What The Budget Reforms In The Debt-Ceiling Bill Likely Mean For OFCCP and Other Federal Agencies
Fewer OFCCP Employee Headcounts, Fewer OFCCP Audits of Contractors, The Continuing Poor Experience with the Contractor Portal, and lack of Training All Likely Lie Ahead
The surprise in the debt-ceiling suspension legislation President Biden signed Saturday was many budget clawbacks (looking backward into prior budgets which had left some budgeted funds unused) AS WELL AS budget restrictions going forward as described in our preceding DirectEmployers Week In Review story.
While the employment law agencies did not suffer any budget clawbacks, they have difficult budget battles now looming. Remember, the debt-ceiling bill did NOT set either FY 2024 or FY 2025 budgets. The budget bill negotiations still lie ahead. However, in an effort to incentivize itself to timely submit the federal budget to the President, Congress agreed to potentially two budget penalties if it does not submit to the President one or more of the 12 discretionary spending bills which collectively comprise what we call “the Federal Budget” BEFORE the end of 2023 (for the FY 2024 budget which begins October 1, 2023: hold that thought) AND ALSO by December 31, 2024, for the FY 2025 budget.
Specifically, Congress agreed in the debt-limit bill to a minus 1% budget DECREASE in EACH of FY 2024 and FY 2025 (for all federal agencies) IF the Congress is unable to agree upon a budget for either Fiscal Year by the end of the calendar year in which each Fiscal Year begins. (In other words, using the FY 2024 budget as an example, if any one or more of the 12 discretionary spending bills the Congress negotiates and submits to the President are not submitted by December 31, 2023, for the FY 2024 budget year (which begins October 1, 2023) an automatic Continuing Resolution will kick-in freezing the agency’s budget at the prior year’s level but with a 1% reduction to the prior year’s budget. By the way, this was a significant “win” for Republicans because it now puts a sharper knife at the throats of Democrats if the parties cannot agree on a federal budget. Without this agreement, an impasse in budget negotiations would otherwise in the normal course lead to a “Continuing Resolution” which maintains the same agency budget as in the prior year so the agencies may continue to have a budget to operate.)
NOTE: Presumably the way this would play out is that if there is NOT agreement on a federal budget for FY 2024 by October 1, 2023, a Continuing Resolution will occur freezing ALL federal agency budgets at the prior year’s budget level. Then, if no budget agreement is had by December 31, 2023, the 1% further budget reduction would then attach to federal agency budgets beginning January 2, 2024.
By the way, Congress has not agreed to a federal budget on time (before October 1 of the year) since 2017.
So, the Federal Agencies Are Potentially Looking At About A 6% Reduction To Their Spending Power in FY 2024
How so? First, there is the potential for the minus 1% budget penalty if Congress cannot agree on all 12 budgets by the end of this calendar year. Second, inflation is still running rampant and is currently, while shrinking, at almost 5% annually. Inflation, of course, erodes the agency’s spending power by the level of that inflation of costs federal agencies incur. And, remember, federal agencies just received an 8.7% payroll increase after the last federal budget. Note: federal agency payrolls are often the largest part of their budget (just over 70% of OFCCP’s budget, for example: about $78M of its $110M authorized budget). So, 1% + 5% = a potential 6% shrinkage of OFCCP’s spending power in FY 2024.
So, these days, OFCCP personnel and benefits costs are about $157,000 per employee, on average (495 employees consuming about $78M in pay and benefits costs), or about six “average” employees per $1M of OFCCP budget. OFCCP’s current budget is ~$111,000,000 (See OFCCP’s FY 2024 Budget Justification.)
If OFCCP’s spending power were to shrink 6% in FY 2024, however, that would result in a loss of about $6.6 million, or 42 OFCCP employees. (We say at least 42, since that is the number of employees OFCCP would have to lose to shrink back down into its budget except that OFCCP would likely not fill lower-level Compliance Officer positions (paid less than OFCCP’s higher “average” salaries and benefits super-weighted with more expensive manager costs). So, OFCCP would have to not fill more than 42 Compliance Officer positions to get down $6.6M in personnel costs.)
