Document Name: Chapter 1 -- Cutting Red Tape Part I
Owner: National Performance Review
Title:Chapter 1 -- Cutting Red Tape Part I
Author: Vice President Albert Gore's National Performance Review
Date:7 September 1993 10:00:00 EST
Content-Type: text/ascii charset=US ASCII
Cutting Red Tape
About 10 years ago, two foresters returned from a hard day in the
field to make plans for the coming week. Searching for a detail
of agency policy, they found themselves overwhelmed by
voluminous editions of policy manuals, reports, and binders
filled with thousands of directives. One forester recalled the
very first Forest Service manual- -small enough to fit into
every ranger's shirt pocket, yet containing everything foresters
needed to know to do their jobs.
"Why is it that when we have a problem," the other forester
asked, "the solution is always to add something--a report, a
system, a policy--but never take something away?"
The first replied: "What if . . . we could just start over?" 1
The federal government does at least one thing well: It
generates red tape. But not one inch of that red tape appears by
accident. In fact, the government creates it all with the best of
intentions. It is time now to put aside our reverence for those
good intentions and examine what they have created--a system that
makes it hard for our civil servants to do what we pay them for,
and frustrates taxpayers who rightfully expect their money's
Because we don't want politicians' families, friends, and
supporters placed in "no-show" jobs, we have more than 100,000
pages of personnel rules and regulations defining in exquisite
detail how to hire, promote, or fire federal employees.2 Because
we don't want employees or private companies profiteering from
federal contracts, we create procurement processes that require
endless signatures and long months to buy almost anything.
Because we don't want agencies using tax dollars for any
unapproved purpose, we dictate precisely how much they can spend
on everything from staff to telephones to travel.
And because we don't want state and local governments using
federal funds for purposes that Congress did not intend, we write
regulations telling them exactly how to run most programs that
receive federal funds. We call for their partnership in dealing
with our country's most urgent domestic problems, yet we do not
treat them as equal partners.
Consider some examples from the daily lives of federal
workers, people for whom red tape means being unable to do their
jobs as well as they can--or as well as we deserve. The district
managers of Oregon's million-acre Ochoco National Forest have 53
separate budgets--one for fence maintenance, one for fence
construction, one for brush burning- -divided into 557 management
codes and 1,769 accounting lines. To transfer money between
accounts, they need approval from headquarters. They estimate the
task of tracking spending in each account consumes at least 30
days of their time every year, days they could spend doing their
real jobs.3 It also sends a message: You are not trusted with
even the simplest responsibilities.
Or consider the federal employees who repair cars and trucks
at naval bases. Each time they need a spare part, they order it
through a central purchasing office--a procedure that can keep
vehicles in the shop for a month. This keeps one-tenth of the
fleet out of commission, so the Navy buys 10 percent more
vehicles than it needs.4 Or how about the new Energy Department
petroleum engineer who requested a specific kind of calculator to
do her job? Three months later, she received an adding machine.
Six months after that, the procurement office got her a
calculator--a tiny, hand-held model that could not perform the
complex calculations her work required. Disgusted, she bought her
Federal managers read the same books and attend the same
conferences as private sector managers. They know what good
management looks like. They just can't put it into
practice--because they face constraints few managers in the
private sector could imagine.
Hamstrung by rules and regulations, federal managers simply
do not have the power to shape their organizations enjoyed by
private sector managers. Their job is to make sure that every
dollar is spent in the budget category and the year for which it
was appropriated, that every promotion is consistent with central
guidelines, and that every piece of equipment is bought through
competitive bidding. In an age of personal computers, they are
asked to write with quill pens.
Never tell people how to do things. Tell them what you want to
achieve, and they will surprise you with their ingenuity.
General George S. Patton
This thicket of rules and regulations has layer upon layer
of additional oversight. Each new procedure necessitates
someone's approval. The result is fewer people doing real work,
more people getting in their way. As management sage Peter
Drucker once said, "So much of what we call management consists
of making it difficult for people to work."6
As Robert Tobias, president of the National Treasury
Employees Union, told participants at the Philadelphia Summit on
Reinventing Government, "The regulations and statutes that bind
federal employees from exercising discretion available in the
private sector all come about as a response to the humiliations,
mistakes, embarrassments of the past." Even though, as Tobias
noted, "those problems are 15, 20, 30 years old," and "the
regulations and the statutes don't change." The need to enforce
the regulations and statutes, in turn, creates needless layers of
The layers begin with "staff" agencies, such as the General
Services Administration (GSA) and the Office of Personnel
Management (OPM). These staff agencies were designed originally
to provide specialized support for "line" agencies, such as the
Interior and Commerce departments, that do government's real
work. But as rules and regulations began to proliferate, support
turned into control. The Office of Management and Budget (OMB)
which serves the President in the budget process, runs more than
50 compliance, clearance, and review processes. Some of this
review is necessary to ensure budget control and consistency of
agency actions--with each other and with the President's
program--but much of it is overkill.
