Federal agency heads will prepare their FY2014 budgets at levels five percent below the amount planned for FY2014 in the FY2013 budget, according to guidance issued by the Office of Management and Budget (OMB) last week. 

OMB Acting Director Jeffrey Zients told agencies that the FY2014 budget will follow the budget framework agreed to by the president and Congress in the Budget Control Act (BCA) of 2011.  This means, according to Zients, agencies must continue to “cut lower-priority spending in order to create room for the most effective investments in areas critical to economic growth and job creation.” 

Under the guidance, agencies will prepare a list of potential “addbacks,” ranked in priority order, to give the administration options for investment opportunities.  The five percent reduction to agency budgets will provide headroom to allow the administration to exercise these options.

As in last year’s guidance, OMB instructs agencies to exclude the use of across-the-board cuts, mandatory spending cuts in appropriations bills, or new user fees to meet funding targets.

Zients told agencies to continue to implement the administration’s management agenda to cut wasteful spending, streamline programs and operations, leverage technology, and to make government more responsive.  The FY2014 budget submission should include: 1) a description of agency plans to advance the management agenda; 2) detailed information on existing management initiatives that will impact the FY2014 budget; 3) information on how savings will be used; and 4) three program proposals that need legislative, budget, or administrative changes to improve program effectiveness or achieve long-term savings.

Agencies are also to achieve more payback from fewer Information Technology (IT) dollars.  They are directed to prepare budgets that fund IT at 10 percent below the average spending level for FY2010-2012 and describe how this funding level will be achieved.

While the memo was addressed to all agencies, OMB is expected to provide separate guidance for DoD budget levels in its annual “passback” memo to the department.  This memo usually provides total budget levels, as well as some program guidance and other requests for special reports and studies.