It was a bold move for a government entity. In 2005, the commonwealth of Pennsylvania hired a private company to overhaul the archaic way it buys goods and services. It seemed simple enough, but what was innovative — and daring — was a key condition: 30 percent of the contractor’s compensation would come from the savings achieved. No savings, no payment.
Putting such a risk on the contractor paid off handsomely. Among other things, officials combined the buying clout and pricing data of all 89 executive branch agencies and departments to strike better deals. Without cutting a single program or service, Pennsylvania saved more than $140 million, or 21 percent, from its annual $700 million tab for everything from office and cleaning supplies to information technology services and tires. The savings far exceeded projections.
Pennsylvania is not alone. Similar value-based contracts enabled the New York City Board of Education to shave $86 million from its $720 million procurement budget, and state and local agencies are experiencing similar savings. Continue reading “Before Slashing Budgets, Find the Savings”
The Budget Control Act (BCA) of 2011 imposed caps on discretionary programs that will reduce their funding by more than $1 trillion over the ten years from 2012 through 2021, relative to the Congressional Budget Office (CBO) baseline from 2010. It also established a Joint Select Committee on Deficit Reduction to propose legislation reducing deficits by another $1.2 trillion over that period, and established a backup “sequestration” procedure to increase the incentive on the Joint Committee to reach a compromise. Because the Joint Committee failed to achieve its goal, sequestration — a form of automatic cuts that apply largely across the board — is now scheduled to occur starting in January 2013 and to cover the period through 2021.
Part 1 of this report outlines how these across-the-board cuts will work in 2013. Part 2 describes how they will work from 2014 through 2021. As explained below, the process for 2013 is substantially different from that for the ensuing eight years.
Broadly speaking, for 2013 the across-the-board cuts will mean about an 8.4 percent cut in most affected non-defense discretionary programs, a 7.5 percent cut in affected defense programs, an 8.0 percent cut in affected mandatory programs other than Medicare, and a 2.0 percent cut in Medicare provider payments. For 2014 through 2021, the Medicare cut will remain at 2 percent while the percentage cuts in other programs will gradually shrink. These estimates — which are revised from estimates in our December 2, 2011, analysis — take into account new CBO budget projections and the details of the President’s funding requests for 2013.
With one exception, this report is based on estimates from CBO on the dollar cuts from the four program categories outlined above — non-defense discretionary, defense, affected mandatory programs, and Medicare – provided as part of CBO’s March 2012 baseline. The Appendix discusses why we have revised our previous estimates and the ways in which we use or alter CBO’s estimates. Continue reading “How the Across-the-Board Cuts in the Budget Control Act Will Work”