by curtailing use of what’s known as the Upper Payment Limit Loophole, saving an estimated $90 billion over ten years; and, reviewed agency’s motor vehicle fleets and reduced vehicle inventories, saving the Federal government over $38 million annually. These are but a few of the many examples of how OMB’s staff yields returns to the American taxpayer. Seventy-five percent of our FY 2004 budget request is devoted to personnel and compensation benefits and we have been disproportionately affected by Congress mandating larger pay raises than proposed by the President. In addition to proposing an essentially flat budget for the past two years, Congress has rescinded additional funding from our budget and denied a request to recapture previously appropriated funds. The result is that I faced a steep wall as we approached the OMB 2004 budget request. If OMB’s budget were held flat again in 2004, I would have no other choice but to reduce our staff by another 39 positions. At this reduced level, OMB could not meet its current responsibilities. In light of constrained funding levels over the past two years, the majority of the increase in the FY 2004 request will permit OMB to continue current operations. The remaining portion of the increase will begin work on the Budget Systems Update and Budget-Performance Integration Initiative ($1,567,000), fund six new FTE ($720,000) for the Office of Information Technology and E-Government, and fund new professional development initiatives for OMB staff ($100,000). The Office of Information Technology and E-Government includes the Federal Enterprise Architecture (FEA) - Program Management Office. The request includes funds to establish six permanent full-time positions to support the work of the office. These positions will support the implementation of the FEA and its long-term support as well as support the integration of the FEA and agency enterprise architectures. OMB will begin a multi-year initiative to update the MAX Budget Systems and to systematically collect and publish integrated budget and performance information. This project will replace current aging technology with new technologies for web-based data collection, an information data warehouse, and advanced analytical reporting tools. It will also enable a common display of outputs and obligations by performance activity that aligns program outputs and outcomes with proposed budget levels, and will systematically track and report on established costs and goals. The FY 2004 OMB budget request includes $1,567,000 for this initiative.Consolidated 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 2004 Budget, the Administration requests a two-part financial restructuring initiative, which would: consolidate the annual appropriations for the White House Office (including the Office of Homeland Security), the Executive Office of the President, Office of Policy Development, Executive Residence, Office of Administration, White House Repair and Restoration, National Security Council, and the Council of Economic Advisers into a single appropriation called “The White House;” and, provide a 10-percent transfer authority among the following accounts: The White House, Special Assistance 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. Transfers from the Special Assistance to the President and the Official Residence of the Vice President account are subject to the approval of the Vice President. This initiative provides enhanced flexibility in allocating resources and staff in support of the President and the Vice President, and permits more rapid response to changing national needs and priorities. Resources requested for the EOP and support of the executive functions of the Vice President in 2004 are $342 million. These resources will support approximately 1,850 personnel, information technology, and other infrastructure needs to serve the President and the Vice President.Electronic Government (E-Gov) I would like to raise an item that is important to the President and is under the purview of this subcommittee – “The E-Gov Fund.” The President is committed to addressing this and has proposed to accelerate efforts to implement electronic government through his Management Agenda and E-Government Strategy. The Expanded Electronic Government Initiative 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. Over the last year, the federal government has made significant progress toward becoming a transformed and more productive “E-Enterprise” to serve citizens. We have overseen 24 citizen-centered, cross-agency E-Government initiatives that have started to make a real improvement in government service. The E-Gov Fund is critical to support these and other high payoff projects that provide citizen services across agency boundaries. For instance, “GovBenefits.gov” provides a single point of access for citizens to locate and determine potential eligibility for over 200 government benefits and services. “Golearn.gov,” which continues to provide new training opportunities for federal workers at a fraction of the cost, and “Regulations.gov,” is estimated to save $94 million by creating a single system that enables the public to comment on federal rules.Conclusion As the Committee reviews OMB’s 2004 budget request, I urge you to recall two years of rigorous restraint at a time of sharply increased work levels. To carry out our budget, management, and regulatory duties for the President and the American people, it is critical that Congress provide the resources to maintain OMB at 510 positions. In addition, I urge you to approve four new initiatives included in our request for six additional positions to expand upon our success on the President’s electronic government initiatives, to update OMB’s IT systems to implement the President’s vision of a results-oriented government, and to provide resources to enhance professional development at OMB. I want to thank you for the opportunity to meet with you today to discuss the OMB budget request. I look forward to working with the Committee. I would be happy to address any questions the Committee may have on the OMB budget or other budgetary issues.Attachment - FTE Chart |