Line agencies then wrap themselves in even more red tape by
creating their own budget offices, personnel offices, and
procurement offices. Largely in response to appropriations
committees, budget offices divide congressional budgets into
increasingly tiny line items. A few years ago, for example, base
managers in one branch of the military had 26 line items for
housing repairs alone.7 Personnel offices tell managers when they
can and cannot promote, reward, or move employees. And
procurement offices force managers to buy through a central
monopoly, precluding agencies from getting what they need, when
they need it.
What the staff agencies don't control, Congress does.
Congressional appropriations often come with hundreds of strings
attached. The Interior Department found that language in its 1992
House, Senate, and conference committee reports included some
2,150 directives, earmarks, instructions, and prohibitions.8 As
the federal budget tightens, lawmakers request increasingly
specific report language to protect activities in their
districts. Indeed, 1993 was a record year for such requests. In
one appropriations bill alone, senators required the U.S. Customs
Service to add new employees to its Honolulu office, prohibited
closing any small or rural post office or U.S. Forest Service
offices; and forbade the U.S. Mint and the Bureau of Engraving
and Printing from even studying the idea of contracting out guard
Even worse, Congress often gives a single agency multiple
missions, some of which are contradictory. The Agency for
International Development has more than 40 different objectives,
disposing of American farm surpluses, building democratic
institutions, and even strengthening the American land grant
college system.9 No wonder it has trouble accomplishing its real
mission--promoting international development.
In Washington, we must work together to untangle the knots
of red tape that prevent government from serving the American
people well. We must give cabinet secretaries, program directors
and line managers much greater authority to pursue their real
As Theodore Roosevelt said: "The best executive is the one
who has the sense to pick good men to do what he wants done, and
self-restraint enough to keep from meddling with them while they
Our path is clear: We must shift from systems that hold
people accountable for process to systems that hold them
accountable for results. We discuss accountability for results in
chapter 3. In this chapter, we focus on six steps necessary to
strip away the red tape that so engulfs our federal employees and
frustrates the American people.
First, we will streamline the budget process, to remove the
manifold restrictions that consume managers' time and literally
force them to waste money.
Second, we will decentralize personnel policy, to give
managers the tools they need to manage effectively--the authority
to hire, promote, reward, and fire.
Third, we will streamline procurement, to reduce the
enormous waste built into the process we use to buy $200 billion
a year in goods and services.
Fourth, we will reorient the inspectors general, to shift
their focus from punishing those who violate rules and
regulations to helping agencies learn to perform better.
Fifth, we will eliminate thousands of other regulations that
hamstring federal employees, to cut the final Lilliputian ropes
on the federal giant.
Finally, we will deregulate state and local governments, to
empower them to spend more time meeting customer
needs--particularly with their 600 federal grant programs--and
less time jumping through bureaucratic hoops.
As we pare down the systems of over-control and
micromanagement in government, we must also pare down the
structures that go with them: the oversized headquarters,
multiple layers of supervisors and auditors, and offices
specializing in the arcane rules of budgeting, personnel,
procurement, and finance. We cannot entirely do without
headquarters, supervisors, auditors, or specialists, but these
structures have grown twice as large as they should be.
Counting all personnel, budget, procurement, accounting,
auditing, and headquarters staff, plus supervisory personnel in
field offices, there are roughly 700,000 federal employees whose
job it is to manage, control, check up on or audit others.10 This
is one third of all federal civilian employees.
Not counting the suffocating impact these management control
structures have on line managers and workers, they consume $35
billion a year in salary and benefits alone.11 If Congress enacts
the management reforms outlined in this report, we will
dramatically cut the cost of these structures. We will reinvest
some of the savings in the new management tools we need,
including performance measurement, quality management, and
training. Overall, these reforms will result in the net
elimination of approximately 252,000 positions. (This will
include the 100,000 position reduction the President has already
set in motion.)
