TESTIMONY
OF MITCHELL E. DANIELS, JR.
DIRECTOR
OFFICE OF MANAGEMENT AND BUDGET
BEFORE
SUBCOMMITTEE ON TRANSPORTATON, TREASURY,
POSTAL SERVICE AND GENERAL GOVERNMENT
COMMITTEE ON APPROPRIATIONS
U.S. HOUSE OF REPRESENTATIVES
March
19, 2003
Mr. Chairman, Representative
Olver, Members of the Subcommittee, I am pleased to be here this afternoon
to discuss the President’s FY 2004 Budget request for the Office
of Management and Budget (OMB).
Advancing
the War on Terrorism and Invigorating the Economy
Before I review OMB’s budget request, I would like to briefly outline
the President’s top priorities for his FY 2004 Budget. The President
plans to prosecute the war on terror relentlessly. There is no more effective
way to protect Americans, or, as we now say, to provide “homeland
security,” than to root out terror and stop it before it can reach
our shores. The President’s Budget provides $380 billion for the war
on terror and the continued rebuilding of our national security capabilities.
Spending on domestic homeland security is also given top priority, with
spending rising at the fastest percentage rate of any major category.
The President is
also committed to reinvigorating an American economy that has grown for
five consecutive quarters, but at a rate that he deems far too slow. To
this end the President proposes a major growth and jobs plan, the third
of his Presidency. Beyond these objectives, the President urges greater
spending on a host of essential activities: veterans’ programs,
the education of our disadvantaged and disabled children, and the alleviation
of Africa’s AIDS tragedy. The request also seeks increased funding
for highway and traffic safety initiatives and provides over 300 additional
air traffic controllers and aircraft inspectors to enhance aviation safety.
While the deficits
in the President’s budget are manageable relative to the size of
the economy, we are determined to reduce deficits and work our way back
to balance. Discretionary spending soared when we ran budget surpluses.
Even with the return to budget deficits, we have continued to increase
discretionary spending to meet the new threats posed by the aftermath
of September 11th. Relative to this elevated base in spending, the President
proposes to hold the rate of growth of the federal government to no faster
than the growth of American family income.
Measuring
Performance and Delivering Results
The President is
constantly focused on the results government produces. Whether the topic
is education, compassion, or homeland security, the measure of success
is not how much we spend but how much we achieve.
In a results-oriented
government, the burden of proof rests on each federal program and its
advocates to prove that the program is getting results. The burden does
not rest with the taxpayer or the reformers who believe the money could
be better spent elsewhere. There can be no proven results without accountability.
These ideas are simple,
but they do not reflect how things have operated in the federal government.
Instead, the Washington mentality has generally assumed that program funding
should steadily increase with the only question being “by how much?”
This type of thinking has wasted untold billions of dollars and prevented
the emergence of results-oriented government.
This budget makes
an unprecedented effort to assess the effectiveness of specific federal
programs. It introduces a new rating tool to hold agencies accountable
for accomplishing results. Programs are rated from Effective to Ineffective,
and the ratings and specific findings produced will be used to make decisions
regarding budgets and policy. The tool assumes that a program that cannot
demonstrate positive results is no more entitled to funding, let alone
an increase, than a program that is clearly failing.
This Program Assessment Rating Tool (PART) is discussed in far greater detail
in a new volume in the budget document – the Performance and Management
Assessments volume. We readily admit that it is far from perfect. In
fact, after using it for the first time, we have identified a number of
shortcomings that will need to be addressed. But it is an important next
step in changing the way federal managers think about their responsibilities.
It places the burden of proving effectiveness squarely on their shoulders.
With further improvement and use, it will provide incentives for federal
managers to make their programs more effective. It will provide meaningful
evidence to this Committee and others to help inform funding decisions,
and identify flaws in underlying statutes that undermine the effectiveness
of programs.
