September 30th marked the end of the federal government’s fiscal year—and the end of a month-long, taxpayer subsidized race to spend as much cash as possible. Perverse incentives help explain why.
Under the current use-it-or-lose-it budgeting system, federal agencies and employees are not rewarded for saving funds. On the contrary, if they don’t use up as much as possible, their subsequent annual budgets will be smaller—and no one in government wants that. So, to perpetuate their existence, government workers go on massive spending sprees rather than forfeit any unused funds.
The Fiscal Times’ Brianna Ehley reported that last year some $50 billion was blown by federal agencies and employees the week prior to October 1:
That total included apparent impulse buys like artwork worth $562,000 for the Department of Veterans Affairs, and toner cartridges worth $144,000 for the Department of Agriculture, as noted last year by The Washington Post. It also included $178,000 worth of “Cubicle Furniture Rehab” for the U.S. Coast Guard.
The Pentagon alone spent about $5.5 billion on the last day of the fiscal year. DOD officials even sent an email encouraging employees to spend as much as they could.
“It is critical in our efforts to [spend] 100 percent of our available resources this fiscal year,” said budget officer Sannadean Sims and procurement officer Kathleen Miller in the email obtained by The Post. “It is also imperative that your organization meets its projected spending goal for June.”
This is nothing new. An analysis by Harvard’s Jeffrey Liebman and the University of Chicago’s Neale Mahoney using data from 2004 to 2009 found that 8.7 percent of total federal spending occurs in the last week of the fiscal year.
- The IRS spent $2,410,000 on "toner products" in a single purchase [Wow! They outdid the IRS].
- The Department of Homeland Security paid $251,016 for "Aeron Mesh Task Chairs" and $15,198 for two pianos. Music to sooth Russia's President Putin, perhaps?
- The State Department obligated $24,969 for a "50 inch LED HD TV" for the embassy in Kabul, Afghanistan, while the embassy in New Delhi, India, made a $20,362 alcohol purchase. This brought the total booze tab for the State Department to nearly $100,000 for the month of September.
- The Department of Veterans Affairs spent over $1.8 million on artwork, including $375,000 for a "Lobby Piece" and $285,000 on a "parking structure facade project" for the Public Artwork Commissioned Project at the Polytrauma & Blind Rehabilitation Center in Palo Alto.
We rarely make good choices when we impulse shop—even less so if you’re impulse shopping with other people’s money. Allowing agencies to roll-over funded funding from one fiscal year to the next would be a step in the right direction. But there are several other reforms we should consider, says Furchtgott-Roth:
If federal workers were rewarded on the basis of saving taxpayer dollars rather than on spending them, some of these expenditures could be eliminated. …
Agency employees could receive a bonus from a pool of funds equal to the smaller of half of the agency's unspent funds, or ten percent of employee salaries. (This cap would avoid the cancellation of an aircraft carrier turning federal workers into millionaires.) Pity the poor administrator determined to spend all of an agency's funds, thereby denying every employee a bonus.
Alternatively, all employees could receive an additional 1-step pay increase in the agency with the greatest savings as a percentage of its budget. All employees with the greatest increase in spending year-over-year would receive a 1-step pay decrease. Again, agency employees would compete to see who can cut costs the most. …
The rush to spend in the month of September is a case study on the misalignment of the interests of taxpayers and federal bureaucrats. With a little resourcefulness, such as bonuses for reduced spending, Congress could encourage agencies to save money, rather than spend it.