Federal agency heads will prepare their FY2017 budgets at levels 5 percent below the “net discretionary total that was planned for FY2017 in the FY2016 budget request, according to guidance (M-15-11) issued by the Office of Management and Budget (OMB).

OMB Director Shaun Donovan said the 5 percent reduction applies to “defense (defense function 050) and nondefense programs.” He instructed agencies to build on proposals in the FY2016 budget, fund presidential priorities, and “continue efforts to increase effectiveness and reduce fragmentation, overlap, and duplication.”

OMB guidance for the FY2017 budget instructs agencies to avoid using across-the-board cuts, cutting mandatory spending in appropriations bills, shifting costs to other parts of the budget, reclassifying discretionary to mandatory, or enacting new user fees to offset existing spending. These the same instructions OMB gave agencies last year for preparing the FY2016 budget.

OMB guidance directs agencies to make budget choices that are “driven by the agency’s strategic plan and prioritization across their goals and objectives as informed by their strategic review.”

Agencies are encouraged to continue investments in the President’s Management Agenda priorities: effectiveness; efficiency; economic growth; and people and culture. OMB wants agencies to focus on: 1) implementing Cross-Agency Priority (CAP) goals; 2) leveraging data-driven management, including supporting Agency Digital Service Teams; 3) freezing or cutting the federal real property footprint; 4) reducing improper payments; 5) financing shared services; and 6) implementing the Digital Accountability and Transparency Act of 2014 and the Federal Information Technology Acquisition Reform Act.

OMB wants agencies to continue the progress already made to institutionalize efforts to “strengthen the use of data and evidence to drive better decision-making.” OMB directs agencies to submit policies that have been proven to work and proposals that develop capacities that utilize evidence, evaluation mad data to improve outcomes.

Donavon decried congressional inaction on sequestration, which he called “senseless austerity.” If congress does not act to change or mitigate sequestration, Donovan said “both defense and nondefense discretionary finding in FY2016 will be at the lowest levels in a decade, adjusted for inflation.” The administration has threatened presidential vetoes of appropriations bills that “locks in” sequestration cuts or reverses defense cuts, while not reversing nondefense reductions.