Confessions of the Deep State — Part Four: The Uncertainty Problem with Government Funding

If you’ve read any of the other parts of this series, you know the drill: these are my personal confessions of things I’ve seen, heard, and experienced as a member of the federal workforce, and along the way I try to examine some real no-kidding problems with our government. And if you’ve just arrived at this series, here’s Part 1, Part 2, and Part 3. If you like what you read, go back and check ’em out.

Ok, full disclosure, there is no such thing as the “Deep State” of Donald Trump’s paranoid delusions. Sorry. I’ve lured you in with clickbait, wily dog that I am. For many reasons, some of which frankly have to do with incompetence, but mostly just because that’s not how conspiracies work, there is no government-wide agenda to dethrone The Donald or undermine his policies. There are LOTS of individuals who are trying to resist Trump’s policy shifts, but that’s pretty much the wages you earn when you’re a power-mad narcissist who doesn’t understand the first thing about governance but still tries to tear down systems that protect the American way of life.

Aaaanywho, this series is about real problems of a slightly more limited, but equally insidious scope. One of which is summed up as follows: from year to year, in a government agency, it is impossible to predict how much funding you’ll get. This seems like it might have something to do with a thing you read about in school, doesn’t it? Something about how Congress controls the purse strings of the nation, and thereby exerts a balancing check on the Executive Branch? They’re still teaching civics, right? No?

Shit. That can’t be good for the nation.

Ok, let’s start from square one. Federal agencies have exactly as much power and authority and Congress and the President decide they do. This is because, legally speaking, federal agencies are only allowed to do those things for which they have a legal mission or justification. This is why you don’t see the Department of Agriculture running the Army, for example; it’s not in their lane, or in their authorization legislation.

Generally speaking, the Executive Branch has a fairly broad remit to execute and enforce the law, including all the agencies and programs that are created by Congressional actions. This is such a broad power, and has such potential for exerting control, that Congress has a special check all to themselves to counteract the President and the federal bureaucracy: money. Congress controls the money. Not the President, not the bureaucracy. Congress. And everything costs money, especially running a government. By increasing or decreasing the amount of money flowing to federal agencies, Congress can pretty effectively limit their power.

Now, in recent years Congress has kind of been dropping the ball, and has had a lot of trouble getting anything done. Unsurprisingly, this has included passing a budget. I say “unsurprisingly,” because we’re currently engaged in an ideological war over how much power government ought to have. If you weren’t aware this was going on, hey, guess what! It totally is! Again! And it’s worse this time!

Apparently the entire Republican Party now believes that we should cut federal powers down to maintaining the Army, beefing up the Border Patrol, subsidizing large corporations, and funneling money to private schools, with some lip service thrown in for the entitlement programs. Oh, and we should cut taxes more. Meanwhile the Democrats are… the Democrats. They’d like to tax and spend to support social policy programs. Really, they haven’t changed much in twenty years, aside from jumping on board the LGBTQ-rights train. The budget is the key vehicle to support the agendas of both sides, so of course it’s a battleground every year.

This has serious ramifications. In particular, it has meant that the budget, if it gets passed at all, gets passed much later in the year than the Framers intended. More often, in recent years, the government has run on what are called “Continuing Resolutions,” which basically just means that the government is given a temporary operating budget, kept at the prior year’s level, while the real budget is being hammered out. We’ve had one of those every year for the past eleven years (except for 2012).

Ok, so put aside your Congress hat for a moment and put on your Federal Bureaucrat hat. No, not that way. Put it on according to Form 1952.a (2), gosh. Imagine yourself in the position of an Agency Administrator. You have your Agency’s mission, which you are legally obligated to pursue. But you have no idea, at all, how much of it you’ll be able to do from year to year!

Because think about it for a second — your ability to push your agency’s mission forward is dependent, more than anything else, on how much money you get and when you get it. Your needs are going to change every year, and usually they are going to increase. Even when they decrease, you don’t dare ask for less money, because you are very likely to get next year what you asked for last year, and you can’t save money for future planning.