Linking Pay
and Performance – the Human Capital Performance Fund
I would like to
highlight another issue under this subcommittee’s purview that is
related to performance – the “Human Capital Performance Fund”
-- that is proposed in the FY 2004 Budget. In the federal civil service
system, pay is generally unrelated to performance. Rewarding high-performing
employees and those with unusually important skills is an essential improvement
over the current practice of evenly spreading pay raises across the federal
workforce, without real regard to performance or contribution. As a step
toward building a performance-oriented pay system, the Administration
has proposed to create the “Human Capital Performance Fund”
for 2004 to allow managers to increase pay beyond annual raises for top
employees and address other critical personnel needs. Reforming the pay
structure of the federal government’s senior managers (as the Administration
has laid out) is another important step to encourage high performance
and foster accountability. In coming months, I would like to work with
you to enact the Human Capital Performance Fund and Senior Executive Service
pay reform proposals.
OMB Budget
Since the late 1970s,
the federal budget has grown more than five-fold and the Office of Management
and Budget (OMB) has assumed a number of new responsibilities, including
regulatory review in the early 1980s and more recently in the area of
electronic government. Despite this dramatic growth in the scope and span
of the federal government and OMB’s responsibilities, OMB has shrunk
as an organization from 715 positions to 516 proposed in this budget,
nearly a 30% decline.
The FY 2004 request
for OMB follows two years in which OMB subjected itself to discipline
far more severe than that it proposed for virtually any other Department.
We did so to make sure that we had searched for all available efficiencies,
and taken every step to maximize productivity.
During the first
two years of the Bush Administration, I have insisted that OMB’s
budget be essentially flat. To meet our rising fixed costs, with unchanged
resources, we have reduced OMB’s authorized positions from 527 to
510. In fact, our current on-board FTE level is only 491. During this
same period, we have demanded more from OMB: we’ve launched the
President’s Management Agenda; reinvigorated regulatory analysis;
established an Information and Technology office; and, oversaw all aspects
of the creation of the Department of Homeland Security – the largest
federal reorganization since the creation of the Department of Defense.
OMB is the primary – some would say the only –
federal agency devoted to saving rather than spending taxpayer dollars.
The work of our analysts proves, on a daily basis, a case for spending restraint
in programs across the government. When the merits of our work are recognized
and enacted, huge multiples of OMB’s budget are saved.
Our people’s
work on better management of the federal government is also yielding taxpayers
handsome returns. As a result of the efforts of the staff at OMB, we have
also: updated Social Security regulations to improve program management,
saving over $2 billion over ten years; consolidated 22 federal payroll
systems into two payroll partnerships, saving the federal government an
estimated $1.2 billion over the next decade; strengthened the financial
management and fiscal integrity of the Medicaid program by curtailing
use of what’s known as the Upper Payment Limit Loophole, saving
an estimated $90 billion over ten years; and, reviewed agency’s
motor vehicle fleets and reduced vehicle inventories, saving the Federal
government over $38 million annually. These are but a few of the many
examples of how OMB’s staff yields returns to the American taxpayer.
Seventy-five percent
of our FY 2004 budget request is devoted to personnel and compensation
benefits and we have been disproportionately affected by Congress mandating
larger pay raises than proposed by the President. In addition to proposing
an essentially flat budget for the past two years, Congress has rescinded
additional funding from our budget and denied a request to recapture previously
appropriated funds. The result is that I faced a steep wall as we approached
the OMB 2004 budget request. If OMB’s budget were held flat again
in 2004, I would have no other choice but to reduce our staff by another
39 positions. At this reduced level, OMB could not meet its current responsibilities.
In light of constrained
funding levels over the past two years, the majority of the increase in
the FY 2004 request will permit OMB to continue current operations. The
remaining portion of the increase will begin work on the Budget Systems
Update and Budget-Performance Integration Initiative ($1,567,000), fund
six new FTE ($720,000) for the Office of Information Technology and E-Government,
and fund new professional development initiatives for OMB staff ($100,000).
