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What does it mean when Congress tells an agency that it has
"...directed a reduction in payroll costs"?
 | It means that the agency better pay attention and get its PC&B computations and
analyses in order, or it will cease to exist. The HUD-DOT-Independent agencies
appropriations bill report language for EPA's EPM account, as passed by the House states,
among other things, that "... the Committee has reduced the funding available for
contracts and grants by $40,183,000, and has directed a reduction in payroll costs of
$35,000,000." (Emphasis added.) This is a large cut. Analysts
need to look at the consequences right away, and do a fast analysis. The fast
analysis follows. The reasons why this may have happened (and why payroll or
PC&B computations are important) is given at the end. (Click to
go to the reason right away.)
 | The FY 2000 budget request estimated that payroll would be $1,001 million in FY 1999.
Cutting this amount by $35 million is a 3.5% cut which, given the Federal personnel
system's ingrained upward biases in the payroll costs, would mean more than a 3.5% cut in
staffing. (The increased costs come about from the annualization of the 1998 pay
raise, and within grade increases and promotions.) |
| The problem is compounded by the recently revealed pay raise of about 4.8% starting in
January, or about 3.6% for the fiscal year. It would take a budget increase of $36
million to provide for this pay raise if nothing is to be cut. But there is no
increase in the budget for the pay raise, and appropriations is not providing anything for
the pay raise. |
| The cut in funds and the increase in costs dictated by the upcoming pay raise are the
same as a cut of 7.1% in the payroll, a serious problem for the agency. In dollar
terms, it is the same as a $71 million cut for the EPM account's payroll. |
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| The problem in this case is compounded by the fact that the appropriations report states
that there will be a cut, which implies that there is a limit set for the total payroll
amount for this account, so the agency would be prevented from transferring funds from
contracts and grants and other expense categories to make up for the reduction in payroll
funding. |
Why is EPA in this predicament?
| Probably because it is not very good at making payroll computations, which leaves the
appropriations committees with questions as to what may be going on:
| The FY 1999 budget request indicated that the payroll would be $878 million for FY 1999.
The FY 2000 request indicated that the payroll would be $1,001 million for FY 1999. |
| This is an increased change in the estimates, for the same staffing levels, of over $100
million, or over 11%, in a year. Congress did not grant the increases requested in
the FY 1999 budget. Furthermore, even if the increases had been granted the request
should have reflected the actual payroll cost of the requested budget, so it should have
been stated as over $1 billion. Nor where there unforeseeable payroll cost
increases. All relevant facts were within management's grasp. |
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| A logical question to ask is where did the over $100 million increase (or over 11%) come
from? Didn't this agency know its payroll costs? Did management have a grasp
of the facts? Evidently, the House Appropriations Committee does not think so. |
| Lesson for the analyst? Know you PC&B numbers, and know them well. In
addition to knowing them, make sure that your legislative body is given your accurate
numbers. Not knowing them and not communicating them will result in severe
repercussions. Appropriations has one basic way to send a message: It cuts
your budget. |
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