Let’s unpack that last statement — there aren’t supposed to be any long-term savings accounts for federal agencies. The way federal funding generally works is that whatever money an agency doesn’t spend at the end of the federal fiscal year (Sept. 30, this will become important in a minute) gets swept back into the Treasury. There are exceptions to this rule, but that’s the way it’s supposed to go. This is intentional: part of Congress’s Power of the Purse is that the bureaucracy has to ask for more money each year, thereby allowing legislators to exercise a continuous check on the Executive Branch.

But what this means in practice is that the average agency administrator usually does not, and to some extent cannot operate with an optimal budget. They are either going to get too much money or not enough, and if you operate under CRs for three or four years, it almost automatically is going to be not enough (inflation is real, folks). This all adds up to a big, shiny, nasty truth: the people who run your federal government cannot plan ahead.

Think about what that means for a second — if you can’t control how much money you’re getting, you can’t make major long-term plans. You can’t take your agency in exciting new directions. You can’t embark on long-term, multi-spectrum modernization efforts. You can’t increase efficiency (because you always have to increase costs before you can increase efficiencies), and in any case you really don’t dare to save money because saving money is not in your interests. You can’t make a real budget.

This problem is infinitely compounded by the fact that when you do get a budget, it’s almost always late. In 2017, the federal budget wasn’t released until goddam MAY, for Pete’s sake. Remember what I said earlier, about the date of the end of the fiscal year being important? Remember what that date was? Never mind, I’ll save you the scrolling, it was Sept. 30. That means that the US Federal Government had about five months to spend a little more than a trillion dollars. How well do you think that money is being spent, with everyone rushing to get it out the door? If you’ve read the other articles in this series, you already know that government procurement is an issue anyway, and this kind of crunch doesn’t help.

So now you’ve got issues as an administrator. You can’t make a real budget. You can’t plan long term. And you’re going to have a lot of trouble spending all the money you do get before it’s swept up at the end of the fiscal year. This all adds up to a real problem because, as it just so happens, you are still expected to do things. You are, in fact, legally obligated to perform your mission. What’s a hardworking administrator to do?

Now, all the agencies get around this in different ways, but the most common response boils down to two words: Slush Fund. Oh, they’re called all sorts of things and formulated in all sorts of ways, but the core idea is the same: identify a pot of money that is not subject to the normal controls and use it to make up the difference when you really, really need funds.

A very common slush fund is grant administration money, for example. The federal government issues grants all the time, across all the agencies. Now, grant-making organizations typically derive a portion of their funding from the grants they administer. They “tax” the grant money passing through, typically at a rate set by Congress, to oversee and manage the grants. And because grant monies are often appropriated by Congress by direct legislation, this fund source tends to be fairly reliable. Moreover, it is a source of funds not directly linked to the normal budget process (i.e. non-discretionary funding), and is therefore stable.

So now you have a reliable, stable funding source that is given to you for broad-ranging oversight authority. What do you do? You cram absolutely everything you can find under the “oversight” mandate, that’s what. Everything you can justify as being part of “grants oversight” can be paid for out of this funding bucket, and believe me, a smart accountant can classify a LOT of stuff into that bucket. If you get really lucky, the bucket doesn’t even get swept back into the Treasury at the end of the year (because a lot of grants operate on “multi-year” money, because the government isn’t entirely insane and doesn’t expect local-level grantees to abide by its rules).

But this is actually a fundamental problem, isn’t it? By doing this you, the administrator, are intentionally evading Congressional control by hiding as much work as possible in a slush fund bucket. You are evading Congressional control by hiding work in money that the Congressmen feel like they are obliged to renew every year. And while some oversight will surely happen, your smart accountants can probably keep the wolves away from the door long enough for you to get stuff done. But you’re ducking the system to do it.

