President’s Budget Indicates Continued Austerity

White House FY2013 BudgetYesterday, President Obama submitted his FY 2013 budget to Congress.  What was perhaps most surprising was that the budget, on the top line, actually grew slightly to $3.803 trillion.  As the Brookings Institute’s William Gallston noted in a brief opinion piece published today, the budget largely reflects Obama’s political strategy going into this election year.  His summary notes three key points: 1) Spending will increase in an effort to boost job growth; 2) The deficit will be restrained primarily through tax increases on the wealthy and on corporations – not be spending cuts, and; 3) entitlement programs will continue to grow causing mitigating cuts to occur in the discretionary budget.

This last item, in particular, raises challenges for government sector real estate.  The planned 4.4% cut to the discretionary budget portends increasing government austerity.  Further, the discretionary budget forecast over the following two years (through FY 2015) anticipates a discretionary budget reduction of an additional 10%.  In response, we expect to see much more of what we’ve already noted: increased space utilization through office redesign, hoteling and telework programs.  Agencies will continue to search for ways to do more with less and the government will maintain its pressure to reduce the cost of leased space.  Funding will be scarce for large scale consolidations or relocations due to the high one-time costs to implement.  Congress will also continue to push CPRA as the tool by which to dispose of unneeded and underutilized real estate.

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