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Document Name: Appendix E: Summary of Savings to Date
Date: 09/07/95
Owner: National Performance Review
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Appendix E: Summary of Savings to Date
The National Performance Review's (NPR's) September 7, 1993, report estimated that approximately $108 billion would be saved over the five-year period FY 1995 through FY 1999 if its recommendations all were implemented. As of September 1, 1995, about $57.7 billion of these projected savings have been achieved, either through administrative actions or enactment by Congress. An additional $4.3 billion in savings are currently pending before Congress, awaiting approval. The remaining $46 billion in savings will be acted upon in the near future. Also, agency reinvention actions undertaken beyond those recommendations made in the original report will realize more than $10 billion in additional savings.
Recommendations from NPR's second phase, begun in December 1994, will yield additional savings of $69.6 billion.1 The recommendations behind these savings are detailed in appendix C and are for the five-year period from FY 1996 through FY 2000. The President's June 1995 balanced budget proposal incorporates these projected savings.
Table E-1 compares NPR's September 1993 savings estimates to the savings that have accrued to date as a result of changes made and those that will occur in the future if these changes remain in place. It also identifies those savings that may occur in the near future as a result of legislative actions now well under way. Following is a brief explanation of these savings estimates and how they were derived.
1. Streamlining the Bureaucracy Through Reengineering
Agencies are making substantial progress in meeting the statutorily required reduction of civilian personnel by 272,900 by the end of FY 1999. By law, agencies are to have reduced their staffing by 111,900 full-time equivalents (FTEs) by the end of September 1995. Our preliminary estimate is that job reductions total at least 160,000. As a result, savings for FY 1995 are projected to be $4.4 billion. Total five-year savings are estimated at $40.4 billion by the end of FY 1999.
Savings were derived by multiplying the total number of reductions by the average cost to the government for a federal employee for the year(s) following departure from federal service.2 The reduction in the total number of federal employees is based on the Administration's baseline of 2,155,200 FTEs as of January 20, 1993.3 The Administration estimates the FY 1995 average cost to the government of each federal employee $43,258.4
2. Reinventing Federal Procurement
The Federal Acquisition Streamlining Act of 1994 (P.L. 103-355), signed into law in October 1994, incorporates many of NPR's recommendations. The Congressional Budget Office did not estimate savings resulting from this legislation, but the Administration estimated a five-year savings of $12.3 billion. Additional legislation is now pending before Congress that could increase these savings, although the original savings estimate made in 1993 may not be achievable. The 1993 estimates were based on $200 billion in procurement spending over five years: actual procurement spending has declined from this figure. Consequently, savings from administrative efficiencies will be lower, in part because overall buying is lower.
Congress is considering additional procurement reforms that will further streamline the process. Additional savings are possible but cannot be estimated at this time.
3. Reengineering Through Information Technology
NPR's 1993 estimated savings included decreases in federal employment due to an increased use of information technology. Because these savings are not easily separable from total savings related to overall agency streamlining, they are reflected above in item 1, "Streamlining the Bureaucracy Through Reengineering." Besides these FTE savings, the additional savings due to information technology include those from the implementation of electronic benefits transfer. The Federal Electronic Benefits Task Force estimates savings of $1.2 billion. Other information technology-related savings include the closure of several large government data processing centers. An additional $4.3 billion in estimated savings are pending in legislation before Congress.
4. Reducing Intergovernmental Administrative Costs
NPR originally recommended modifying the Office of Management and Budget (OMB) Circular A-87, "Cost Principles for State, Local, and Indian Tribal Governments," to provide a fixed fee-for-service option in lieu of costly reimbursement procedures used to calculate the actual administrative costs of disbursing grants. It was originally estimated that half of the states and localities would adopt this approach, and that savings of up to $700 million a year could be realized. OMB revised Circular A-87 on April 19, 1995, to allow this approach. It is unclear, however, whether the projected cost savings will be realized. Estimates will be recalculated in the future based on actual experiences with this approach.
5. Changes in Individual Agencies
Last year, President Clinton signed 34 laws affecting agency actions. Many of these included savings, such as the Department of Agriculture's reorganization bill; the Customs Modernization Act; and the appropriations bills for the Departments of Labor, Commerce, Justice, and Transportation.
Additional savings related to reinvention are being achieved by agencies beyond those savings claimed in NPR's original report. For example, the Federal Communications Commission began auctioning wireless licenses and has raised $8.9 billion so far, and the General Services Administration's time out and review of federal construction projects has resulted in savings of $1.2 billion. These savings, while included in the President's balanced budget proposal, are not included in the following table, which only includes savings specifically recommended in the original report.
Notes
1. Savings are calculated using the current services baseline approach. They include mandatory as well as discretionary savings and revenue increases. For Treasury, savings include $1 billion in revenues resulting from debt collection reform.
2. This methodology does not account for severance pay, increases in annuity expenses, or the point in the year at which a person leaves federal service (obviously, savings are greater if a person leaves earlier rather than later in a year). That is why savings are not claimed until the following year. Note that the average employee cost may be lower than the actual salaries of departing personnel, since many of the people leaving are older and more highly paid than the average employee.
3. See Executive Office of the President, "Analytical Perspectives," Budget of the U.S. Government, FY 1996 (Washington, D.C.: U.S. Government Printing Office), p. 180.
4. The Congressional Budget Office uses a different methodology to calculate employee compensation; its estimate of average employee cost is lower.