A reduction of 252,000 positions will reduce the civilian,
non-postal work force by almost 12 percent--bringing it below two
million for the first time since the 1966.12
This reduction, targeted at the structures of control and
micromanagement, is designed to improve working conditions for
the average federal employee. We cannot empower employees to give
us their best work unless we eliminate much of the red tape that
now prevents it. We will do everything in the government's power
to ease the transition for workers, whether they choose to stay
with government, retire, or move to the private sector.
Our commitment is this: If an employee whose job is
eliminated cannot retire through our early retirement program,
and does not elect to take a cash incentive to leave government
service, we will help that employee find another job offer,
either with government or in the private sector.
Normal attrition will contribute to the reduction. In
addition, we will introduce legislation to permit all agencies to
offer cash payments to those who leave federal service
voluntarily, whether by retirement or resignation. The Department
of Defense (DOD) and intelligence community already have this
"buy-out" authority; we will ask Congress to extend it to all
agencies. We will also give agencies broad authority to offer
early retirement and to expand their retraining, out-placement
efforts, and other tools as necessary to accomplish the 12%
reduction. Agencies will be able to use these tools as long as
they meet their cost reduction targets.
These options will give federal managers the same tools
commonly used to downsize private businesses. Even with these
investments, the downsizing we propose will save the taxpayer
billions over the next 5 years.
None of this will be easy. Downsizing never is. But the
result will not only be a smaller workforce, it will also be a
more empowered, more inspired, and more productive workforce.
As one federal employee told Vice President Gore at one of
his many town meetings, "If you always do what you've always
done, you'll always get what you always got." We can no longer
afford to get what we've always got.
Step 1: Streamlining The Budget Process
Most people can't get excited about the federal budget
process, with its green-eyeshade analysts, complicated
procedures, byzantine language, and reams of minutiae. Beyond
such elements, however, lies a basic, unalterable reality. For
organizations of all kinds, nothing is more important than the
process of resource allocation: what goal is sought, how much
money they have, what strings are attached to it, and what
hurdles are placedble reality. For organizations of all kinds,
nothing is more important than the process of resource
allocation: what goal is sought, how much money they have, what
strings are attached to it, and what hurdles are placed before
managers who must spend it.
In government, budgeting is never easy. After all, the
budget is the most political of documents. If, as the political
scientist Harold D. Lasswell once said, politics is "who gets
what, when, how," the budget answers that question.13 By crafting
a budget, public officials decide who pays what taxes and who
receives what benefits. The public's largesse to children, the
elderly, the poor, the middle class, and others is shaped by the
budgets that support cities, states, and the federal government.
But if budgeting is inherently messy, such messiness is
costly. Optimally, the budget would be more than the product of
struggles among competing interests. It also would reflect the
thoughtful planning of our public leaders. No one can improve
quality and cut costs without planning to do so.
Unfortunately, the most deliberate planning is often
subordinated to politics, and is perhaps the last thing we do in
constructing a budget. Consider our process. Early in the year,
each agency estimates what it will need to run its programs in
the fiscal year that begins almost 2 years later. This is like
asking someone to figure out not only what they will be doing,
but how much it will cost 3 years later--since that's when the
money will be spent. Bureau and program managers typically
examine the previous year's activity data and project the figures
3 years out, with no word from top political leaders on their
priorities, or even on the total amount that they want to spend.
In other words, planning budgets is like playing "pin the tail on
the donkey." Blindfolded managers are asked to hit an unknown
OMB, acting for the President, then crafts a proposed budget
through back-and forth negotiations with departments and
agencies, still a year before the fiscal year it will govern.
Decisions are struck on dollars--dollars that, to agencies, mean
people, equipment, and everything else they need for their jobs.
OMB's examiners may question agency staff as they develop options
papers, OMB's director considers the options during his
Director's Review meetings, OMB "passes back" recommended funding
levels for the agencies, and final figures are worked out during
a final appeals process.
Early the next year, the President presents a budget
proposal to Congress for the fiscal year beginning the following
October 1. Lawmakers, the media, and interest groups pore over
the document, searching for winners and losers, new spending
proposals, and changes in tax laws. In the ensuing months,
Congress puts its own stamp on the plan. Although House and
Senate budget committees, guide Congress' action, every committee
plays a role.
