Obama’s FY 2016 Budget: Higher Wages, More Spending, Less Real Estate

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There’s good news if you’re a federal employee, assuming that President Obama’s proposed 2016 budget is enacted intact: It will come with a 1.3 percent pay increase.

Now, 1.3 percent isn’t a big hike, but it’s better than the 1 percent that came in FY 2015, and certainly better than the years that were leaner than that.

There’s good news, too, for several beleaguered agencies: the FY 2016 budget allows for hiring increases totaling some 34,000 jobs. About a third of those jobs will fall under the aegis of the Department of Veterans Affairs, and another 3,800 will be within the Department of Homeland Security, with other increases going to Health and Human Services.

All that may be a bright spot for the construction and property sectors. In the immediate term, this centers on Washington, where many of these jobs—especially those at DHS—will be located. Even allowing for the ever smaller office space allotted for federal workers, which now ranges from 80 to 150 square feet, these new workers will need to be housed somewhere.

But reading the tea leaves, within the budget is bigger good news for construction nationwide in the longer term. That news lies in its strong emphasis on infrastructure spending. Remarks a senior administration official, “The President goes very big on infrastructure in the budget to repair roads, bridges, freight, and our rail systems. . . . It’s $480 billion, which allows us to fund at about 40 percent above the current level of spending.” That amount of money will allow for some significant projects and development, and there seems to be a stirring of bipartisan support for the notion of long-overdue infrastructure improvement.

At the same time, it’s worth noting that the President’s commentary on the budget offers a long side note on “shrinking the federal real property footprint,” as the report puts it. Observing that more than $21 billion annually is spent on upkeep of the government’s 300,000-plus properties and that lease costs amount to another $6.8 billion, the Administration “proposes to use $200 million in annual rental payments collected from agencies, $130 million over the 2015 enacted level, to execute additional office space consolidations.” The goal is to reduce the federal footprint by about 500,000 square feet over the fiscal year.

Additionally, the budget includes a proposed $57 million to enact the Civilian Property Realignment Act (CPRA), which would create an independent board to review the government’s property portfolio and recommend to Congress properties to dispose of or reconfigure. It is estimated that this will save more than $1.2 billion over ten years.

Congress can always kill the pay raise, though it will have to do so by directly imposing a pay freeze, never a popular move among the best of circumstances. (Government workers vote, and there are a lot of them.) But Congress can also thwart President Obama’s budget plans in any number of ways, especially given the reigning antitaxation climate—and the infrastructure spending package hinges on business tax reform, especially on taxing assets that are now parked overseas. Observers on the Hill are expecting a fight. We’ll let you know as specifics develop.

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