Federal Agencies Will Be Hit Hard by Sequestration in 2016

Federal agencies will be facing some tough decisions if sequestration caps remain in place in fiscal 2016.

According to an Office of Management and Budget (OMB) report released this month, federal agencies will have to cut back on nearly $90 billion in discretionary spending unless Congress acts in favor of removing the caps or modifying them.

Discretionary defense spending must be reduced by $53.9 billion and discretionary non-defense spending must be cut by $36.5 billion, according to OMB’s analysis.

OMB concluded that “the cap reductions that are now required by law to resume in 2016 do not provide sufficient resources for national security, domestic investments, and core government functions that are required to ensure the nation is achieving its full potential in a growing economy.”

Due to the Budget Control Act, sequestration caps automatically go into effect every year unless Congress decides otherwise. In 2015, lawmakers did just that and agreed to a budget plan that tempered the financial blow of sequestration on federal agencies.

No doubt, the federal workforce will feel the impact, if discretionary spending caps, as projected, manage to stay in place in 2016.

However, the Obama Administration’s budget proposal for 2016 would temper the impact of sequestration. The budget calls for restoring “discretionary spending to levels that would continue to support economic growth, opportunity, and safety and security.”

This would be achieved by a series of spending cuts, closing of various tax loopholes, and other measured not defined in OMB’s analysis.

Whether Congress acts on the president’s budget is unclear. The government’s fiscal 2016 budget will likely involve a mix of proposals from Republican and Democratic lawmakers, as well as White House proposals.