Savings From 1981 and 1982 Personnel Ceiling Reductions

Pursuant to a congressional request, GAO reviewed the estimated savings which could be realized by reducing personnel ceilings in various civilian agencies. These were presented in a 1981 presidential budget submission. Specifically, GAO considered whether savings from ceiling reductions would be appreciably offset by related reduction in force (RIF) costs and reductions in revenues generated by agencies.

The Office of Management and Budget (OMB) could not offer any documentation to support the projected savings or the extent to which offsetting costs were considered. The estimate was prepared using average personnel compensation costs multiplied by the number of positions. However, this equation did not equal the estimated savings presented in the message. OMB also considered factors unique to the agencies involved and took into account the rate of attrition within the federal government. The agency erroneously assumed that attrition would reduce the federal civilian employment to the new ceiling levels without the need for major RIF's. However, OMB could not present any documentation to substantiate this theory. GAO believes that the RIF's which have already occurred and those projected for the next year could seriously disrupt federal programs with a resulting loss in productivity as agency managers and employees worrying about RIF's divert their time and attention from pursuing assigned programs. GAO stated that it is too soon to determine whether or not the ceiling reductions will produce long-term savings. However, if Congress and the public are to rely on the OMB budgetary cost and savings estimates, it is imperative that OMB document these estimates. GAO believes that the instant estimate of budgetary savings from lowering personnel ceilings should have been qualified to recognize that costs such as those discussed in this report would significantly reduce short-term savings.