IEC Legislative Brief: Potential Impacts of the Sequester on IEC Members

On March 1, 2013, federal agencies will see an across-the-board automatic spending reduction take effect. The initial cut of $85 billion will occur immediately and apply equally to defense and non-defense spending, with cuts totaling $1.2 trillion over a 10 year period. However, many large mandatory programs (such as Social Security, Medicaid, veterans benefits, and low-income services) are exempt from the cuts. As a result of these cuts, federal agencies may be forced to reprioritize, down-size projects and staff, and even terminate programs.

What is the Sequester?

In an effort to address unsustainable federal spending, the Budget Control Act of 2011was enacted to establish statutory limits on discretionary spending and an automatic process of spending reductions if Congress and the President did not approve deficit reduction legislation before the cuts kicked in on January 2, 2013.

When it was conceived in 2011, the sequester was intended as a last resort. The idea of mandatory and indiscriminate federal spending cuts across all agencies was meant to be intolerable to both Democrats and Republicans, and force Congress to prioritize agency expenditures and develop a package of acceptable reductions. If Congress was unable to pass legislation by the deadline, then $1.2 trillion in automatic cuts across the federal government over ten years would be triggered.

A day before the sequester was set to kick in, Congress passed the American Taxpayer Relief Act(ATRA) of 2012. Although the ATRA managed to address one half of the fiscal cliff – the tax portion – the bill did not contain a solution for federal spending, only postponing the scheduled cuts under the Budget Control Act until March 1, 2013.

Since the start of the 113th Congress in January, legislators and the White House have been unable to strike a deal, and agencies are preparing internally for cuts to begin this Friday. Although a spending agreement may yet be reached in the days or weeks following the sequester, agencies will be forced to make budget decisions immediately.

Impact of Sequestration on Federal Agencies and Programs

A September 2012 Office of Management and Budget (OMB) report to Congress on the impact of the sequester provides preliminary estimates and classifications of the potential impact on each federal agency. The agencies, which have already been drafting their sequestration plans based on OMB’s projections, will begin operating at reduced funding levels. The precise percentages of cuts to specific programs within each department are yet unknown. However, the most likely consequence of the sequester will be agency staff furloughs – which could mean either full or partial reduction in employee hours. OMB projects the number of staff impacted to total in the “hundreds of thousands.”

Safety and Labor

A White House fact sheet released on February 8, 2013, describes the possible effects of a sequester on the enforcement activities of the Occupational Health and Safety Administration (OSHA). The White House had initially predicted that the agency could see furloughs to its inspector cadre, which would have resulted in fewer inspections. However, OSHA Secretary David Michaels recently confirmed that the agency had been granted additional flexibility by OMB and was able to “reprogram” funds. This will allow OSHA to “identify sufficient reductions -- while still being able to support our priorities and mission -- to take the required budget reductions without furloughing OSHA staff.” Cuts will instead take place in administrative areas, such as bonuses, purchases, travel, and a moratorium on new hires.

At a recent Labor Safety Roundtable hosted by the Small Business Administration’s Office of Advocacy, Deputy Assistant Secretary Jordan Barab predicted that cuts to the agency’s voluntary safety and training programs