By the way, OFCCP rarely in modern history has had to undertake lay-offs to fit within its annual budget. Rather, OFCCP each year suffers a very high quit rate of (sometimes) as much as 25% (usually in the first year of employment). Accordingly, OFCCP uses employee “attrition” to balance its books through reduced payroll and benefits costs.
Consequences to OFCCP and Contractors
Potential Outcome # 1: Fewer OFCCP audits. OFCCP is currently at an all-time low for the number of audits it undertakes, but it could, and will, go lower absent a budget for FY 2024 sufficient to at least keep its authorized employee headcount at 495 FTEs. (OFCCP employs part-time employees, so not all employees are “Full-Time”…hence the computation expressed as FTEs.)
OFCCP completed only 899 Compliance Evaluations by whatever name in FY 2023 (last year): 866 Supply and Service Contractor audits and 33 Construction Contractor (quickie) audits. See OFCCP By The Numbers for FY 2023. That is about 1.6 audits per year per OFCCP employee. (That is down, by the way for context, from about 12 audits per year per Compliance Officer (alone) following 3–4-day on-site investigations, typically accomplished through 4-8 Compliance Officers, in OFCCP audits conducted during the Reagan Administration. So, there is great room for productivity improvements at OFCCP as another way to increase its number of audits.)
However, at its current level of productivity, the loss of another 42 (or let’s round it up to 50 Compliance Officers since that is more likely) would mean the loss of another 80 audits per Fiscal Year. That would drop OFCCP in FY 2024 to close to only about 800 audits per year (899-80=819).
NOTE: OFCCP’s audit numbers could also INCREASE artificially in FY 2024 if the agency changes the mix towards a heavier diet of Construction Contractor audits. (Construction audits require substantially fewer OFCCP hours than Supply & Service Contractor audits to complete. Typically Construction Contractor audits occupy only about 1/3rd the number of OFCCP hours it takes to complete a Supply & Service audit. As a benchmark for comparison, as recently as the Obama Administration, OFCCP used to annually complete 500 Construction Contractors audits per Fiscal Year.)
Potential Outcome # 2: The Underperforming OFCCP Contractor Portal (for Supply & Service Contractors) is not likely to get fixed in the next year absent a budget substantially higher than the agency’s about $111M FY 2023 budget. The Contractor Portal has many critics and few defenders, if any: “a trainwreck”; “a complete clusterf _ _ _”; “not ready for prime time”; “should have never been released to the public”; “ I cannot believe the hundreds of hours we have had to put into that monstrosity of a Portal”; “embarrassing”, “doesn’t work”; “not well thought out”. “OFCCP should have consulted the contractor community before they designed that mess”, etc., etc., etc.
And now, many contractors that voluntarily certified their AAPs in the Contractor Portal during its maiden voyage last year are reconsidering whether to do so this year. (44% did not participate in the Portal Certification invitation OFCCP issued last year when it inaugurated the partially built-out Contractor Portal to certify AAPs. By all accounts, that percentage of contractors avoiding the Contractor Portal to certify their AAPs will be higher this year following the Contractor Portal’s difficult debut.)
It takes both money and design leadership. The money is most likely not to be there, so contractors expecting a repaired and user-friendly interface are likely to continue to be disappointed and frustrated.
Potential Outcome # 3: While not crystal clear, it is likely that OFCCP has some money earmarked for it from the 2021 $ 1.7 trillion Bi-Partisan Infrastructure Bill to undertake construction audits. OFCCP was hoping for these monies to add staff to conduct Construction Contractor audits and to train its Compliance Officers in Construction Contractor audits. The new wrinkle is that the Debt-Ceiling statute the President just signed also contains a provision (that we reported in our main story reporting the signing of this new statute on Saturday) that will require an agency spending MORE than its budgeted amount to offset those additional spendings with cuts to the agency’s existing budget.
These are arcane and unique statutory entitlements and restrictions. But, if it turns out that the Budget Increase statute nullifies OFCCP’s infusion of Infrastructure Act monies, or the agency does not, in fact, receive additional Infrastructure Act monies, it will not be further ahead on its $111M FT 2023 annual budget.
Potential Outcome # 4: Training OFCCP staff. Forget about it. Not happening.