With the talks over the current year about government shutdowns, I was reflecting on the fact that government agencies seem to be living paycheck to paycheck, something that is not recommended for individuals due to the danger of job loss.
Do government agencies (like parks, schools, the DMV, courts, CPS, etc.) not have the ability to save a little from their monthly (etc.) funds allocation to save some for a future day in which the payments stop, to keep themselves running? Isn’t this exactly what individuals and businesses do for their own safety?
I am pretty sure that if they did that, it would quickly be stigmatized as waste and inefficiency, and their allocations would be cut by the relevant amount (or more).
Probably for the same reason government agencies can’t save money period-if your department or agency doesn’t spent the money it receives, someone upstairs might decide that you can do just fine with less money and cut your budget.
For government agencies, the wages bill is by far the biggest expense. (2nd biggest is typically estates). To have a cash reserve big enough to pay the full wages bill for only a few weeks would mean having 10% of the yearly budget as cash reserves. The financial cost of doing this is huge.
As a simplistic calculation, you have 10% of your budget locked up at a 10% interest cost, that means that 1% of your entire budget is being spent every year just so that you have the ability to cover wages in the event of a very short government freeze. If you did the same for every risk of similar or greater magnitude, you’d be spending your entire budget on interest payments for risk contingency, and not actually do anything as a department.
This ignores the problems in scrapping together a cash reserve in the first place, and the likelihood that someone would pinch it after you scraped it together in the name of efficiency.
And they might not just cut your budget for next year, they may take whatever you haven’t spent yet to pay for some unexpected expense (BP spill?) or to give it to someone who “needs” it.
Comparing the government to individuals or businesses like this is always a bad idea. Government agencies don’t get salaries, they get an annual budget, and they’re expected to spend all of it. If Congress wants to save some of that money instead, they cut the agency’s budget. If an agency starts saving lots of money each year, it won’t get to keep it - Congress will just take back the savings and cut the agency’s budget the next year, and the agency will get ripped by its supporters in Congress for not even making use of all of the resources they’ve fought to allocate. Why would anyone want federal agencies stacking up huge reserves of cash? It’s inefficient. You give the agencies the exact amount of money you want them to spend, and you let Congress and the Treasury department handle savings separately.
Plus unlike individuals or businesses, the US government is never realistically going to run out of money (deliberately and irresponsibly engineered “debt crises” aside), so the way they approach budgets has to be different. It’s just not a comparison worth making - they’re completely different animals.
Agencies typically wouldn’t have the ability to bankroll large amounts of cash, because funds are made available to the agencies through the Department of the Treasury and the Office of Management and Budget. The OMB is in charge of a process known as apportionment, which really means that funds are metered out to agencies to prevent the agencies from doing anything that would get them into trouble – like spending money too quickly, or not spending money quickly enough, depending on the activity and situation. This occurs all the time, not just during budgetary crises.
“Use it or lose it” is pretty much the idea. In practice this does lead to a lot of waste, with agencies spending money on whatever they can at the end of the year so as not to have anything left over.
Spending government money is actually very complicated. The authorization of spending, appropriation of funds, holding of funds, ordering of payment, and actual tendering of payment are often handled by completely different people.
People complain that the government is unaccountable. Well, those as the policy level – elected officials and their appointees – might be insufficiently accountable. But civil servants are often held so freaking accountable that it’s hard for them to breathe freely, or, more to the point, it’s hard for them to actually get any actual work done.
Imagine that we had a government agency who’s job it was to find and eliminate wasteful spending. One of the first places they would look would be bureaus who “save” money from their budgets. Clearly those bureaus do not need the money now and, if they think they will need additional funds in the future, they should be documenting their needs in furture requests.
In Missouri the state is supposed to keep a “rainy day fund” when the budget runs a surplus, to make up for budget shortfalls or sudden emergencies (like the Joplin tornado this spring.)
For years tax-cutting politicians have attacked the fund as “wasteful spending,” “holding on to the tax payer’s money” and other cute catch phrases and pretty much eliminated it.
Keep in mind there is no such thing as “government.” There is local government, county government, state government and federal government that covers most things. Each has their own set of budgets, rules, regs, policies, etc. “government” can only do what it’s allowed to do by you and our elected representatives.
The potential for a federal government shutdown due to the debt ceiling issue has nothing to do with local, county of state government issues, per se, although the potential shutdown has ramifications far beyond “government” (at any level) to include political, economic and social problems.
Most government agencies don’t directly handle employee payrolls. I was a government employee who worked for the Department of Corrections. But my paycheck was issued by the State Comptroller’s office.
I have a friend who works at NASA, in the budgeting department. One of his jobs is to make sure at the end of the fiscal year that all the money they got gets spent, so it doesn’t get decreased the next year. And it’s not like they’re just putting the money in a pile and burning it, or throwing a big party to spend it-- It is still going towards legitimate work. It’s just not necessarily the same legitimate work as if they were able to save it up for the most deserving projects.
Some 30 years ago the then Superintendent of Yellowstone National Park realized he had an $800,000 budget surplus near the end of his fiscal year. I don’t recall the reasons why (unused snow removal money, fewer wildland fires, whatever). In any case he did not want to have that amount removed from the following fiscal year budget so he did what any resourceful person would do - what do you buy and store that you will eventually need anyway down the line, and save the taxpayers money?
Texas has a $9.4 billion rainy day fund funded primarily with revenue from oil and gas operations. It has grown to that amount since its initiation in 1987. They plan to tap a portion of it this budget session.
I presume that fund is maintained by the state treasury itself, not by some particular agency? The federal Treasury Department might keep a rainy day fund, but if the EPA or the Farm Service Agency tried to do it they’d probably just lose the money at the end of the year.