Authorizing committees debate the merits of existing
programs and the President's proposals for changes within their
subject areas. While they decide which programs should continue
and recommend funding levels, separate appropriations committees
draft the 13 annual spending bills that actually comprise the
Congressional debates over a budget resolution,
authorization bills, and appropriations drag on, often into the
fall. Frequently the President and Congress don't finish by
October 1, so Congress passes one or more "continuing
resolutions" to keep the money flowing, often at the previous
year's level. Until the end, agency officials troop back and
forth to OMB and to the Hill to make their case. States and
localities, organizations and advocates seek time to argue their
cause. Budget staffs work non-stop, preparing estimates and
projections on how this or that change will affect revenues or
spending. All this work is focused on making a budget--not
planning or delivering programs.
Ironies riddle the process.
-- Uncertainty reigns: Although they begin calculating their
budget 2 years ahead, agency officials do not always know by
October 1 how much they will have to spend and frequently don't
even receive their money until well into the fiscal year.
-- OMB is especially prone to question unspent funds--and
reduce the ensuing year's budget by that amount. Agency officials
inflate their estimates, driving budget numbers higher and
higher. One bureau budget director claims that many regularly ask
for 90 percent more than they eventually receive.
-- Despite months of debate, Congress compresses its actual
decision-making on the budget into such a short time frame that
many of the public's highest priorities--what to do about drug
addiction, for example, or how to prepare workers for jobs in the
21st century--are discussed only briefly, if at all.
-- The process is devoid of the most useful information. We
do not know what last year's money, or that of the year before,
actually accomplished. Agency officials devise their funding
requests based on what they got before, not whether it produced
There are two ways to reduce expenditures. There is the
intelligent way...going through each department and questioning
each program. Then there is the stupid way: announcing how much
you will cut and getting each department to cut that amount. I
favor the stupid way.
Michel Belanger Chairman, Quebec National Bank May 7, 1992
In sum, the budget process is characterized by fictional
requests and promises, an obsession with inputs rather than
outcomes, and a shortage of debate about critical national needs.
We must start to plan strategically--linking our spending with
priorities and performance. First, we must create a rational
Action: The President should begin the budget process with an
executive budget resolution, setting broad policy priorities and
allocating funds by function for each agency.14
Federal managers should focus primarily on the content of
the budget, not on the process. A new executive budget resolution
will help them do that. The President should issue a directive in
early 1994 to mandate the use of such a resolution in developing
his fiscal year 1996 budget. It will turn the executive budget
process upside down.
To develop the resolution, officials from the White House
policy councils will meet with OMB and agency officials. In those
sessions, the administration's policy leadership will make
decisions on overall spending and revenue levels, deficit
reduction targets, and funding allocations for major inter-agency
policy initiatives. The product of these meetings--a resolution
completed by August--will provide agencies with funding ceilings
and allocations for major policy missions. Then, bureaus will
generate their own budget estimates, now knowing their agency's
priorities and fiscal limits.
Our own Environmental Protection Agency (EPA) tried a
similar approach in the 1970s as part of a zero-based budgeting
trial run. Although zero-based budgeting fell short, participants
said, two important advantages emerged: a new responsiveness to
internal customer needs and a commitment to final decisions. When
participants voted to cut research and development funds because
they felt researchers ignored program needs, researchers began
asking programs managers what kind of research would support
their efforts. EPA also found that, after its leaders had
agonized over funding, they remained committed to common
Critics may view the executive budget resolution process as
a top-down tool that will stifle creative, bottom-up suggestions
for funding options. We think otherwise. The resolution will
render top officials responsible for budget totals and policy
decisions, but will encourage lower-level ingenuity to devise
funding options within those guidelines. By adopting this plan,
we will help discourage non-productive micro-management by senior
department and agency officials.
Action: Institute biennial budgets and appropriations.15
We should not have to enact a budget every year. Twenty
states adopt budgets for 2 years. (They retain the power to make
small adjustments in off years if revenues or expenditures
deviate widely from forecasts). As a result, their governors and
legislatures have much more time to evaluate programs and develop
Annual budgets consume an enormous amount of management
time--time not spent serving customers. With biennial budgets,
rather than losing months to a frantic "last-year's
budget-plus-X-percent" exercise, we might spend more time
examining which programs actually work.
The idea of biennial budgeting has been around for some
time. Congressman Leon Panetta, now OMB director, introduced the
first biennial budgeting bill in 1977, and dozens have been
offered since. Although none have passed, the government has some
experience with budget plans that cover 2 years or more. In 1987,
the President and Congress drafted a budget plan for fiscal years
1988 and 1989 that set spending levels for major categories,
enabling Congress to enact all 13 appropriations bills on time
for the first time since 1977.
