Foundation

Tis the Season to “Use It or Lose It”

by Demian Brady, Spencer Woody / /

What do new grand pianos, cornhole sets, and mountain guide jackets all have in common? Answer, they are all purchases made by federal government agencies and departments in the last month.

With the end of the fiscal year swiftly approaching on September 30th, departments and agencies are incentivized by the budgetary process to clear the remainder of their budget before the end of the year. Why? Any unspent funds are transferred back to the Treasury when the year is closed out.

Essentially, if the money appropriated to a department by Congress for a given year is not obligated, then the department loses the money. Moreover, if departments spend less than their allotted amount in a given fiscal year, Congress is more likely to authorize and appropriate less funding to that department in subsequent years. This practice of engaging in last minute spending sprees is known as “use-it-or-lose-it” spending.  

According to a study conducted by Dr. Jeffrey Liebman of Harvard University and Neale Mahoney of Chicago University Booth School of Business, payouts issued within the last few weeks of the fiscal year tend to be higher in terms of both numerical spending and spending on wasteful projects. According to Liebman and Mahoney, “if the marginal value is below the social costs of funds” during any transaction, it is wasteful spending.

Their research clearly denotes a spike in spending towards the end of the fiscal year and reveals that 8.7 percent of acquisition spending in fiscal years 2004 through 2009 took place in the last week of the fiscal year.

Generally, departments and agencies will spend frugally for the first portion of the year due to uncertainty about the year’s expenses and to prepare for unpredictable costs. Budgets are focused on higher priority issues, like achieving the mission of the organization and funding highly publicized programs.

After it becomes clear that the department will be able to cover its yearly expenses, the remaining funds are burned on low-priority, luxurious, and often wasteful projects, like new flat screen televisions, sculptures, and furniture.

This year is no different. As we complete the last week of FY 2016, taxpayers can expect government agencies and departments to engage in their spending sprees. Unfortunately there are plenty of examples of this kind of spending within the month of September that demonstrate action and reforms must be made to curtail wasteful and last minute splurges. By searching for contracts awarded in September on the Federal Business Opportunities website, it is possible to find a number of questionable, wasteful, and excessive spending items.

  • The United States Army purchased $25,301 worth of cornhole sets on September 7th.

  • The Department of Transportation purchased a $20,000 grand piano for the The United States Merchant Marine Academy on September 12th.

  • On September 12th, the Department of the Interior purchased a $162,800 bronze sculpture for the Itjen Courtyard in Klondike Gold Rush National Historical Park located in Skagway, Alaska (population of 1,057 people).

  • The Department of State awarded $39,750 on September 20th to a contractor for public opinion research in the Czech Republic.

  • On September 27th, the State Department awarded $27,400 for a focus group study in Italy. A handful of other focus group studies and public opinion surveys in foreign countries were purchased by the State Department.

  • The Department of Labor spent $5,560 on Sony televisions and hardware on September 20th.

  • The Department of Homeland Security purchased $32,112 worth of Federal Emergency Management Agency (FEMA) flags on September 23rd.

  • On September 15th, the United States Air Force spent $24,000 to paint and “bird-proof” a static display aircraft at Niagara Falls Air Reserve Station in Niagara Falls, New York.

  • Between September 13th and 26th the Department of State also purchased $351,049 worth of “representational furnishings” for offices and residences in Mexico, South Sudan, Bahrain, Ecuador, and the United Arab Emirates.

  • On September 23rd, the National Guard Bureau purchased 38 Arcteryx Mountain Guide Jackets to the tune of $13,392.

  • The General Services Administration spent $18,500 to replace the carpet in the Honorable Chief Judge Ralph Erickson’s chamber in North Dakota. The administration posted this purchase on September 26th.

  • The Department of the Interior purchased $8,051 worth of gym equipment on September 22nd.

  • On September 27th, the National Guard Bureau purchased $103,628 worth of musical instruments and sound equipment for the Iowa Army band.

  • On September 6th, the United States Army purchased an expandable paintball arena for $30,900. The Army followed that purchase up with buying a “Basketball Boot & Shoot Hoop,” an inflatable football toss, and T-shirt cannons for $30,630, $29,103, and $14,306, respectively.

  • On September 26th, the United States Army also spent $25,751 to build a playground in Gillham Lake, Arkansas as well $11,987 on a picnic shelter in Wheaton, Minnesota.

  • The United States Air Force spent $76,850 on golf netting to protect housing along the golf course at Francis E. Warren AFB in Wyoming.

  • On September 24th, the National Guard Bureau spent $217,598 on promotional items like locker room bags, drawstring bags, and Camelbak water bottles, all of which had the logo on the National Guard on them.

Some people might argue that these examples of spending are just drops in the bucket. However, wasteful and excessive government spending must be sought out and eliminated regardless of whether it lies in billion dollar failing programs or a few thousand dollars for T-shirt cannons. Rather than thinking of the responsibilities these departments and agencies have to taxpayers, they are lining their own pockets with luxurious and unwarranted goods and services. The government should not be incentivized by a use-it-or-lose-it structure to spend money when it does not have to or need to, especially when those funds can go back to taxpayers or pay down at least a portion of the $19.5 trillion national debt.

Taxpayers expect and deserve better than a process that incentivizes departments, agencies, and officials to excessively benefit from last minute spending sprees. Reforms that not only rein in federal spending, but monitor and incentivize against unnecessary and luxurious spending would greatly benefit the economy, the budget, and Americans’ trust in government.


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