FEDERAL AGENCIES:

Another stopgap funding bill threatens to derail programs

Speaking to federal employees this week, Sen. Ben Cardin delivered his usual denunciation of across-the-board sequestration budget cuts. They're inefficient, he said, and dangerous to agency missions. They should have never gone into effect. He vowed to fight them.

But the Maryland Democrat briefly strayed from the topic at hand to address sequestration's more established, yet overshadowed, fiscal twin: the continuing resolution, or CR.

Congress, he said, must stop resorting to such stopgap funding measures and get back to "regular order" -- that is, passing spending bills by the beginning of the fiscal year -- even if that means harsh cuts to the bottom line.

"You may not like it, you may not get everything you need, but you've got a budget," Cardin told senior managers at Nuclear Regulatory Commission headquarters.

He'd have more luck ending sequestration. For the last 30 years, Congress has delivered on-time spending bills only three times. A CR is now business as usual, with agencies forced to treat their programs as ad hoc ventures rather than long-term investments.

The focus on CRs -- and their damaging effects -- is often lost amid sequestration rhetoric. But the two are intertwined, creating financial uncertainty for agencies, which now can't plan more than a few months in advance. And while sequestration may end, CRs may prove a habit much harder to break.

They also threaten specific federal programs. Budgeting by CR may harm initiatives to increase energy efficiency for low-income homeowners, to electronically track hazardous waste, to acquire federal lands and even to prevent and respond to wildfires. And they have left in the lurch state agencies that rely on federal grants to support numerous environmental and energy programs.

Philip Joyce, a professor of management and finance at the University of Maryland, told lawmakers earlier this year that "government by continuing resolution" has caused, among other things, hiring freezes, morale problems, increased contracting costs, deferred maintenance and wasted time. Ineffective programs continue, and new problems are left to linger, said Joyce, who wrote a report on the topic for the IBM Center for the Business of Government.

"Budgeting is about planning for the future," he told the Senate Homeland Security and Governmental Affairs Committee. "Any organization -- whether it is the federal government, a state or local government, or a business -- needs to have some notion of the funds that it will have available in order to effectively budget, and manage."

The Government Accountability Office agrees. In a 2009 study, analysts looked at six agencies to see how they handled CRs. They found that officials had delayed hiring for everything from grant oversight to financial management.

Managing operations under a CR also results in potentially hundreds of hours of lost productivity. In many cases, agencies are forced to enter into contracts for only as long as a CR lasts. So if a CR lasts 30 days, employees spend the time to award a 30-day contract -- and then do it all over again for the next CR.

This year, they did that twice. Last year, it was five times. The year before that, it was seven.

Fiscal 2014 doesn't look any more promising, with both Republicans and Democrats admitting that a CR is the most likely outcome to the current appropriations battle. When Congress reconvenes in September, the House will be in session for only nine days before the end of the fiscal year; a CR appears to be the only attainable goal.

In a recent interview, Michelle Sager, GAO's director of strategic issues, pointed out the positive -- namely, that CRs prevent government shutdowns.

Budget officials, she said, also have a lot of practice in dealing with short-term budgets.

"Agencies have become accustomed to managing those uncertainties," she said. "For better or worse, it is something they have had to deal with for a long time."

But no matter how well agencies handle CRs, they can't prevent the inefficiency of such short-term budgeting. Every year, CRs delay new programs and waste money on old ones.

'The cupboard is bare'

Supporters of the Department of Energy's Weatherization Assistance Program worry that another CR could spell doom for the long-standing scheme to help low-income homeowners become more energy-efficient. The program has been a perennial point of concern over the last few budget cycles because its funding was cut to about a third of its typical levels in fiscal 2012, a few years after receiving a $5 billion infusion from the 2009 stimulus law.

The program received about $68 million under the current CR -- compared to pre-stimulus levels typically above $200 million per year. DOE managed to reprogram about $70 million within its Energy Efficiency and Renewable Energy account this year to sustain the weatherization program.

But department officials have told outside supporters that they would not be able to find additional EERE money next year, said Brad Penney, general counsel for the National Association for State Community Services Programs, a nonprofit that works with state weatherization programs that rely on the DOE grants.

"We've been told that [reprogramming] is not an option for FY 14. ... The cupboard is bare," Penney said in a recent interview.

Instead, Penney is hoping the administration can convince lawmakers to treat weatherization as a "budget anomaly" and increase its spending levels by cutting from other energy and water programs within a CR.

Another potential victim of the CR carousel is a U.S. EPA initiative to develop an electronic system to track hazardous waste, meant to replace the burdensome and expensive paper reporting system.

Supporters say the electronic manifest system could potentially result in net savings of $75 million for states and users and would be sustained through user fees -- but only if an estimated $15 million upfront investment can go through. Congress unanimously approved the program in 2012 and gave EPA three years to set it up, but has not provided dedicated funding in any CRs (E&ENews PM, Oct. 5, 2012).

Last year, EPA was able to shift some funding for the first year of the system, but David Case of the Environmental Technology Council said most of that money went to stakeholder meetings and issuance of requests for information from vendors that could set up the program.

"They want to do things through a government contract, and ultimately, this will be paid for with user fees," said Case, who has advocated for the e-manifest system. "But initially, we need a federal appropriation for EPA to retain a contractor until the user fees are collected. And I don't know that they'll have the money to begin the contracting process."