In addition, Congress directed the Defense Department to
submit a biennial budget for fiscal 1988 and 1989 to give
Congress more time for broad policy oversight. At the time,
Congress asserted that a biennial budget would "substantially
improve DOD management and congressional oversight," and that a
two-year DOD budget was an important step toward across-the-board
biennial budgeting. Administrations have continued to submit
biennial budgets for DOD.
The 1990 Budget Enforcement Act and the 1993 Omnibus Budget
Reconciliation Act set 5-year spending limits for discretionary
spending and pay-as-you-go requirements for mandatory programs.
With these multi-year caps in place, neither the President nor
Congress has to decide the total level of discretionary spending
each year. These caps provide even more reason for biennial
budgets and appropriations. In Congress, 7 out of 10 members
favor a biennial process with a 2-year budget resolution and
multi-year authorizations. The time is ripe.
We recommend that Congress establish biennial budget
resolutions and appropriations and multi-year authorizations. The
first biennium should begin October 1, 1996, to cover fiscal
years 1997 and 1998. After that, bienniums would begin October 1
of each even-numbered year. Such timing would allow President
Clinton to develop the first comprehensive biennial federal
budget, built on the new executive budget resolution. In off
years, the President would submit only amendments for exceptional
areas of concern, emergencies, or other unforeseen circumstances.
Biennial budgeting will not make our budget decisions
easier, for they are shaped by competing interests and
priorities. But it will eliminate an enormous amount of busy work
that keeps us from evaluating programs and meeting customer
Action: OMB, departments, and agencies will minimize budget
restrictions such as apportionments and allotments.16
Congress typically divides its appropriations into more than
1,000 accounts. Committee reports specify thousands of other
restrictions on using money. OMB apportions each account by
quarter or year, and sometimes divides it into sub-accounts by
line-item or object class--all to control over-spending.
Departmental budget offices further divide the money into
Thus, many managers find their money fenced into hundreds of
separate accounts. In some agencies, they can move funds among
accounts. In others, Congress or the agency limits the transfer
of funds, trapping the money. When that happens, managers must
spend money where they have it, not where they need it. On one
military base, for example, managers had no line item to purchase
snowplow equipment, but they did have a maintenance account. When
the snowplow broke down they leased one, using the maintenance
account. Unfortunately, the 1-year lease cost $100,000--the same
as the full purchase price.
Such stories are a dime a dozen within the federal
bureaucracy. (They may be the only government cost that is coming
down.) Good managers struggle to make things work, but, trapped
by absurd constraints, they are driven to waste billions of
dollars every year.
Stories about the legendary end-of-the-year spending rush
also abound. Managers who don't exhaust each line item at year's
end usually are told to return the excess. Typically, they get
less the next time around. The result: the well-known spending
frenzy. The National Performance Review received more examples of
this source of waste--in letters, in calls, and at town
meetings--than any other.
Most managers know how to save 5 or 10 percent of what they
spend. But knowing they will get less money next year, they have
little reason to save. Instead, smart managers spend every penny
of every line item. Edwin G. Fleming, chief of the Resources
Management Division of the Internal Revenue Service's Cleveland
District, put it well in a letter to the Treasury Department's
Every manager has saved money, only to have his allocation
reduced in the subsequent year. This usually happens only
once, then the manager becomes a spender rather than a
planner. Managing becomes watching after little pots of
money that can't be put where it makes business sense
because of reprogramming restrictions. So managers, who are
monitors of these little pots of money, are rewarded for the
ability to maneuver, however limitedly, through the baroque
and bizarre world of federal finance and procurement.
Solutions to these problems exist. They have been tested in
local governments, in state governments, even in the federal
government. Essentially, they involve budget systems with fewer
line items, more authority for managers to move money among line
items, and freedom for agencies to keep some or all of what they
save--thus minimizing the incentive for year-end spending sprees.
Typically, federal organizations experimenting with such
budgets have found that they can achieve better productivity,
sometimes with less money.
