Agencies, cut your budgets!

On August 19, AP reported that “White House budget chief Jacob Lew has ordered agency heads to submit spending plans for the upcoming budget at least 5 percent below this year’s levels. He also wants them to propose ways to trim a total of at least 10 percent of their spending.” And, “Lew’s letter suggests that savings can be found by eliminating unneeded programs and making agencies more efficient. It also invites agency heads to propose initiatives that would spark economic growth.” To read the story, click here .

Lew is probably right that to “trim” next year’s budget by 5 percent, an Agency will have to eliminate some programs. But are they “unneeded” programs? If they are unneeded, then why do they exist to begin with. Perhaps a better choice of words would have called them “lower prioritized” programs.

While immediate savings are desirable, I wish OMB and the federal Agencies would start thinking about long range plans to reduce administration costs not by eliminating programs but by reconfiguring business processes and retooling supporting infrastructure so that they eventually deliver even better services at lower costs. This is not something that can be done in a year or two, but I am quite certain that in many cases it is doable over a period of perhaps five to ten years. After studying the Social Security Administration, I became convinced that it was doable there by 2020.

Let’s see how SSA deals with reduced funding. SSA’s FY2012 budget will be approximately a billion dollars less than the President’s request. How will SSA deal with the shortfall? It will reduce working hours, thereby reducing overtime pay; see http://money.usnews.com/money/retirement/articles/2011/07/29/social-securitys-money-saving-strategies . This means that some services will be cut. Which ones? The public will have half an hour less a day to visit SSA field offices. While this indeed solves the problem of reducing costs, it does nothing to enhance the efficiency of SSA service delivery. Perhaps the shorter open-to-the-public day will get more people to interact with SSA online, but there is no analysis that shows that overall, this will increase efficiency. What is certain is that services to some people will be delayed.

SSA, as indeed, all federal Agencies, has to not only accommodate immediate needs but also start planning for the long term. Ideally, such long term planning is done when money is not so tight. But we are now where we are, and delaying long-term planning to when money is not so tight is a poor option. That’s because the longer we delay such planning and eventually executing on such plans, the more we get entrenched (and entrapped) in legacy environments that are becoming increasingly complex and costly. That is, the longer we postpone making meaningful changes, the more expensive making such changes will become in the future.

Read about my views regarding long-range vision and strategy in my paper Social Security 2020: Vision and Strategy .

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