Currently, EPA collects carbon-copy paper manifests to track hazardous waste -- everything from dry cleaning chemicals to used motor fuel -- in a system that businesses and states say is too cumbersome and can cost as much as $200 million a year. Steven Brown, executive director of the Environmental Council of States, said making the entire system electronic would not only save money, but make it "more friendly to get permits and more friendly to those of us who need to see them."

"But a CR means no new funds, unless [Congress] moves around money or allows EPA to move money from one part of the budget to another," Brown said. "If there's no funding, we're stymied and then we're forced to keep doing things the old way. It's not something the states want, the White House wants or anybody wants."

'Pretty disastrous'

Budget standoffs also have significantly hampered the Obama administration's public lands initiatives, curtailing everything from the acquisition of new federal lands to the prevention of and response to wildfires.

A perfect example is the Land and Water Conservation Fund, the government's main vehicle for acquiring new lands and securing conservation easements on private lands, said Alan Rowsome, senior director of government relations for lands at the Wilderness Society.

While funding for LWCF increased marginally during the administration's first term, short-term CRs have prevented the Interior Department and Forest Service from pursuing new or long-term acquisition projects, Rowsome said.

When a six-month CR was passed last March to fund the government through the end of fiscal 2013, agency officials were forced to go on a LWCF spending spree, purchasing much of its real estate in half the time, Rowsome said.

Such spending leads to inefficiencies and provides a disincentive for landowners to do business with the government, Rowsome said. Landowners could more easily sell their lands to a developer, he said.

"Your realty people are sitting on their hands, telling landowners, 'We're working on it,'" Rowsome said.

The perpetual worry is obligating money the agencies can't legally spend, Rowsome said.

GAO's Sanger said that concern was a common thread among the agencies GAO studied. The appropriations process is unpredictable. Some years, a few agencies get full-year budgets, while others are left with a CR. CRs can last an entire year, or a single month. They can continue the prior year's funding, or they can include so-called anomalies that provide specific agencies and programs with more funds.

Agency officials are left to guess their final bottom line.

That can be especially hard for funding for wildfire suppression, which has failed to keep pace with the rising costs of quelling blazes as the West copes with longer, hotter and drier summers and the Forest Service lacks the funds to remove hazardous trees.

While past CRs have included supplementary wildfire funding, that money often comes too late to prevent major disruptions in Forest Service restoration programs.

As a result, the Forest Service several times over the past decade has siphoned money from its forest stewardship programs, a cycle that repeated itself last week (E&ENews PM, Aug. 21).

"The Forest Service cannot change course from what is a pretty disastrous and ineffective fire management funding regime," Rowsome said.

Lawmakers of both parties support more money to clear dense, fire-prone underbrush, in addition to contingency funding to prevent future "fire borrowing." But continuing resolutions make it all but impossible to address those needs.

States hurt

For state agencies that rely on EPA grants and revolving funds to help support their clean air, water and hazardous waste programs, the uncertain schedule that accompanies short-term funding resolutions is magnified. It has led to staff cuts, program cancellations, limited inspections and the looming threat of more cuts on the horizon.

For states, not knowing how much -- if any -- federal money will be there for the next fiscal year has made it difficult to craft an annual budget. Bruce Andersen, director of the department of air quality in Wyandotte County, Kan., said the unpredictable CRs and the budget cuts have left him unable to plan ahead of time and fill vacant staff positions.

"It's really difficult to run an agency when there's a certain amount of required action," Andersen said. "In the good old days, you'd have the budget and know what you were getting in the fiscal year. But not anymore."

Andersen, whose agency covers Kansas City, said his staff totaled 10 people just five years ago, but is now down to six. He estimated that $224,000 comes from the federal level to his local agency (passing through a state-level department), much of which goes to staffing. So when money comes in as late as the last quarter of the fiscal year, it's tough to spend it in such a short time.

"You just can't respond quickly," said Andersen, a co-chairman of the funding committee at the National Association of Clean Air Agencies. "You don't want to bring somebody in and have to let them go in a year because there's not funding. A lot of training goes into bringing people up to speed."

Steven Brown, executive director of the Environmental Council of the States, said his members have even threatened to turn back federal money for certain programs, since they can't sustain funding based on a short-term measure. That forces EPA to step in for a mandatory program, but usually at a higher cost.

"If this is one or two states or one or two programs, it's probably not a big deal," Brown said. "But this could snowball. EPA's costs are higher ... and the money they take back may not be enough to run a program."

Worse, Brown said, was the difficult situation states faced with multiple funding bills in previous fiscal years. It can take months for EPA money to trickle down to the state level, or even for the government to approve state budgets and tell them how much they'll get. When a bill passes in March -- like it did last year -- that leaves states trying to spend half their budget in a few short months.

"It looks like we have unspent funds, but the reason the funds are unspent is because we just got the money," Brown said.

But that was used as a justification for the House Appropriations Committee to recommend cutting the state revolving funds for drinking water and clean water infrastructure. In the House fiscal 2014 bill, the SRFs faced a 69 percent cut compared to President Obama's proposed budget, which was already $472 million shy of fiscal 2013 approved levels.

And that also means expensive projects that will require significant, long-term funding may not be used early on, with states instead waiting until their funding is approved and guaranteed. That, said Natural Resources Defense Council Legislative director Scott Slesinger, could lead to greater budget troubles down the road.

"EPA, [the National Oceanic and Atmospheric Administration] and these environmental agencies are able to deal with their budgets in a short-term way that masks the problem and significantly exacerbates the medium- to long-term problem," he said. "If you think of it like infrastructure, here's a point where it takes a few bucks to patch a hole in the road, but if you wait long enough, you have to replace the whole thing."

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