During an experiment at Oregon's Ochoco National Forest in
the 1980s, when dozens of accounts were reduced to six,
productivity jumped 25 percent the first year and 35 percent more
the second. A 1991 Forest Service study indicated that the
experiment had succeeded in bringing gains in efficiency,
productivity, and morale, but had failed to provide the Forest
Service region with a mechanism for complying with congressional
intent. After 3 years of negotiations, Washington and Region 6,
where the Ochoco Forest is located, couldn't agree. The region
wanted to retain the initial emphasis on performance goals and
targets so forest managers could shift money from one account to
another if they met performance goals and targets. Washington
argued that Congress would not regard such targets as a serious
measure of congressional intent. The experiment ended in March
When the Defense Department allowed several military bases
to experiment with what was called the Unified Budget Test, base
commanders estimated that they could accomplish their missions
with up to 10 percent less money. If this experience could be
applied to the entire government, it could mean huge savings.
Beginning with their fiscal year 1995 submissions to OMB,
departments and agencies will begin consolidating accounts to
minimize restrictions and manage more effectively. They will
radically cut the number of allotments used to subdivide
accounts. In addition, they will consider using the Defense
Department's Unified Budget plan, which permits shifts in funds
between allotments and cost categories to help accomplish
OMB will simplify the apportionment process, which
hamstrings agencies by dividing their funding into amounts that
are available, bit by bit, according to specified time periods,
activities, or projects. Agencies often don't get their funding
on time and, after they do, must fill out reams of paperwork to
show that they adhered to apportionment guidelines. OMB will also
expedite the "reprogramming" process, by which agencies can move
funds within congressionally appropriated accounts. Currently,
OMB and congressional subcommittees approve all such
reprogrammings. OMB should automatically approve reprogramming
unless it objects within a set period, such as five days.
While understandable in some cases, such earmarks hamper
agencies that seek to manage programs efficiently. Agencies
should work with appropriations subcommittees on this problem.
Action: OMB and agencies will stop using full-time equivalent
ceilings, managing and budgeting instead with ceilings on
operating costs to control spending.18
In another effort to control spending, both the executive
and legislative branches often limit the number of each agency's
employees by using full-time equivalent (FTE) limits. When
agencies prepare their budget estimates, they must state how many
FTEs they need in addition to how many dollars. Then, each
department or agency divides that number into a ceiling for each
bureau, division, branch, or other unit. Congress occasionally
complicates the situation by legislating FTE floors.
Federal managers often cite FTE controls as the single most
oppressive restriction on their ability to manage. Under the
existing system, FTE controls are the only way to make good on
the President's commitment to reduce the federal bureaucracy by
100,000 positions through attrition. But as we redesign the
government for greater accountability, we need to use budgets,
rather than FTE controls, to drive our downsizing. FTE ceilings
are usually imposed independently of--and often conflict
with--budget allocations. They are frequently arbitrary, rarely
account for changing circumstances, and are normally imposed as
across-the-board percentage cuts in FTEs for all of an agency's
units- -regardless of changing circumstances. Organizations that
face new regulations or a greater workload don't get new FTE
ceilings. Consequently, they must contract out work that could be
done better and cheaper in-house. One manager at Vice President
Gore's meeting with foreign affairs community employees at the
State Department in May 1993 offered an example: his FTE limit
had forced him to contract out for a junior programmer for the
Foreign Service Institute. As it turned out, the programmer's
hourly rate equaled the Institute Director's, so the move cost
money instead of saving it.
The President should direct OMB and agency heads to stop
setting FTE ceilings in fiscal year 1995.
For this transition, the agencies' accounting systems will
have to separate true operating costs from program and other
costs. Some agencies already have such systems in place; others
must develop financial management systems to allow them to
calculate these costs. We address this issue in a separate
recommendation in chapter 3.
This recommendation fully supports the President's
commitment to maintain a reduced federal workforce. Instead of
controlling the size of the federal workforce by employment
ceilings--which cause inefficiencies and distortions in managers'
personnel and resource allocation decisions--this new system will
control the federal workforce by dollars available in operating
Action: Minimize congressional restrictions such as line items,
earmarks, and eliminate FTE floors.19
Congress should also minimize the restrictions and earmarks
that it imposes on agencies. With virtually all federal spending
under scrutiny for future cuts, Congress is increasingly applying
earmarks to ensure that funding flows to favored programs and
Imagine the surprise of Interior Secretary Bruce Babbitt,
who a few months after taking office discovered that he was under
orders from Congress to maintain 23 positions in the
Wilkes-Barre, Pennsylvania, field office of his department's
anthracite reclamation program. Or that his department was
required to spend $100,000 to train beagles in Hawaii to sniff
out brown tree snakes. Edward Derwinski, former secretary of
Veteran Affairs, was once summoned before the Texas congressional
delegation to explain his plan to eliminate 38 jobs in that
Action: Allow agencies to roll over 50 percent of what they do
not spend on internal operations during a fiscal year.21
As part of its 13 fiscal year 1995 appropriations bills,
Congress should permanently allow agencies to roll over 50
percent of unobligated year-end balances in all appropriations
for operations. It should allow agencies to use up to 2 percent
of rolled-over funds to finance bonuses for employees involved.