The Office of Information
Technology and E-Government includes the Federal Enterprise Architecture
(FEA) - Program Management Office. The request includes funds to establish
six permanent full-time positions to support the work of the office. These
positions will support the implementation of the FEA and its long-term
support as well as support the integration of the FEA and agency enterprise
architectures.
OMB will begin a
multi-year initiative to update the MAX Budget Systems and to systematically
collect and publish integrated budget and performance information. This
project will replace current aging technology with new technologies for
web-based data collection, an information data warehouse, and advanced
analytical reporting tools. It will also enable a common display of outputs
and obligations by performance activity that aligns program outputs and
outcomes with proposed budget levels, and will systematically track and
report on established costs and goals. The FY 2004 OMB budget request
includes $1,567,000 for this initiative.
Consolidated
Executive Office of the President Appropriation
The Executive Office
of the President (EOP) includes a number of organizations dedicated to
serving the President. As part of the 2004 Budget, the Administration
requests a two-part financial restructuring initiative, which would: consolidate
the annual appropriations for the White House Office (including the Office
of Homeland Security), the Executive Office of the President, Office of
Policy Development, Executive Residence, Office of Administration, White
House Repair and Restoration, National Security Council, and the Council
of Economic Advisers into a single appropriation called “The White
House;” and, provide a 10-percent transfer authority among the following
accounts: The White House, Special Assistance to the President and Official
Residence of the Vice President, Office of Management and Budget, United
States Trade Representative, Office of National Drug Control Policy, Council
on Environmental Quality, and the Office of Science and Technology Policy.
Transfers from the Special Assistance to the President and the Official
Residence of the Vice President account are subject to the approval of
the Vice President.
This initiative
provides enhanced flexibility in allocating resources and staff in support
of the President and the Vice President, and permits more rapid response
to changing national needs and priorities. Resources requested for the
EOP and support of the executive functions of the Vice President in 2004
are $342 million. These resources will support approximately 1,850 personnel,
information technology, and other infrastructure needs to serve the President
and the Vice President.
Electronic
Government (E-Gov)
I would like to raise
an item that is important to the President and is under the purview of
this subcommittee – “The E-Gov Fund.” The President
is committed to addressing this and has proposed to accelerate efforts
to implement electronic government through his Management Agenda and E-Government
Strategy. The Expanded Electronic Government Initiative is designed to
bring more services to the American citizen over the Internet, make government
more efficient, and improve IT management throughout the Executive Branch.
Over the last year,
the federal government has made significant progress toward becoming a
transformed and more productive “E-Enterprise” to serve citizens.
We have overseen 24 citizen-centered, cross-agency E-Government initiatives
that have started to make a real improvement in government service. The
E-Gov Fund is critical to support these and other high payoff projects
that provide citizen services across agency boundaries. For instance,
“GovBenefits.gov” provides a single point of access for citizens
to locate and determine potential eligibility for over 200 government
benefits and services. “Golearn.gov,” which continues to provide
new training opportunities for federal workers at a fraction of the cost,
and “Regulations.gov,” is estimated to save $94 million by
creating a single system that enables the public to comment on federal
rules.
Conclusion
As the Committee
reviews OMB’s 2004 budget request, I urge you to recall two years
of rigorous restraint at a time of sharply increased work levels. To carry
out our budget, management, and regulatory duties for the President and
the American people, it is critical that Congress provide the resources
to maintain OMB at 510 positions. In addition, I urge you to approve four
new initiatives included in our request for six additional positions to
expand upon our success on the President’s electronic government
initiatives, to update OMB’s IT systems to implement the President’s
vision of a results-oriented government, and to provide resources to enhance
professional development at OMB.
I want to thank you
for the opportunity to meet with you today to discuss the OMB budget request.
I look forward to working with the Committee. I would be happy to address
any questions the Committee may have on the OMB budget or other budgetary
issues.
Attachment - FTE Chart |
