Budget holdup taking its toll

In hopes of wrapping up the post-election lame-duck session, the House voted this week to forgo action on several appropriations bills for fiscal 2003 and instead operate under a continuing resolution through Jan. 11.

The move means most federal departments are running business at funding levels for the previous fiscal year and can't initiate new activities.

Analysts called the measure a temporary solution. "The problems won't go away," said John Osthaus, an associate with McConnell International LLC, speaking at Federal Sources Inc.'s executive conference Nov. 13. "It just postpones the so-called day of reckoning."

With the economy still in a slump and more vendors turning to the government market, the hold-up is taking its toll, according to Osthaus.

"There's great uncertainty [as to] when the money will be available," he said. "It's bad for agencies. The longer you go under a restrictive rate, the more you have to absorb."

There's a lot at stake, particularly for information technology spending. President Bush has asked Congress for $52 billion for federal IT programs in fiscal 2003 — up from $45 billion in fiscal 2002.

For now, the money is in defense. The Defense Department "is where the action is going to be," said Jim Kane, Federal Sources' president and chief executive officer.

Bush signed the department's $355 billion appropriations bill into law Oct. 23, freeing up funding for IT systems. (So far, the only other budget to get the go-ahead is for military construction.)

The budget "will help provide stability for [the] department and IT companies that support [it]," said Wayne Schroeder, deputy undersecretary of defense, resource planning and management. "I think it also shows there's going to be support in coming years for IT programs at DOD."

The financial future for IT programs at civilian agencies — even in the near-term — remains unclear. The continuing resolution could be extended through February or March, Osthaus predicted.

"There are real IT needs in these agencies," he said. "Eventually, some of this money at least will have to be made available."