Agencies Vie for Funding Under Darman’s Plan

Budget Director Richard G. Darman is planning a novel maneuver aimed at forcing federal agencies to accept austere funding levels in the Bush Administration’s fiscal 1991 budget.

In a letter to Cabinet secretaries earlier this week, Darman announced a “competition” in which the agency chiefs will appear before President Bush to plead for a share of a “limited pool” of money set aside to fund high-priority programs.

For example, the competition presumably would pit William J. Bennett, the Administration’s drug policy director, against Education Secretary Lauro F. Cavazos and Environmental Protection Agency Administrator William K. Reilly, each of whom wants more money for programs that Bush has identified as top priority. With a relatively small pot of money to fund a relatively large amount of requests, Bush would have to dole the dollars out parsimoniously.

The move marks an important change in the way the Administration prepares its budget. Bush is scheduled to submit his fiscal 1991 budget to Congress on Jan. 8. Lawmakers just finished work on the budget for fiscal 1990, which began Oct. 1.

Under the prior system, the Office of Management and Budget reviewed agency budget requests and proposed spending cuts or increases for each government program. Cabinet departments then could accept the OMB’s proposals, negotiate with it or appeal to the White House for more money. In many cases, the politically sensitive White House sided with the agencies and ordered the OMB to scrounge for savings elsewhere in the budget.

But Darman has devised a process that is designed to put the agencies in a fiscal squeeze while requiring the President to choose among competing priorities. “It’s clever,” said one budget expert who is familiar with the plan. “It’s classic Darman.”

Darman’s letter, a copy of which was obtained by the Washington Post, begins with a reminder that the Gramm-Rudman law “requires the President to submit a budget for FY 1991 with an estimated deficit of $64 billion or less. This is obviously a serious constraint.”

Under the plan outlined in the letter, the OMB has created two separate tracks for the Administration’s budget decision-making.

The first track, which includes the vast bulk of federal appropriations, closely resembles the old process. The OMB has sent the agencies a long list of specific proposals for savings in these programs, and Darman said that the OMB would be open to negotiation as in prior years.

But there is a twist: If an agency disagrees with an OMB-proposed program cut and wishes to carry its dispute to the White House, it can do so only by throwing the program onto the second track, where the competition is to take place.

The competition is expected among programs for which the agencies have requested sizable increases, including AIDS research, the planned space voyage to Mars, anti-drug initiatives, the cleanup of toxic and nuclear waste and programs aimed at preventing global warming.

The size of the funding pool has not yet been determined, Administration officials said. Bush will personally decide how the pool is to be divvied up, Darman told the Cabinet officers.

Although officials were divided about the likely impact of Darman’s system, most said it will increase his leverage in the bargaining process.

Suppose, for example, that a Cabinet agency objects to an OMB-proposed cut in one of its programs on the first track. The agency presumably would be fearful of pursuing its grievance to the point of throwing its run-of-the-mill program into competition with high priorities such as anti-drug efforts. The program, after all, might emerge from the competition with an even lower level of funding than the OMB had proposed.

Moreover, for programs on the second track, agencies may be strongly tempted to scale back their requests for increases and strike a compromise with the budget office, lest they fare poorly in the competition. Darman’s letter offers the agencies that option.

Agency budget officials said that they are considering how to respond to the new system. Some said they doubt that it would have a serious impact in the long run, but they said its novelty may put them at a disadvantage initially.