U.S. Weighs Lay-Offs, Cutbacks : Gramm-Rudman May Also Reduce Law Enforcement

The Reagan Administration, faced with the need to trim $11.7 billion from this year’s budget, is contemplating cuts that include laying off some federal employees one or two days a week, leaving thousands of jobs vacant and scaling back crucial law enforcement programs.

To comply with the Gramm-Rudman budget-balancing measure enacted by Congress last month, most domestic programs will have to be cut uniformly by 4.3% as of March 1, the White House announced Monday. And the Defense Department will have to impose a 4.9% reduction on the programs it cuts, the White House said.

Officials Confused

Federal officials acknowledged widespread confusion over how to impose equal cutbacks on every program in the domestic budget, except for Social Security, welfare benefits and the handful of other programs that Congress specifically exempted from the Gramm-Rudman Act.

And they pointed out that the cuts required for this year probably will appear modest next to those in store for fiscal 1987. If Congress and the White House fail to agree on at least $50-billion worth of deficit reductions for that year, the Gramm-Rudman Act will require another round of across-the-board spending cuts to make up the difference.

“This year is only a hint of what is to come,” an official of Congress’ General Accounting Office said. “It’s going to be painful for everybody.”

The Customs Service, for example, is already planning to let several hundred vacancies go unfilled for the rest of this fiscal year, even though Congress called only last month for beefing up the agency’s efforts to curb drug smuggling.

‘Managers Screaming’

“Although that was the most painless thing we could do, we still have a number of managers screaming about it,” an official, who requested anonymity, said.

Similarly, the Internal Revenue Service faces a $156-million cut that would wreak havoc with the effort to avoid a repetition of last year’s chaotic handling of millions of tax returns.

And some agencies are looking at furloughs of as many as one or two days a week to trim costs, a congressional official said. Likewise, grant and benefit programs will have to be sliced by 4.3%.

At the same time, the inflexible rules imposed by the Gramm-Rudman Act are creating a number of peculiar twists.

For example, the law will require the Panama Canal Commission to cut spending by an estimated $16 million to $20 million. But the savings will not help reduce the deficit because a 1977 treaty requires that any profits be turned over to Panama.

And some government outlays will go untouched this year because the budget ax is falling in the middle of the fiscal year, which began Oct. 1. Israel, for example, has already received all of its $1.2 billion in economic grants for fiscal 1986, and public broadcasting has already received its full $130 million.

Because those programs escaped cuts this year, the Administration will have to compensate by imposing deeper reductions on government operations. Although Egypt expects to be treated equally with Israel in foreign aid, officials said, it will not receive its full $815 million.

Some government beneficiaries already have begun to feel the effects of the balanced budget measure. Under Gramm-Rudman, the government will save $1.4 billion by denying retired federal civilian and military personnel and recipients of black-lung benefits the 3% inflation adjustments that they would have been entitled to under current law.

Medicare Cuts Limited

Programs sheltered from cuts, besides Social Security, include most anti-poverty programs, two veterans’ programs and interest on the national debt. In addition, the law limits to 1% the amount that may be cut in 1986 from Medicare and other health benefits for veterans, Indians and migrant workers.

The President’s Office of Management and Budget and the Congressional Budget Office will jointly announce details of the 1986 cuts on Wednesday. The Gramm-Rudman Act limits the 1986 cuts to $11.7 billion even if, as expected, the OMB and CBO estimate that the deficit will reach about $220 billion, far beyond Gramm-Rudman’s $171.9-billion target.

With $1.4 billion already saved by eliminating some cost-of-living benefit adjustments, the remaining $10.3 billion is divided equally between domestic programs and defense. The OMB and CBO calculated the 4.3% cut for domestic outlays by dividing about $5.2 billion in cutbacks among all non-exempt programs.

The Defense Department was allowed greater flexibility for 1986 in allocating its cuts. In part because President Reagan decided to protect personnel and certain weapons programs from spending limits, the percentage cut from the rest of the defense budget is somewhat greater than from domestic programs.

The Gramm-Rudman law is being challenged in court on constitutional grounds, but the issue is not expected to be settled by the March 1 deadline.

Loophole on Pay Cuts

Although the law permits cancellation of cost-of-living increases for federal pensions, it was designed to forbid pay cuts for current federal workers. Thousands of employees were not covered by the language, however, and are vulnerable to pay cuts, according to a key House subcommittee aide.

“The only people specifically protected from pay cuts are general schedule, Foreign Service and Veterans Administration hospital employees,” said Andrew Feinstein, staff director for the civil service subcommittee of the House Post Office and Civil Service Committee. “Nothing prohibits pay cuts for members of Congress, congressional staffers, senior Administration executives and blue-collar workers.”

Several officials predicted that there would be few, if any, firings of federal employees in the first round of Gramm-Rudman cuts because severance pay would outweigh the payroll savings between now and Sept. 30, the end of the fiscal year. But such reductions in force are likely to be a popular cost-cutting strategy if a second round of uniform cuts is ordered in the fall for fiscal 1987, according to an official of the Office of Personnel Management.

Less Firearms Training

At this stage, though, many federal agencies are still uncertain how they will respond to any cutback orders. “We’ll probably have to cancel plans for two computerization projects that, ironically, were going to save money in the long run,” said a customs official. “And we may have to cut back firearms training, as well as improved border checks and processing of imported goods.”

Perhaps the most striking example of the difficulty in making uniform cuts involves the Washington subway system, where about $2 million is supposed to be eliminated from an account that helps pay interest on federally guaranteed bonds. That could cause a default on the nearly $1 billion in outstanding loans and, unless officials can find an escape hatch, require the government to pay off the entire $1 billion immediately.