Let’s take another example. Centralization of labor is a key component of federal budget discussions in these fiscally clipped times. The idea here is that a central organization can do the work once done by many disparate agencies, theoretically for less money. HR is a good case study; a lot of cabinet-level organizations have centralized Human Resources groups that provide HR work to several different agencies under their umbrella. I’m not going to go into their efficacy here (it usually sucks), but instead I’m going to focus on their funding.

Most of these centralized groups, be they HR or IT or infrastructure management, are funded internally by “taxing” the agencies they serve. So Agency A pays a bit, and Agency B pays a bit, and so on, and everyone gets HR services. But this is an interesting little dynamic, isn’t it? Congress isn’t really overseeing this service; it’s coming out of the various Agencies’ budgets a little way down the line. And the Agencies aren’t really overseeing the funds; they’re all going into a central coffer, and administered by a separate accounting group. What you end up with rather quickly is a slush fund that operates like a black box: money goes in, work comes out, but no one on the outside is really sure what happens in the middle.

I worked for an department once that operated a central fund to provide common services like cell phones and network connectivity. Literally no one in the client agencies had a clue what went on in this fund. Very few people in the central administration group did either. In fact, about three people in the whole department knew how this fund worked, and two of them were extremely well-paid contractors. The central admin group ran that thing like their personal piggy bank for years before someone finally started to catch on.

And here’s the key problem. You can think of this as a kind of Newtonian equation: action-reaction, cause-effect. Congress is incapable of passing a regular budget, and is severely incapable of passing a responsive budget that would accurately assess the needs of the Executive Branch. Moreover, the legal structure of the Executive Branch actively discourages multi-year planning, because that sort of thing might lead to decreased Congressional control of funding. This in turn forces the various agency administrators to develop alternative sources of stable funding to ensure that they are capable of at least minimally meeting their legislatively obligated missions. Which actively decreases Congressional control of agency funding, and actively decreases an agency’s internal ability to monitor funds.

Rinse. Repeat. Spin. This sort of thing has been going on forever, but it has only accelerated in these modern times of fiscal fuckery. The end result is that Congress’s ability to control the Executive Branch is decreased, the Executive Branch’s internal checks are weakened, the agency administrators don’t always know what’s going on with their own funds, and nobody can successfully plan more than a year or two ahead (and that’s if they’re lucky). Folks, this is not a way to run a railroad. It’s really not a way to run the government of the most powerful nation on Earth.

If you’ve read any of the other parts in this series, you know that this issue impacts everything else I’ve been talking about. Unlike most of the other parts of this series, however, this problem actually has a very simple (albeit unlikely-to-really-happen) solution, even if it is only a partial fix:

Make all government budgets to be two-year money.

In other words: change the Treasury rules such that unobligated funds are not reclaimed from agencies at the end of the fiscal year. Give the agencies two years to spend their budget, then sweep the funding.

This wipes out a whole host of problems all at once. It makes it easier for procurement groups to space out their spending, which has positive impacts on efficiency and accountability. It allows administrators to forward-plan their projects and programs just a little bit, and encourages forward-thinking. It lessens the risk of Congress and the President doing something monumentally stupid (which is more likely by the day, it seems) by allowing agencies to build up a legal emergency fund. And it removes some of the, shall we say, incentives of necessity to create black-box slush funds.

Overall, this fix would solve the major problem of uncertainty, at least a little bit. It would change a situation where agencies can’t know how they will spend their money until the very last minute to a situation where agencies have at least twelve months’ worth of space to breathe, evaluate, and make better choices.

Admittedly, this solution would create some problems. It would make the accountants all sob into their spreadsheets, for one thing; it’s much harder to keep track of multi-year money, but that’s why God invented computers. It would also very slightly decrease Congress’s power over the Executive Branch, but let’s face it — they’ve not been doing a stellar job recently, and no one really sees that changing. The advantage of this solution is that it solves the immediate problem. I’m absolutely positive there would be downstream unintended consequences. But hey, that’s why we have Offices of Inspectors General.

Searching for truth in a world focused on belief.