Federal agencies can avoid furloughs and most budget cuts during a short-term sequester if Congress fails to stop the across-the-board spending cuts before they go into effect Jan. 2, 2013, according to a government watchdog group.

In a report released Friday, OMB Watch concludes that Congress' inaction won't necessarily result in deep cuts -- at least at first. That's a different story than the one told by congressional leaders, who say Congress must act before the sequestration goes into effect to avoid devastating cuts to both defense and nondefense programs.

But Republicans and Democrats are far apart on how to avoid the sequester, which will be triggered Jan. 2 thanks to the August 2011 debt ceiling deal. And at least one lawmaker has suggested that Congress punt the fix until after the lame-duck session and retroactively stop the across-the-board cuts in the new year (Greenwire, Oct. 15).

That scenario does not necessarily spell immediate disaster for federal agencies, according to Patrick Lester, director of federal fiscal policy at OMB Watch. In the 14-page report, he lays out the White House's "substantial power to mitigate sequestration" through such administrative tools as apportionment and reprogramming.

"[I]f sequestration is triggered, if the administration chooses to take action to lessen its impacts, and if it lasts just a few weeks and is retroactively canceled, then there would be minimal or no damage to most affected federal defense and non-defense programs," he wrote.

Agencies can avoid furloughs, for example, by using the powers Congress granted them in this year's continuing resolution. The legislation -- which funds the government through March 27 -- specifically allows agencies to apportion compensation and benefits to avoid furloughing employees.

In other words, they can front-load their personnel budgets, using more in the first weeks of the calendar year to keep employees working full time. But first, they must take "all necessary actions" to defer or reduce nonessential administrative costs, according to the continuing resolution.

Lester also writes that existing contracts and grants would be protected. That is because most were fully funded from past years' budgets. Sequestration would affect only new budget authority in fiscal 2013. New contracts and grants, however, could at least be delayed in the event of a short-term sequester.

Other tools at agencies' disposal include unobligated balances from previous years, which can provide a fiscal cushion, and funding transfers between programs, which have to be approved by Congress.

But it's all just a short-term fix to buy time.

"If triggered, the worst effects of sequestration may be avoided temporarily -- long enough for Congress to consider alternatives -- but they can only be postponed for a while," Lester wrote.