This approach, which the Defense Department and Forest Service
have used successfully, would reward employees for finding more
productive ways to work. Moreover, it would create incentives to
save the taxpayers' money.
Shared savings incentives work. In 1989, the General
Accounting Office (GAO) discovered that the Veterans
Administration had not recovered $223 million in health payments
from third parties, such as insurers. Congress then changed the
rules, allowing the VA to hire more staff to keep up with the
paperwork and also to keep a portion of recovered third-party
payments for administrative costs. VA recoveries soared from $24
million to $530 million.22
If incentives to save are to be real, Congress and OMB will
have to refrain from automatically cutting agencies' budgets by
the amount they have saved when they next budget is prepared.
Policy decisions to cut spending are one thing; automatic cuts to
take back savings are quite another. They simply confirm
managers' fears that they will be penalized for saving money.
Agencies' chief financial officers should intervene in the budget
process to ensure that this does not happen.
Step 2: Decentralizing Personnel Policy
Our federal personnel system has been evolving for more than
100 years--ever since the 1881 assassination of President James
A. Garfield by a disappointed job seeker. And during that time,
according to a 1988 Office of Personnel Management publication:
...anecdotal mistakes prompted additional rules. When the
rules led to new inequities, even more rules were added.
Over time...a maze of regulations and requirements was
created, hamstringing managers...often impeding federal
managers and employees from achieving their missions and
from giving the public a high quality of service.
Year after year, layer after layer, the rules have piled up.
The U.S. Merit Systems Protection Board reports there are now 850
pages of federal personnel law--augmented by 1,300 pages of OPM
regulations on how to implement those laws and another 10,000
pages of guidelines from the Federal Personnel Manual.
Our federal personnel system ought to place a value on
experience. That's not always the case. Consider the story of
Rosalie Tapia. Ten years ago, fresh from high school, she joined
the Army and was assigned to Germany as a clerk. She served out
her enlistment with an excellent record, landed a job in Germany
as a civilian secretary for the Army, and worked her way up to
assistant to the division chief. When the Cold War ended, Tapia
wanted to return to the U.S. and transfer to a government job
here. Unfortunately, one of the dictates contained in the
government's 10,000 pages of personnel rules says that an
employee hired as a civil servant overseas is not considered a
government employee once on home soil. Any smart employer would
prefer to hire an experienced worker with an excellent service
record over an unknown. But our government's policy doesn't make
it easy. Ironically, Tapia landed a job with a government
contractor, making more money-- and probably costing taxpayers
more-- than a job in the bureaucracy would have paid.
On one topic alone--how to complete a standard form for a
notice of a personnel action- -the Federal Personnel Manual
contains 900 pages of instructions. The full stack of personnel
laws, regulations, directives, case law and departmental guidance
that the Agriculture Department uses weighs 1,088 pounds.
Thousands of pages of personnel rules prompt thousands of
pages of personnel forms. In 1991, for example, the Navy's Human
Resources Office processed enough forms to create a "monument"
3,100 feet tall--six times the height of the Washington monument.
Costs to the taxpayer for this personnel quagmire are enormous.
In total, 54,000 personnel work in federal personnel positions.23
We spend billions of dollars for these staff to classify each
employee within a highly complex system of some 459 job series,
15 grades and 10 steps within each grade.
Does this elaborate system work? No.
After surveying managers, supervisors and personnel officers
in a number of federal agencies, the U.S. Merit Systems
Protection Board recently concluded that federal personnel rules
are too complex, too prescriptive, and often counterproductive.
Talk to a federal manager for 10 minutes: You likely will
hear at least one personnel horror story. The system is so
complex and rule-bound that most managers cannot even advise an
applicant how to get a federal job. "Even when the public sector
finds outstanding candidates," In 1989, Paul Volcker's National
Commission on the Public Service explained, "the complexity of
the hiring process often drives all but the most dedicated away."